We recently published an article titled, Jim Cramer’s Latest Stock Picks. In this article, we are going to take a look at where e.l.f. Beauty, Inc. (NYSE:ELF) stands against other stock picks by Jim Cramer.
On Monday, Jim Cramer of Mad Money took a closer look at the market’s recent movements, reassuring investors that rising bond yields shouldn’t cause excessive worry. He noted that bond yields have surged significantly since the Federal Reserve cut rates last month, a trend that might seem counterintuitive. Cramer acknowledged that bonds were behind Monday’s “ugly action in the big caps”.
The Dow fell by 344 points, the S&P slipped by 0.18%, while the Nasdaq managed a slight gain of 0.27%. Cramer emphasized that while bonds play a crucial role, they aren’t the sole factor influencing the market’s performance, despite what some may claim. He expressed his frustration with those who panic at the sight of rising interest rates, suggesting that such reactions are misguided. Cramer pointed out that the stock market has experienced a remarkable rally.
“The stock market has had a fabulous run, even as bond yields have crept up almost the entire time. They love to ignore that glaring fact, the bears. Every day is groundhog day for them. They see interest rates go up higher, so they panic themselves and they are trying to panic us.”
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Cramer proceeded to break down the arguments typically made by bond bears, who often use long-term interest rates as a weapon against the Fed. He criticized their simplistic approach, where rising rates are blamed on the Federal Reserve while falling rates somehow earn them credit. According to him, the Fed’s recent decision to cut rates by 50 basis points was necessary.
“… Here’s the simple truth, did the Fed need to do a double rate cut moving 50 basis points and not 25? Yes. Yes, they had to do it if they wanted to be sure that the proverbial plane didn’t crash.”
He firmly stated that Jerome Powell, the Fed Chair, is simply fulfilling his duties responsibly, and those who continuously express skepticism will ultimately be proven wrong. Addressing the notion that a rate cut would trigger inflation, Cramer pointed out that the bond market’s reaction suggests that the initial cut has already sparked fears of inflation resurgence.
He challenged the idea that the effects of a rate cut are immediate, asserting that higher loan rates, particularly for 30-year mortgages, can actually have an anti-inflationary effect, contrary to what some might believe. He highlighted that the most pressing concern in the inflation landscape remains housing.
Cramer also tackled the prevailing belief among bears that stock prices cannot rise if interest rates increase. He dismissed this idea as arbitrary, asserting that we are far from a situation where higher rates would definitively damage the bull market.
“We are nowhere near the point where the bull can be slain by higher, longer rates… Stocks have soared with bond yields at these levels before; in fact, they’ve soared with the 30-year at 5%, they’ve soared with the 30-year at 6%, so let’s stop it with the jeremiads.”
Ultimately, he argued that such fears merely drive investors away from solid companies that are performing well.
Our Methodology
For this article, we compiled a list of 13 stocks that were discussed by Jim Cramer during the lightning round of his episodes of Mad Money on October 18 and 21. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
e.l.f. Beauty, Inc. (NYSE:ELF)
Number of Hedge Fund Holders: 40
Cramer called e.l.f. Beauty, Inc.’s (NYSE:ELF) situation complicated but also guessed that it would return faster than others in the group. Here’s what he had to say:
“Well, remember, this is a very tough situation because all of cosmetics are in a downturn that is so staggering that it caught everybody by surprise, especially Fabrizio Freda at Estee Lauder. I think Estee Lauder is not as good as E.l.f, but I recognize that this group is in the doldrums. I don’t want to make a single call on a group decline. I do think that when they come back, this one will come back faster than all of them.”
e.l.f. Beauty (NYSE:ELF) is a big name in the cosmetics industry and provides a diverse range of cosmetic and skin care products offered under several brand names, including e.l.f. Cosmetics, e.l.f. Skin, Well People, Naturium, and Keys Soulcare. The company has recently reported significant growth, marking a strong beginning to the fiscal year.
Tarang Amin, e.l.f. Beauty’s Chairman and Chief Executive Officer highlighted that the company achieved 50% net sales growth in the first quarter, along with an increase of 260 basis points in market share. The achievement signifies the 22nd consecutive quarter of growth in both sales and market share, positioning the company among a select group of high-growth consumer companies.
In the first quarter of fiscal year 2025, e.l.f. Beauty (NYSE:ELF) generated revenue of $324.5 million, a substantial 50% increase compared to the same period the previous year. Non-U.S. markets contributed significantly to this growth, accounting for 16% of total net sales, with net sales from these markets soaring by 91% year-over-year. The company’s updated outlook for fiscal 2025 expects a year-over-year increase in net sales of 25% to 27%, an upward revision from the earlier expectation of 20% to 22%.
Overall, ELF ranks 7th on our list of latest stock picks by Jim Cramer. While we acknowledge the potential of ELF as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ELF but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.