In this article, we’ll dive into Jim Cramer’s top 10 stock picks that he wants you to watch out.
Jim Cramer noted that Tuesday’s pullback was expected as the market had been rising for eight consecutive days, and a ninth would have taken it into rare territory, a streak not seen since 2004. The session was tough, with the Dow dropping 62 points and the S&P falling 2%, almost like a 33% loss. This raises the question of whether the market still has the momentum to keep climbing, especially since bad news finally caused stocks to drop, something that hadn’t happened much during the recent 8-day rally.
“We were due for today’s modest pullback—the S&P had been up for eight straight days, and nine straight would have put us in rarefied territory. We haven’t seen that kind of winning streak since 2004. Today’s session was rough, with the Dow off by 62 points and the S&P dipping 2%, like losing 33%. We have to wonder if the market still has the momentum to go higher because today we got bad news, and guess what—stocks actually went down. That didn’t happen much during the 8-day gain.”
Cramer observed an unusual trend during this winning streak. If a company reported better-than-expected earnings, the stock surged. Even if the results were only slightly better than feared, the stock still went up. And if a company posted disappointing earnings, the market shrugged it off, assuming it was the last bad quarter because the Fed might soon cut rates, so people kept buying anyway.
“You see, we had a very odd pattern during the winning streak. It was a bit of Pangloss and a nip of Camelot. When a company reported a better-than-expected quarter, it was great. When a company reported a quarter that was just better than feared, the stock still rose. And when a company reported a bad quarter, we decided that it was the last bad quarter because the Fed was about to cut rates, so it was no big deal—buy anyway. In other words, companies could do no wrong, but not today. Today, we had a bit of a reckoning, a dose of reality.”
Jim Cramer observed that the market had been enjoying a stretch where good performance boosted stocks, and even poor performance was cushioned by the belief that the Fed would step in to help. However, after seven consecutive days of gains, he pointed out that this optimistic pattern might be coming to an end. The market has now reached a level where stocks won’t automatically get the benefit of the doubt. Cramer explained that we’re back to a more typical environment where strong stocks rise and weaker ones fall. At these elevated levels, it’s no longer enough to dismiss the bearish outlook with a simple “heads I win, tails you lose” mindset.
“We’ve reached a point where the market is sufficiently elevated, and we’re back to business as usual—where the good stocks rise, and the bad ones fall. At these high levels, we can’t just dismiss the bears with “heads I win, tails you lose.” There’s a return to rationality, and rationality is the enemy of a market where everything rallies indiscriminately.”
Our Methodology
In this article, we reviewed a recent post of Jim Cramer and his latest insights on what to watch in the stock market for Tuesday. We highlighted ten stocks he mentioned and provided details on hedge fund sentiment for each. The stocks are ranked based on the number of hedge funds that own them, from lowest to highest.
At Insider Monkey we are obsessed with 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).
Jim Cramer Wants You to Watch Out For These 10 Stocks
10. The Gap Inc. (NYSE:GPS)
Number of Hedge Fund Investors: 39
Jim Cramer noted that Citi has initiated a positive catalyst watch for The Gap Inc. (NYSE:GPS), which owns brands like Banana Republic, Old Navy, and Athleta. The Gap Inc. (NYSE:GPS) has responded well, gaining 2.5%.
“Citi opened a positive catalyst watch for Gap, which also owns Banana Republic, Old Navy, and Athleta. The stock gained 2.5%. I am going to interview Gap CEO Richard Dickson when the retailer reports earnings on Aug. 29.”
The Gap Inc. (NYSE:GPS) has been strategically restructuring its business by closing underperforming stores and enhancing its online and digital platforms. This shift aims to boost profitability over time. The Gap Inc. (NYSE:GPS)’s strong brand portfolio, including Old Navy, Banana Republic, and Athleta, remains a significant asset with growth potential in both domestic and international markets.
Additionally, The Gap Inc. (NYSE:GPS) is well-positioned to benefit from the growing consumer preference for casual and athleisure wear, which aligns with its product offerings. This trend is expected to persist, especially as remote work and lifestyle changes continue. Furthermore, The Gap Inc. (NYSE:GPS)’s focus on sustainability and inclusivity resonates with modern consumers, potentially increasing brand loyalty and driving sales growth.
9. Macy’s Inc. (NYSE:M)
Number of Hedge Fund Investors: 44
Jim Cramer noted that Macy’s Inc. (NYSE:M) shares fell over 7% despite the department store chain surpassing earnings expectations. The drop was driven by a revenue shortfall and a lowered full-year sales forecast. In contrast, Bloomingdale’s and Bluemercury, which are part of the same retail group, are performing better than Macy’s Inc. (NYSE:M) according to Cramer.
“Macy’s shares sank more than 7% after the department store chain beat on earnings but missed on revenue. The company cut its full-year sales forecast. Bloomingdale’s and Bluemercury are doing better than the Macy’s nameplate.”
Macy’s Inc. (NYSE:M) is a strong investment opportunity because of its solid brand and loyal customers, which help drive traffic to both its physical and online stores. Macy’s Inc. (NYSE:M) has effectively combined its physical stores with its digital operations, creating a smooth shopping experience that meets changing consumer habits. This omnichannel approach is already boosting revenue through increased online and mobile sales.
Macy’s Inc. (NYSE:M) also owns valuable real estate in key urban areas, adding intrinsic value and offering chances to monetize underperforming properties. By expanding its private labels and exclusive brands, Macy’s Inc. (NYSE:M) is able to achieve higher profit margins and stand out in the crowded retail market. Currently, Macy’s Inc. (NYSE:M) is trading at a low price-to-earnings ratio compared to its historical averages and industry peers, and is currently undervalued. This makes it an attractive buy for investors who believe in Macy’s Inc. (NYSE:M)’s potential for growth and a successful turnaround.
8. Ford Motor Company (NASDAQ:F)
Number of Hedge Fund Investors: 47
Jim Cramer observed that Ford Motor Company (NASDAQ:F) has decided to delay the production of a new plant in Tennessee, which was set to build a next-generation all-electric pickup truck. Ford Motor Company (NASDAQ:F) is also canceling its plans for a three-row electric SUV and will now focus more on hybrids. Cramer mentioned that his team sold off their remaining Ford Motor Company (NASDAQ:F) shares on August 5.
“Ford announced Wednesday that it’s delaying production of a new plant in Tennessee to produce a next-generation all-electric pickup truck. It’s also canceling plans for a three-row electric SUV. Ford said it will instead prioritize hybrids. Shares rose about 1%. We sold off the rest of our Ford position on Aug. 5.”
Ford Motor Company (NASDAQ:F) is heavily investing in EVs like the F-150 Lightning and Mustang Mach-E, which positions it well in the expanding EV market. Ford Motor Company (NASDAQ:F) is also collaborating with tech partners to enhance autonomous and connected car features, driving further innovation. Meanwhile, the demand for its traditional vehicles, such as the F-Series trucks, remains high, providing significant revenue.
Ford Motor Company (NASDAQ:F)’s focus on improving efficiency and managing costs is boosting its profitability. With its stock trading at an attractive valuation compared to competitors, Ford Motor Company (NASDAQ:F) represents a promising investment.