In this article, we will take a detailed look at the Jim Cramer Says You Should Buy These 10 Stocks.
Jim Cramer last week talked about the decline of tech stocks after the latest CPI report, saying investors “abandoned” tech stocks like “rats from the sinking ship.”
“It was titanic! They took their money and went all in on small and medium-sized companies we call the Russell 2000 because we got a much softer than expected consumer price index.”
Cramer said that the latest CPI number shows inflation “has been beaten” and interest rates are “coming down.” The CNBC host said if we keep getting positive data, he won’t be surprised to see not one but two or three rate cuts this year.
Cramer wondered how major tech companies could fall on the low inflation numbers, and answered his own question by saying that sometimes in the backdrop of lower bond yields stocks of companies that “need lower rates” can suddenly rise.
“What happened today always happens when rates plunged,” Cramer said.
However, Cramer said that there isn’t enough positive data available yet to keep supporting this rally of stocks that benefit from lower rates, adding that such short-term rallies last for about three days. Cramer predicted that big tech stocks will be back after a “few more plunging days.”
For this article we watched several latest programs of Jim Cramer and picked 10 stocks he’s bullish on. With each company we have mentioned the number of hedge fund investors. 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).
10. CAVA Group Inc (NYSE:CAVA)
Number of Hedge Fund Investors: 26
Jim Cramer has been bullish on restaurant chain CAVA Group Inc (NYSE:CAVA) lately and in a latest program reaffirmed his positive outlook on the stock. Over the past one month Cava shares have pulled back 6%, but Cramer thinks you should not “panic.”
“Don’t panic, understand that they’re coming down, just as a sector rotation.”
Last month, CAVA Group Inc (NYSE:CAVA) reported upbeat Q1 results and hiked full-year guidance. CAVA Group Inc (NYSE:CAVA) now sees 2024 restaurant comparable sales growth of 4.5% to 6.5%, compared with the consensus estimate of +4.5%. Adjusted EBITDA guidance was increased to $100 million to $105 million from a prior outlook for $86.0 million to $92.0 million. CAVA Group Inc (NYSE:CAVA) average unit volume (AUV) has impressed investors while its restaurant-level profit margins, guided to 24% for 2024, are also upbeat given the current market environment.
CAVA Group Inc (NYSE:CAVA) shares have gained about 124% so far this year and the stock’s P/E ratio is now 224, triggering valuation concerns. While CAVA Group Inc (NYSE:CAVA) has reported closed to 30% YoY sales growth over the past couple of quarters, Cava bears say the company might not be able to sustain its comparable sales growth down the road as comp sales growth is easy to achieve during early growth stages. They also say most of CAVA Group Inc (NYSE:CAVA) store footprint spans rich neighborhoods with high population density, and as CAVA expands its store footprint to other areas its profit from growth might moderate. The stock’s forward P/E ratio of 370 is outlandishly higher than industry average of 16.65. Average Wall Street price target on the stock is $87, below its current price of $91.
Next Century Growth Small Cap Strategy stated the following regarding CAVA Group, Inc. (NYSE:CAVA) in its first quarter 2024 investor letter:
“CAVA Group, Inc. (NYSE:CAVA) is a fast casual restaurant chain serving authentic Mediterranean cuisine, featuring customizable bowls and pitas. CAVA currently owns and operates >300 stores, and the company targets a 15% plus new store growth rate. The intermediate goal is to have 1,000 stores by 2032 with plenty of opportunity to grow beyond that level. The company already delivers solid restaurant level margins >20% and they believe 3-5% same store sales growth is achievable over time. As the business matures, they should be able to leverage G&A expense which should lead to strong earnings growth over many years.”
9. Dover Corp (NYSE:DOV)
Number of Hedge Fund Investors: 28
Industrial products company Dover Corp (NYSE:DOV) is one of the stocks Jim Cramer is bullish on. In a recent program, Cramer said that Dover is a “terrific industrial company” that is making “a great move in the data center.”
“Dover Corp (NYSE:DOV) is going to be a big name for me.”
Dover Corp’s (NYSE:DOV) business is offering products and services via five segments: engineered products, clean energy & fueling, imaging & identification, pumps & process solutions and climate & sustainability technologies. Each segment’s revenue is over $1 billion on an annual basis. In 2023 the company’s full-year free cash flow came in at $1.1 billion, nearly double the previous year’s figure. This increase was due to effective working capital management and reduced capital expenditures. The free cash flow conversion rate has risen above 90%.
What makes Dover Corp (NYSE:DOV) a promising data center stock? The company talked about that during its latest earnings call:
We are also benefiting from our exposure to data centers and the secular growth in infrastructure investment with the significant power requirements of next generation chips that support artificial intelligence adoption are now requiring liquid cooling methods. We are exposed to liquid cooling of data centers in both our heat exchanger business, which enables heat transfer within the coolant distribution units and in the connector business which provides leak free liquid connection points at the server racks and manifolds and now directly to the individual chip cooling cold plates. I’ll leave the data center infrastructure market forecast to our end customers further down the chain. For us, it’s clearly an area of robust growth in the foreseeable future as evidenced by our recent order trajectory and high profile specification wins with the chip OEMs. Importantly, we have proactively installed production capacity and are well positioned to meet any meaningful inflections in demand with industry best lead times.
Dover Corp (NYSE:DOV) has an astonishing dividend growth history, with over 50 straight years of dividend hikes.
Wall Street expects the Dover Corp (NYSE:DOV) earnings to grow 9.20% next year, while the average analyst price estimate on the stock is $195, about 6% higher than the current stock price. The stock’s forward P/E ratio of 20 looks attractive based on these factors.
8. Reddit Inc (NYSE:RDDT)
Number of Hedge Fund Investors: 31
Jim Cramer was asked about Reddit Inc (NYSE:RDDT) in a latest program. He hit the “buy, buy, buy” button.
Cramer said that Reddit Inc (NYSE:RDDT) and Pinterest are like “new channels” and they are “working.”
With over 80 million daily active users, Reddit Inc (NYSE:RDDT) remains one of the fastest-growing social media platforms in the world. While Facebook and Twitter show signs of maturing growth, Reddit Inc (NYSE:RDDT) still has huge upside potential as more and more people flock to Reddit discussion boards for authentic opinion and discussion. User input from millions of people on various topics freely accessible to anyone is Reddit Inc (NYSE:RDDT)’s moat. As of 2023, users posted 16 billion comments on the platform, according to the company. That’s why companies are flocking to pay money to Reddit to use its data to train their AI models. Reddit Inc (NYSE:RDDT) has licensing agreement with Alphabet Inc.’s Google worth $60 million to help train large language models. Reddit Inc (NYSE:RDDT) has signed licensing agreements totaling $203 million, with terms lasting two to three years. The company generated approximately $20 million from AI content deals last quarter and expects to exceed $60 million by year-end. Reddit Inc (NYSE:RDDT) has signed licensing agreements totaling $203 million, with terms lasting two to three years.
During the first quarter Reddit Inc (NYSE:RDDT) revenue soared 40% year over year. Wall Street expects the company’s fiscal 2025 revenue to rise 21% on a YoY basis. Daily active users in the first quarter jumped 37% y/y.
7. Dow Inc (NYSE:DOW)
Number of Hedge Fund Investors: 35
Jim Cramer was recently asked about energy and chemical company Sasol. He instead pitched Dow Inc (NYSE:DOW) as a better alternative.
“No, if you’re going to do that you want to buy Dow, no longer Dow Chemicals, Dow Inc (NYSE:DOW)”
Dow Inc (NYSE:DOW) is one of the biggest chemical companies in the world. The company operates in three segments: Packing & Specialty Plastics, Intermediates & Infrastructure and Materials & Coatings. The stock is down about 7% so far this year as pricing headwinds, unfavorable environment amid elevated interest rates and lower volumes continue to take a toll on business. But analysts believe the stock is poised for growth in the long term, especially after the interest rate decrease cycle begins. Dow Inc (NYSE:DOW) is expected to deliver about $2 billion in EBITDA growth by 2026. Dow’s business is exposed to market cycles and interest rates. Dow Inc (NYSE:DOW) thrived when interest rates fell to near-zero levels in the midst of the COVID-19 pandemic. Amid unfavorable environment Dow’s management has been cutting costs and improving efficiency. Dow Inc (NYSE:DOW) recently decided to sell its flexible packaging laminating business to Arkema for $150 million.
Dow Inc (NYSE:DOW) has about $3.7 billion in cash and equivalents, up from $2.98 billion at the end of 2023. Over the past 12 months free cash flow came in at $2 billion, while cash from operations in $5 billion.
Dow Inc (NYSE:DOW) has a dividend yield of over 5%, and management is confident it can continue to deliver strong shareholder value, which shows the company has visibility on improvement in the future. During Q1 earnings call, Dow’s CEO Jim Fitterling said:
Over the past five years, we have worked hard to improve our balance sheet, to improve cash-flow conversion and to build a more resilient company that maintains consistent discipline. This was demonstrated when we delivered $12.4 billion in peak EBITDA in 2021, higher than any other timeframe in Dow’s history. This has created the opportunity for us to invest strategically at the bottom of the cycle for long-term profitable growth. And as implementation of our growth strategy increases our underlying EBITDA, we will continue to target at least 65% of operating net income to shareholders as we move up the next peak. This means at least 45% in dividends and 20% in share buybacks.
6. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Investors: 65
Jim Cramer in a latest program talked about Costco Wholesale Corporation (NASDAQ:COST) membership fee hike, saying it’s significant because the company had planned not to raise its fees “until they saw inflation under control.”
Cramer said that Costco Wholesale Corporation (NASDAQ:COST) is the “first line of defense on deflation” followed by Walmart.
“Congratulations to Costco Wholesale Corporation (NASDAQ:COST) for not gouging, for doing great things. Fantastic job!” Cramer said.
Costco recently reported a 7.4% increase in monthly net sales for June to $24.48 billion, compared to $22.78 billion in the prior year. Analysts believe the latest membership fee hike won’t impact Costco Wholesale Corporation (NASDAQ:COST) negatively amid a loyal customer base. Costco has over 74.5 million paying memberships and a renewal rate of 90.5% In May the company posted fiscal third quarter results. Despite massive inflation, the company’s results were upbeat as it beat estimates on both revenue and EPS. Costco Wholesale Corporation (NASDAQ:COST) saw a 6.1% increase in comparable foot traffic, while maintaining a remarkably low shrink rate of under 0.2%, which is one-tenth of the industry average. The value for money Costco Wholesale Corporation (NASDAQ:COST) offers is making customers flock to its executive membership, which costs almost double the regular membership. The company had 34.5 million paid executive memberships, an increase of 661,000 on a sequential basis. Costco Wholesale Corporation (NASDAQ:COST) executive members now represent over 46% of paid members and 73.1% of worldwide sales.
As consumers continue to look for better prices and inflation is far from over, Costco is expected to keep growing. Costco Wholesale Corporation (NASDAQ:COST) is also a strong dividend payer, with about two decades of consistent dividend increases.
Madison Sustainable Equity Fund stated the following regarding Costco Wholesale Corporation (NASDAQ:COST) in its fourth quarter 2023 investor letter:
“Costco Wholesale Corporation (NASDAQ:COST) reported solid holiday results and announced a special dividend of $15 per share. Earnings were better than expected driven by better gross margin. Same store sales were 3.9% with solid traffic. Costco also noted better discretionary trends and solid seasonal sales.”
5. Wells Fargo & Co (NYSE:WFC)
Number of Hedge Fund Investors: 73
Jim Cramer was recently asked by a caller whether Morgan Stanley is a good stock pick in the banking industry. Cramer instead pitched Wells Fargo & Co (NYSE:WFC) as a better buy.
“The only one I’d still buy in that group is Wells Fargo of Charlie Scharf (WFC CEO). That would be the stock to buy.”
Like Cramer, many other analysts are praising Charlie Scharf’s plans to make Wells Fargo & Co (NYSE:WFC) efficient. During the first quarter the company saw a 10% increase in investment banking revenue, while trading revenue jumped 15% increase YoY, amounting to $1.8 billion. The bank has notably expanded its credit card portfolio, with card balances increasing by 30% from FY19 to FY23. This growth is fueled by new product offerings and a focus on high-quality customers, with over 80% of credit cardholders having FICO scores above 660.
In 2024 Wells Fargo & Co (NYSE:WFC) is expected to generate about $23 billion of pre-tax income in 2024, and $25 billion in 2025. Analysts believe the Federal Reserve could lift restrictions (imposed following compliance issues in 2016) on the bank, including the asset cap, this year, unlocking further growth catalysts.
ClearBridge Value Equity Strategy stated the following regarding Wells Fargo & Company (NYSE:WFC) in its fourth quarter 2023 investor letter:
“Stock selection in the financials sector proved to be the largest contributor to relative outperformance. Banking stocks such as Wells Fargo & Company (NYSE:WFC) saw their share price rise during the quarter as investors anticipated Fed rate cuts that would reduce deposit costs while retaining economic strength and minimizing the risk of credit losses.”
