In this article, we’ll explore Jim Cramer’s 10 Go-To Stocks for Success.
In a recent episode of Mad Money, Jim Cramer offers a perspective on Nvidia and its recent market behavior on Wednesday’s episode of Mad Money, presenting a straightforward analysis of the company’s stock performance and the broader implications for investors. Cramer notes that owning the company’s stock was easier when the company was less well-known. As the company has become a major market focus, it’s attracted significant attention and criticism, which is evident after its recent financial report.
“Once you get this big, to the point where you become the focal point of the entire stock market, you’re going to have a target on your back. And that’s exactly what I think happened tonight to the stock after the firm reported a fine and dandy set of numbers. But fine and dandy is no longer enough for this incredible company.”
Despite reporting impressive numbers—122% revenue growth, a 152% increase in adjusted earnings per share, and a $50 billion buyback— the firm’s stock fell after hours. This reaction reflects high expectations that may have become unrealistic. The stock market as a whole suffered due to pre-quarter jitters surrounding the company, with declines in major indices like the Dow, S&P 500, and Nasdaq Composite. The drop in the firm’s stock price after the earnings report, coupled with concerns about its influence on the broader market, has led some to call this period the GPU maker’s “buzzkill quarter.”
“The Dow declining 59 points was bad, the S&P losing 0.6%, and the Nasdaq Composite 1.12%. And now, with the stock sinking after hours, we could be in for a hangover from what they’re already calling the company’s buzzkill quarter. But the people saying this might as well be having a watch party—yes, there was one—but there’s nothing to celebrate here. Move on.”
Cramer emphasizes that the company’s role in artificial intelligence is significant, but its overemphasis has become a burden on the market. The company’s market capitalization has skyrocketed from around $500 billion to over $3 trillion in just 18 months. Cramer suggests that the company’s immense importance might be overblown and that a recalibration might benefit the market.
“We know that artificial intelligence is the way of the future, and it’s the best bet on AI. But the company has become an albatross around the market’s neck because no one stock should be a proxy for the future of the S&P 500. Yet, that’s exactly what’s happened as the company has grown from around $500 billion in market cap just 18 months ago to more than $3 trillion now. Maybe after tonight, it will shed that millstone—like Apple did. You know what? That would be a godsend for all of us.”
Cramer expresses frustration with how quickly concerns about the company have spread to the broader tech sector, although he acknowledges that companies like Salesforce reported positive numbers. Cramer concludes by advising investors to diversify their portfolios beyond just tech stocks. He suggests that while diversification might seem less exciting, it is a crucial strategy to mitigate risks associated with over-reliance on a single sector or stock.
“It felt like insult added to injury when there was no injury to the company. It will muddle through and recharge at its next iteration. Blackwell goes boring, and we see renewed expectations. I hope they don’t get excessive like they were tonight.”
Our Methodology
This article reviews a recent episode of Jim Cramer’s Mad Money, where he discussed ten stocks he believes have significant growth potential. It also looks at how hedge funds view these stocks and ranks them based on their level of hedge fund ownership, starting with the least owned and moving to the most owned.
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’s 10 Go-To Stocks for Success
10. Foot Locker Inc. (NYSE:FL)
Number of Hedge Fund Investors: 23
Foot Locker Inc. (NYSE:FL) remains a major player in the athletic footwear and apparel market, thanks to its strong partnerships with top brands like Nike Inc. (NYSE:NKE), Adidas (OTC:ADDYY), and Puma. Although the retail industry faces challenges, Foot Locker Inc. (NYSE:FL)’s strong market position and loyal customer base give it a significant edge over competitors. Foot Locker Inc. (NYSE:FL)’s efforts to remodel stores, improve digital systems, and enhance its supply chain are aimed at better serving customers and running operations more efficiently.
Jim Cramer believes that Foot Locker Inc. (NYSE:FL) is a turnaround story with significant potential, even though its stock fell 10% recently. Despite reporting stronger-than-expected results, including a return to same-store sales growth and improved gross margins, foot Locker Inc. (NYSE:FL) had already risen 45% before this earnings report. This prior increase, combined with skepticism about meeting full-year forecasts, likely contributed to the drop.
“Second down retailer hits too close to home. I’m talking about Foot Locker. As a former holding of the Charitable Trust, we bailed on in June. Absolute numbers here were not as strong as ANF’s. Foot Locker still firmly in turnaround mode under new CEO Mary Dillon. I should say relatively new, but they were still better than expected across the board. I actually like the quarter.
After five quarters of same-store sale shrinkage, Foot Locker returned to growth, up 2.6%. Handily beat the expectations. That should have been enough to keep the stock a little bit higher. Gross margins expanded. That should have been enough. Inventories decreased by 10%. That should have been enough. And they only lost 5 cents per share when Wall Street expected a 7-cent loss. But they still lost money.”
By focusing on expanding its online presence and omnichannel capabilities, Foot Locker Inc. (NYSE:FL) is well-positioned to benefit from the growing trend of online shopping. Foot Locker Inc. (NYSE:FL)’s efforts to control costs and streamline its store operations suggest that it could see better profit margins in the future. With its stock trading below historical averages, there is a potential buying opportunity for investors.
Furthermore, Foot Locker Inc. (NYSE:FL)’s attractive dividend yield provides steady income while waiting for the stock’s value to rise. As the economy recovers and consumer spending increases, Foot Locker Inc. (NYSE:FL) is set to gain from a rise in demand for athletic wear. The growing popularity of athleisure and interest in sports and fitness are likely to drive sales growth.
Here’s what Foot Locker Inc. (NYSE:FL)’s CFO, Mike Baughn, has to say in their latest earnings call:
“In the second quarter, starting with revenue, total sales increased 1.9% led by comps up 2.6%, which was slightly ahead of our prior guidance of flat to up slightly. Total revenues included an $11 million non-recurring charge associated with the rollout of the company’s enhanced FLX program, which impacted our total sales line and not comps within the quarter. In terms of monthly cadence, comps improved as we moved through the quarter, with May comps down low single digits, June comps up mid-single digits, and July the strongest month of the quarter with comps up mid-single digits and slightly ahead of June. Moving to margins, we were pleased to return to gross margin rate expansion in the quarter and accomplishing that while also improving our comp trajectory.
On a reported basis, gross margin for the quarter expanded 50 basis points to 27.6%. Merchandise margins were down 20 basis points. Occupancy as a percent of sales levered 70 basis points on the positive comp. To note, the quarter included an approximate 40 basis point impact related to the non-recurring FLX charge taken in the quarter. Excluding the FLX charge, gross margin increased approximately 90 basis points, including 20 basis points of merchandise margin expansion due to the reduced promotional levels year-over-year. Approximately $10 million of gross margin savings from our cost optimization programs also flowed through our cost of goods line. For the second quarter, our SG&A rate came in at 25.1%, representing deleverage of 130 basis points.
Investments in technology and brand building, as well as ongoing inflationary pressures, were partially offset by savings from the cost optimization program of approximately $10 million. Collectively, our cost optimization program generated total savings of approximately $20 million in the second quarter. Finally, our earnings loss per share was $0.13, and non-GAAP earnings per share landed at a loss of $0.05 per share. Included in both our GAAP and non-GAAP earnings per share results was an approximate $0.09 impact from our non-recurring FLX charge. Turning to the balance sheet, we ended the quarter with $291 million of cash and total debt of $445 million. At quarter end, inventories were down 10% versus last year, as we remained committed to keeping our inventories controlled, slowing product to better match demand, and improving our inventory turns in 2024.
Turning to cash flows. Cash flow from operations was $68 million in the quarter, while capital expenditures were $56 million, yielding a positive free cash flow of $12 million in the second quarter, a significant improvement as compared to the prior year. We are pleased to see positive free cash flow in the quarter and remain on track to generate positive free cash flow for the year, moving on to the changes towards international operations, as well as our corporate footprint, that were announced this morning. The further streamlining and optimization of our international footprint will impact approximately 30 stores and is expected to be completed by mid-2025. In 2023, these regions represented approximately 1% of global revenue and over $10 million in operating losses.” (Click here to continue reading…)
9. Kohl’s Corporation (NYSE:KSS)
Number of Hedge Fund Investors: 31
Kohl’s Corporation (NYSE:KSS) is well-positioned for growth due to its successful partnership with Sephora and plans to expand Sephora shop-in-shops within its stores. This expansion aims to enhance the shopping experience, attract more customers, and boost sales per square foot. Additionally, Kohl’s Corporation (NYSE:KSS) is improving its store layout and strengthening its omnichannel services, like buy-online-pickup-in-store (BOPIS) and curbside pickup, which are expected to increase both in-store and online sales.
Jim Cramer sees Kohl’s Corporation (NYSE:KSS) as a retailer with the potential for a turnaround under the leadership of its new CEO, Tom Kingsbury, who previously had success at Burlington. Despite a recent mild bounce in Kohl’s Corporation (NYSE:KSS)’s stock, Cramer believes this was more about the stock’s significant drop of 34% from its April highs rather than the earnings report alone.
“How about Kohl’s? The other retailer that gained ground today in response to earnings. These guys are trying to mount a comeback under the leadership of new CEO Tom Kingsbury. He’s a retail wizard, formerly of Burlington. Wow, what he did with that one. But I think the stock’s mild bounce today was more a reflection of the fact that Kohl’s was down 34% from its April highs as of last night’s close.
Although I like its total embrace of the fast-growing Sephora business, which is embedded in over 900 Kohl’s locations, at the end of the day, this was a mixed quarter for the department store chain. Kohl’s saw a 5.1% decline in same-store sales, worse than expected, and a significant revenue miss. Kingsbury said, and I quote, “”Customers exhibited more discretion in their spending, which pressured our sales,” end quote. That, of course, were pockets of strength like the aforementioned Sephora, along with home decor. That was nice. And gift and impulse purchases.”
The latest Q2 2024 earnings report shows Kohl’s Corporation (NYSE:KSS) net sales at $3.9 billion, a slight decrease from last year but still better than expected. Kohl’s Corporation (NYSE:KSS)’s adjusted earnings per share (EPS) of $0.52 exceeded forecasts, and its operating margin improved to 7.5% from 6.5% last year. As consumer spending shifts toward value-oriented retailers, Kohl’s Corporation (NYSE:KSS) is set to benefit from its wide range of products and strong brand selection.
With improving consumer confidence and increased spending, Kohl’s Corporation (NYSE:KSS) is expected to see growth in sales, particularly in apparel and home goods. Kohl’s Corporation (NYSE:KSS)’s focus on operational efficiency, including better inventory management and supply chain improvements, supports its long-term growth prospects. Recent initiatives, such as expanding the Sephora partnership by the end of 2024, enhancing e-commerce capabilities, and implementing cost-saving measures, all enhance Kohl’s Corporation (NYSE:KSS) investment potential.
8. Nordstrom Inc.(NYSE:JWN)
Number of Hedge Fund Investors: 34
Nordstrom Inc. (NYSE:JWN) is a leading American retailer known for its upscale department stores and robust e-commerce presence. Nordstrom Inc.(NYSE:JWN)’s commitment to personalized service and exclusive offerings, including Nordstrom Rack stores, helps maintain a loyal customer base and enhances its competitive position as consumers seek premium shopping experiences.
Jim Cramer is optimistic about Nordstrom Inc. (NYSE:JWN)’s recent performance, noting that the company exceeded expectations with both same-store sales and earnings, and has raised its full-year earnings forecast.
“Last night, Nordstrom delivered better-than-expected same-store sales and a substantial earnings beat, with management raising its full-year earnings forecast. Now, you might not think an expensive department chain would work here, but Nordstrom’s strength came from its off-price Nordstrom Rack business, with 269 stores around the country. As for the core department store, it got a boost from the company’s annual anniversary sale. More of that sale fell during the second quarter of the period this year, which really bolstered the numbers, even as it will hurt the current quarter.
Look, overall, I think Nordstrom should get credit for leaning into value. That’s what the customer needs and wants. Stock rallied over 4% today, but while that’s justifiable, I’m not willing to stick my neck out. I have to tell you, though, I think that this Rack is worth more than the whole chain, and that may be the conundrum people feel.””
Nordstrom Inc.(NYSE:JWN)’s significant investments in digital transformation and its omnichannel strategy have improved its e-commerce platform and integrated it with physical stores. This strategy provides a smooth shopping experience across both online and offline channels, supporting growth in online sales and leveraging data-driven marketing to personalize customer interactions.
In the latest Q2 2024 earnings report, Nordstrom Inc.(NYSE:JWN) recorded net sales of $3.77 billion, slightly down from $3.99 billion the previous year. However, Nordstrom Inc.(NYSE:JWN)’s earnings per share (EPS) of $0.84 surpassed expectations, showcasing effective cost management and operational efficiency. The gross profit margin improved to 35.2% from 34.5%, reflecting better inventory and pricing strategies.
Nordstrom Inc.(NYSE:JWN) is focusing on expanding its Nordstrom Rack stores, enhancing supply chain and inventory management, and boosting sales through promotional events like the Anniversary Sale. These efforts are designed to strengthen its market presence and improve responsiveness to consumer demand.
