We recently published an article titled Jim Cramer Thoughts on 8 Stocks As He Discussed Market Froth. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other stocks.
Jim Cramer, the host of Mad Money, discussed how “froth” is currently affecting the market, explaining that trend-driven stocks need to experience a decline before more stable stocks can begin to recover.
“The fad stocks, they need to go down before non-fad stocks can triumph. That’s what’s happening. It’s just a fact of life in this business.”
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After a rough week marked by a significant downturn in trendy stocks, Cramer pointed out that it is a rare positive sign in an otherwise negative environment that the trend seems to be running its course. Cramer reflected on the market’s performance, mentioning that the Dow managed to inch up by 33 points, while the S&P 500 fell by 0.5%. However, the Nasdaq dropped by 1.21%, turning negative for the year.
He also stressed that the decline primarily occurred toward the end of the trading day, which he found unusual and concerning, though he was not sure about the specific cause of the abrupt drop. “It was pronounced, it was nasty,” Cramer remarked, highlighting the sharpness of the downturn.
“Now, nobody wants anybody to lose money, including me, but there’s a thing called froth, and we gotta talk about it as froth is the enemy of prudence. Smart investing requires a degree of prudence, something that’s highly incompatible with froth.”
He explained that smart investment strategies require a certain degree of caution, which frothy market conditions cannot support. He pointed out that for a period, the market had been filled with froth but lacked prudence, especially evident during the turbulent trading seen late last week. However, Cramer noted that as the froth subsides, investors are turning to assets with more durability and longevity. He specifically mentioned that drug stocks have been performing well recently.
“So here’s the bottom line: Once these frothy momentum stocks come in enough, then we will finally be in a much more straightforward world, a world where what tends to rally is not the sizzle, but the steak.”
Our Methodology
For this article, we compiled a list of 8 stocks that were discussed by Jim Cramer during the episode of Mad Money aired on February 24. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the fourth quarter of 2024, which was taken from Insider Monkey’s database of over 1,000 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 317
Cramer, noting that Microsoft Corporation (NASDAQ:MSFT) contributed to the froth recently, said:
“Let’s speak to the frothiest of froth, quantum computing. Yeah, it is pretty funny when you think about it. We know that before Microsoft started talking about quantum computing and being all jazzed and bulled up about it, there was this fringe quality to the entire theme. Then Microsoft went all in about quantum computing based on all new source of matter, made it sound like quantum’s around the corner.”
Cramer pointed out that nothing seemed more credible than Microsoft Corporation (NASDAQ:MSFT) promoting a compelling narrative around quantum computing, until Friday evening when a Wall Street Journal article titled “Physicists Question Microsoft’s Quantum Claim” came out. Cramer reacted strongly to the piece, describing it as a “total takedown” of the company’s quantum computing claims. He emphasized that the article was a harsh and thorough criticism, noting that it was a “vicious beating” for Microsoft’s pitch in the quantum computing space. He added:
“Here’s the snippet, ‘This is where you cross over from the realm of science to advertising,’ said Jay Sau, a theoretical condensed matter physicist at the University of Maryland… Talked about a guy who knows the stuff. He even worked for Microsoft on some odd jobs. Maybe got to like an expert who’s willing to cross a pretty darn big employer with some truth that sent down all the quantum computing stocks. Rigor one, froth nothing. Can we please stick a knife in quantum already?”
Microsoft Corporation (NASDAQ:MSFT) creates a wide range of software, services, devices, and solutions, including productivity tools, cloud computing services, enterprise applications, gaming products, and offerings for both consumers and businesses.
Overall MSFT ranks 1st on our list of the stocks Jim Cramer recently discussed. While we acknowledge the potential of MSFT 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 time frame. If you are looking for an AI stock that is more promising than MSFT 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.
