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.
7. Target Corporation (NYSE:TGT)
Number of Hedge Fund Investors: 52
Jim Cramer highlighted Target Corporation (NYSE:TGT) as a standout performer, noting that the company saw its shares surge by over 14%. This increase followed Target Corporation (NYSE:TGT)’s strong earnings and revenue results for the quarter. CEO Brian Cornell attributed the positive performance to the successful May rollback of prices on 5,000 items, which resonated well with customers.
“Target was the big winner. Shares surged more than 14% after the big box retailer beat on earnings and revenue for the quarter. CEO Brian Cornell said customers are responding to the May rollback of prices on 5,000 items.”
Target Corporation (NYSE:TGT) stands out as a strong investment choice due to its solid financial performance and strategic growth efforts. Target Corporation (NYSE:TGT) has consistently demonstrated strong revenue growth and high profit margins, with a 6% increase in revenue and a 4% rise in comparable sales in its Q2 2024 earnings report. This indicates Target Corporation (NYSE:TGT)’s effective supply chain management and strong consumer demand. Target Corporation (NYSE:TGT)’s investments in improving its online and in-store operations, along with its successful omnichannel strategy, are expanding its market share.
Target Corporation (NYSE:TGT)’s focus on same-day services, like order pickup and delivery, is attracting more customers and enhancing its competitive position. Furthermore, Target Corporation (NYSE:TGT)’s stock is currently valued attractively compared to its historical averages and retail peers, suggesting it is undervalued and a good buying opportunity. Target Corporation (NYSE:TGT)’s strong brand and customer loyalty, bolstered by popular private label brands like Good & Gather and Cat & Jack, further support its stability and growth potential.
ClearBridge Value Equity Strategy stated the following regarding Target Corporation (NYSE:TGT) in its Q2 2024 investor letter:
“Conversely, stock selection in the consumer staples sector was a relative detractor. The biggest detractor in the sector was Target Corporation (NYSE:TGT), the general merchandise retailer, which faced pressure after its first-quarter earnings fell short of market expectations. In addition to higher expenses, driven by a focus on newer, higher-quality goods, the string of higher-than-anticipated inflationary readings and declining consumer confidence created a more difficult environment for discretionary spending.”
6. Medtronic plc (NYSE:MDT)
Number of Hedge Fund Investors: 52
Jim Cramer notes that Medtronic plc (NYSE:MDT) has recently seen several upgrades to its price targets following its earnings report on Tuesday. Baird raised its target from $82 to $90 per share but maintained a hold-equivalent rating, while Wells Fargo (NYSE:WFC) increased its target to $106 and kept an overweight rating.
“Medtronic picked up multiple price target bumps after its earnings report Tuesday. Baird goes to $90 a share from $82 but kept its hold-equivalent rating. Wells Fargo went up a dollar to $106 and maintained its overweight rating. Its neuromodulation business was a standout in the quarter.”
Medtronic plc (NYSE:MDT) is a major player in the medical device field, with a wide range of products across cardiovascular, diabetes, and neurological areas. Its large market share and global presence set the stage for ongoing growth. Medtronic plc (NYSE:MDT) is dedicated to innovation, shown by its strong lineup of new products and technologies, including advancements in robotic-assisted and minimally invasive surgeries. The introduction of the Hugo™ robotic-assisted surgery system highlights Medtronic’s strategy to stay ahead in the market and boost future revenue.
Recent financial reports show Medtronic plc (NYSE:MDT)’s steady revenue growth, with a 5% increase compared to last year, reflecting strong demand for its products. Medtronic plc (NYSE:MDT)’s focus on cost control and efficiency has improved its profit margins and financial health. As demand for advanced medical technologies rises and the global population ages, Medtronic plc (NYSE:MDT) is well-positioned to benefit from these trends. Recent acquisitions, like Mazor Robotics, have strengthened its capabilities in neurosurgery, which is expected to drive future growth and increase value for shareholders.
5. The TJX Companies Inc. (NYSE:TJX)
Number of Hedge Fund Investors: 56
Jim Cramer highlighted The TJX Companies Inc. (NYSE:TJX) for its strong quarterly performance. Although The TJX Companies Inc. (NYSE:TJX) raised its full-year guidance, it fell slightly short of some forecasts. Despite this, The TJX Companies Inc. (NYSE:TJX)’s stock jumped over 3%, reflecting investor confidence in its continued success.
“Club name TJX Companies delivered quarterly beats on earnings and revenue. The off-price retailer behind T.J. Maxx, Marshalls and HomeGoods raised full-year guidance, though it was a tad short of expectations. Shares jumped more than 3%.”
The TJX Companies Inc. (NYSE:TJX) is set for continued success with its strong off-price retail model featuring brands like T.J. Maxx, Marshalls, and HomeGoods. This approach works well by offering high-quality items at lower prices, which attracts budget-conscious shoppers, even during tough economic times. The TJX Companies Inc. (NYSE:TJX) has shown impressive financial results, including a 7% increase in comparable store sales this year from both new and existing locations.
The TJX Companies Inc. (NYSE:TJX) maintains solid profit margins and generates strong cash flow, reflecting its financial health and growth potential. The TJX Companies Inc. (NYSE:TJX) is expanding both in the U.S. and internationally, with new market entries like Australia bolstering its growth prospects. Advanced inventory management helps The TJX Companies Inc. (NYSE:TJX) manage stock levels efficiently, minimize markdowns, and boost profitability.
Madison Investors Fund stated the following regarding The TJX Companies, Inc. (NYSE:TJX) in its Q2 2024 investor letter:
“The TJX Companies, Inc. (NYSE:TJX), an off-price retailer, continues to do well. Its value-based retail stores are resonating with consumers given the backdrop of higher inflation, which led to strong revenue and profit growth in the most recent quarter.”
4. JD.com Inc. (NASDAQ:JD)
Number of Hedge Fund Investors: 59
Jim Cramer noted that Walmart Inc. (NYSE:WMT) recently sold off its $3.7 billion investment in JD.com Inc. (NASDAQ:JD). Despite this significant divestment, Walmart Inc. (NYSE:WMT) plans to maintain its partnership with JD.com Inc. (NASDAQ:JD). Interestingly, this move caused JD.com Inc. (NASDAQ:JD)’s stock to drop by 8%. Cramer speculated that this decline might suggest an overinflated market in China.
“Walmart blew out of its stake in Chinese online retailer JD.com. However, the American retail giant will continue the partnership. Strangest thing: The move knocked JD.com stock down 8%. It’s making me think that perhaps the whole market in China is wildly inflated.”
JD.com Inc. (NASDAQ:JD) is a top player in China’s e-commerce sector, with a major market share that puts it in strong competition with Alibaba Group Holding Limited (NYSE:BABA). JD.com Inc. (NASDAQ:JD)’s extensive product selection and efficient delivery system enhance its market position.JD.com Inc. (NASDAQ:JD)’s recent financial results are strong, showing a 12% increase in revenue compared to last year, thanks to higher customer engagement and a broader market presence.
JD.com Inc. (NASDAQ:JD)’s substantial investments in technology, such as AI and automation, are improving efficiency and cutting costs. With the e-commerce market in China expanding due to more internet use and consumer spending, JD.com Inc. (NASDAQ:JD) is well-placed to grow its market share. Additionally, its expansion into Southeast Asia and partnerships with global brands add to its growth potential.
Ariel Global Fund stated the following regarding JD.com, Inc. (NASDAQ:JD) in its first quarter 2024 investor letter:
“We initiated a position in China-based technology-driven E-commerce company, JD.com, Inc. (NASDAQ:JD). The brand has long been known across the region as a superior online shopping channel due to its unique first-party model and unparalleled fulfillment service underpinned by JD Logistics. Yet, a challenging macro environment drove shares lower as shoppers began seeking bargains. In response, the company made significant investments in elevating its third-party merchant platform to enhance its variety of product offerings and price competitiveness for consumers. We believe these actions will yield an improved product mix, stronger top-line growth and margin expansion on a go-forward basis.”
3. Palo Alto Networks Inc. (NASDAQ:PANW)
Number of Hedge Fund Investors: 66
Jim Cramer observed that Bank of America raised its price target for Palo Alto Networks Inc. (NASDAQ:PANW) to $400 per share from $370, acknowledging the stock’s recent upward momentum. Despite this upgrade, the analysts maintained a hold rating, citing ongoing concerns that could affect the investment outlook.
“Palo Alto Networks price target at BofA increased to $400 per share from $370, in recognition of the cybersecurity stock’s recent surge. The analysts kept their hold rating, saying the company “continued flagging a few negatives for a few quarters that keep tainting the investment case.” Palo Alto on Tuesday extended its recent stock rally on this week’s solid earnings. The Club stock was basically flat Wednesday.”
Palo Alto Networks Inc. (NASDAQ:PANW) is a leading name in the cybersecurity industry, offering advanced solutions like next-generation firewalls, cloud security, and endpoint protection. Its top rankings from Gartner confirm its strong market position. Recent financial results show a 22% increase in revenue year-over-year, driven by high demand for its cybersecurity products. With the growing global need for cybersecurity due to rising cyber threats and stricter regulations, Palo Alto Networks Inc. (NASDAQ:PANW) is well-positioned to capitalize on this trend.
Palo Alto Networks Inc. (NASDAQ:PANW)’s substantial investments in research and development keep it at the cutting edge of technology, with innovations such as the Cortex XSOAR platform reinforcing its leadership. Additionally, acquisitions like Expanse and Demisto have strengthened its cloud security and security operations capabilities, setting Palo Alto Networks Inc. (NASDAQ:PANW) up for continued growth and a stronger competitive stance.
2. American Express Company (NYSE:AXP)
Number of Hedge Fund Investors: 92
Jim Cramer noted that Bank of America Corporation (NYSE:BAC) downgraded American Express Company (NYSE:AXP) from a “Buy” to a “Hold” due to weaker consumer spending. Despite this downgrade, the analysts maintain a positive long-term outlook for American Express Company (NYSE:AXP). Cramer questioned the downgrade, given the analysts’ continued optimism about American Express Company (NYSE:AXP)’s future.
“Bank of America downgraded American Express to a hold from buy. The analysts cited muted consumer spending. They still like it longer term, however, for which I say: Why downgrade it?”
American Express Company (NYSE:AXP) presents a strong investment opportunity due to its well-established brand and high customer loyalty. American Express Company (NYSE:AXP) is known for its excellent service and exclusive benefits, which attract and keep high-spending customers. American Express Company (NYSE:AXP) has shown strong financial performance, with recent reports highlighting significant revenue and net income growth, largely driven by increased spending by cardholders.
American Express Company (NYSE:AXP) benefits from rising consumer and business spending, evidenced by a 12% year-over-year increase in network spending. Its investments in digital technology and international expansion position it well for capturing a larger share of the global payments market. With a robust balance sheet, solid capital ratios, and a history of returning value to shareholders through dividends and buybacks, American Express Company (NYSE:AXP) maintains strong investor confidence.
Artisan Select Equity Fund stated the following regarding American Express Company (NYSE:AXP) in its first quarter 2024 investor letter:
“American Express Company (NYSE:AXP) shares rose 22% this quarter. This is an interesting case study given our earlier discussion about inflation. American Express operates one of the largest credit card networks in the world. Its revenue is largely a function of a fee rate applied to the dollar value of goods and services that are transacted through its network. That dollar value is, of course, nominal. As inflation pushes up the value of those goods and services as it has for the past few years, American Express will capture that value through its fee structure. The past few years inflation has clearly been a benefit. Aside from its inherent inflation protection, the business is a very strong one. Payments continue to shift toward electronic forms, benefiting American Express. It also has a strong brand that attracts loyal and highly profitable customers that are the envy of the industry. Recent results have been strong with revenues moving nicely ahead of GDP.”
1. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Investors: 95
Jim Cramer noted that Walmart Inc. (NYSE:WMT)’s recent decision to sell its $3.7 billion stake in Chinese online retailer JD.com Inc. (NASDAQ:JD) is surprising, especially given that Walmart Inc. (NYSE:WMT) will still maintain its partnership with JD.com Inc. (NASDAQ:JD). Despite this, Walmart Inc. (NYSE:WMT)’s own stock saw a 1% increase.
“Walmart blew out of its $3.7 billion stake in Chinese online retailer JD.com. However, the American retail giant will continue the partnership. Strangest thing: The move knocked JD.com stock down 8%. It’s making me think that perhaps the whole market in China is wildly inflated. Walmart shares rose 1%.”
Walmart Inc. (NYSE:WMT) is an attractive investment due to its strong position as a leading global retailer with a wide reach in both physical stores and e-commerce. Walmart Inc. (NYSE:WMT) has significantly grown its online business, with e-commerce revenue jumping 37% in the latest fiscal year. Walmart Inc. (NYSE:WMT)’s ability to seamlessly integrate online and in-store shopping—through options like buy online, pick up in-store, and same-day delivery—improves customer convenience and drives sales.
Walmart Inc. (NYSE:WMT)’s large-scale and cost leadership are supported by its efficient supply chain and tech investments. Walmart Inc. (NYSE:WMT)’s ongoing expansion, including international moves like acquiring Flipkart in India, enhances its market presence and growth potential. Furthermore, Walmart Inc. (NYSE:WMT)’s commitment to returning value to shareholders through dividends and share buybacks underscores its financial stability and shareholder focus.
While we acknowledge the potential of Walmart Inc. (NYSE:WMT), our conviction lies in the belief that under the radar 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 NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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