During Mad Money’s episode on October 1, host Jim Cramer urged investors to remember the market’s strong performance over the past quarter, making note of the rising tensions in the Middle East, which led to a decline in major stock indices on Tuesday.
He pointed out that the landscape has shifted beyond just the major technology companies, and shed light on the top performers of the S&P 500. Cramer observed that the last three months have witnessed what he described as “the revenge of the little guy companies.” He said:
“When you look at the 10 best performers of the third quarter, we discover that this formerly narrow market has totally changed its stripes.”
Cramer emphasized that the current market rally is driven by companies that are often overlooked. He said:
“It is a remarkable list that represents a real broadening out of the winners. Some would say it’s a sign of where we’re headed. I might not go that far, but clearly, we need to start digging a lot deeper to find winners going forward.”
In his recent commentary, Cramer highlighted that the major winners of the third quarter were unexpectedly obscure, primarily comprising a group of ten stocks focused on power generation and interest rate cuts.
He pointed out that these stocks diverged from the well-known Magnificent Seven and traditional FAANG names, with an absence of fast-growing medical or cybersecurity companies, many of which have faced challenges recently.
Cramer suggested that investors look to the bottom of the S&P 500 for insights into market trends. He noted that Super Micro finished last for the quarter, plummeting 49%. It serves as a reminder that backing the wrong AI investment can lead to significant losses. Despite this, Cramer emphasized the need for the market to focus on new stocks for long-term growth rather than relying on past leaders.
Jim Cramer’s 10 Best Performers in the Third Quarter
Our Methodology
For this article, we compiled a list of 10 stocks that Jim Cramer mentioned during his episode of Mad Money on October 1. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
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).
Jim Cramer’s Best Performers List: Top 10 Picks
10. Erie Indemnity Company (NASDAQ:ERIE)
Number of Hedge Fund Holders: 14
During his episode, Cramer said that “Erie’s success is eerie.” Erie Indemnity Company (NASDAQ:ERIE) functions as the managing attorney-in-fact for the subscribers of the Erie Insurance Exchange in the United States. It offers various services, including the issuance and renewal of insurance policies, underwriting, and sales-related support.
Additionally, the company provides customer service, administrative assistance, and information technology support. Cramer mentioned that the company was the best-performing stock in the entire S&P 500. He said:
“It’s up 49%. Now, a lot of that had to do with the stock’s admission to the index, which brought it into a slew of automatic buyers, but man. Erie Indemnity manages the Erie Insurance Exchange, $10 billion in premiums, around 7 million policies in force, and when the Fed cuts rates, insurance companies go wow. This one’s truly emblematic of the eclectic non-tech group of winners that dominated the third quarter.”
Erie Indemnity’s (NASDAQ:ERIE) growth trajectory has been significant, especially highlighted by reaching 6 million policies in force in 2021. Achieving an additional 1 million policies in just three years is remarkable, considering that it took over 60 years to reach the first million.
Furthermore, the direct written premiums for the exchange increased by 20% in the second quarter of 2024 compared to the same period in the previous year. In the second quarter, it reported net income of $163.9 million, or $3.13 per diluted share. It was a significant increase from the $117.9 million, or $2.25 per diluted share, reported in the second quarter of 2023.
9. Stanley Black & Decker, Inc. (NYSE:SWK)
Number of Hedge Fund Holders: 24
Stanley Black & Decker, Inc. (NYSE:SWK) is a manufacturer of hand tools, power tools, outdoor products, and associated accessories, serving a global market that spans the United States, Canada, Latin America, Europe, and Asia.
Through the Tools & Outdoor segment, it offers a comprehensive selection of professional-grade power tools and equipment, which are all marketed under well-known brands such as DEWALT, CRAFTSMAN, and BLACK+DECKER. Its Industrial segment offers specialized fasteners and tools.
Talking about his charitable trust’s portfolio, Cramer mentioned the company and commented:
“We wanted to invest in a company that tends to outperform when mortgage rates go lower and people fix up their homes. After years of lagging the market, Stanley Black & Decker has come back with a vengeance, up 37.9% in the third quarter. It was rallying in anticipation of the rate cuts.”
In light of recent economic challenges, including sustained high interest rates that have pressured the housing market, Stanley Black & Decker (NYSE:SWK) has taken proactive measures to overcome the challenges.
A comprehensive restructuring plan launched in 2022 seeks to streamline operations by consolidating facilities, reducing management layers, and improving the supply chain. It is designed to reduce costs significantly, targeting a reduction of $2 billion in run rate costs between 2022 and 2025.
As of mid-2024, Stanley Black & Decker’s (NYSE:SWK) global cost reduction program remains on track, with an anticipated savings of $1.5 billion by the end of 2024 and a total of $2 billion by 2025. By mid-2023, the actions taken had already achieved $1.3 billion in run rate savings.