Jim Cramer’s 10 Best Stocks to Buy After Fed Rate Cut

4. Western Digital Corporation (NASDAQ:WDC)

Number of Hedge Fund Investors: 80

Jim Cramer notes that Western Digital Corporation (NASDAQ:WDC)’s stock has historically outperformed in the three months following the first interest rate cut. However, he cautions that Western Digital Corporation (NASDAQ:WDC), a manufacturer of hard drives and solid-state drives, has often been considered a value trap.

“Western Digital is up over 20% on average in the three months following the first rate cut. This maker of hard drives and solid-state drives, basically storage for your phone or PC, has historically been a giant value trap. Right now, we’re seeing an uptick in demand for storage as part of the AI data center theme.”

Western Digital Corporation (NASDAQ:WDC) is poised for continued growth, driven by the increasing demand for storage solutions in response to the rapid expansion of data generation, cloud computing, and AI applications. As data centers expand and more devices require storage, Western Digital is well-positioned to capitalize on these market trends and gain market share.

In its Q2 2024 earnings report, Western Digital Corporation (NASDAQ:WDC) reported about $4.5 billion in revenue, showing significant year-over-year growth. Improved gross margins resulted from effective cost management and increased demand for higher-margin products like SSDs. Western Digital Corporation (NASDAQ:WDC)’s commitment to innovation is clear in its substantial investments in research and development, leading to advancements in flash storage technology and new next-generation SSDs that meet industry demands for faster, more efficient solutions.

Strategic partnerships with major cloud service providers are expected to boost revenue and secure long-term contracts, enhancing financial stability. Additionally, Western Digital Corporation (NASDAQ:WDC) maintains a strong balance sheet with manageable debt and ample liquidity, allowing it to handle market fluctuations effectively. Recent plans to improve manufacturing capabilities, especially in 3D NAND technology, along with sustainability initiatives, may also appeal to environmentally-conscious investors.

Parnassus Mid Cap Fund stated the following regarding Western Digital Corporation (NASDAQ:WDC) in its Q2 2024 investor letter:

“We re-initiated a position in Western Digital Corporation (NASDAQ:WDC), a manufacturer of memory semiconductor chips and hard disk drives, as we believe earnings expectations are far too low. Semiconductors have been another of our most-alpha-generative industries, thanks to the industry’s secular tailwinds and our in-house expertise. Western Digital stands to benefit from the rapid growth of memory-hungry AI applications. The valuation for Western Digital was low relative to its peers, giving us a way to participate in AI at a reasonable valuation.”