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.
8. Axon Enterprise, Inc. (NASDAQ:AXON)
Number of Hedge Fund Holders: 36
Axon Enterprise, Inc. (NASDAQ:AXON) is engaged in the development, manufacturing, and sale of conducted energy devices (CEDs) under the TASER brand. The company operates through two main segments, Software and Sensors, and TASER.
It offers a comprehensive range of products that includes various Taser models, such as Taser 10 and Taser 7, as well as camera systems like Axon Body and Axon Fleet. Its software solutions encompass Axon Records and Evidence, supplemented by mobile applications, training services, and hardware extended warranties.
Cramer mentioned the company and said:
“Axon stock has been red hot for ages so it’s no surprise at all that it rallied another 35.8% in the third quarter. [It] seems strange that we don’t talk about this stock more but it’s very much part of the broadening of the winners column.”
In August, Axon Enterprise (NASDAQ:AXON) reported a significant increase in quarterly revenue, up 35% compared to the previous year. The growth was largely driven by a remarkable 47% rise in cloud sales, along with a 28% increase in Taser revenue.
The quarter marked an important achievement for the company, as cloud revenue reached $195 million, nearly matching the $197 million generated from hardware sales. The company serves customers across all 50 states in the U.S. and operates in 90 countries, with Axon Cloud now housing over 2 billion law enforcement evidence files.
The extensive cloud infrastructure is becoming essential for local, state, federal, and international public safety agencies, whether for evidence collection or analysis. The profitability of the cloud business adds another layer of appeal, as it recorded a gross margin of 72.4% for the quarter.
By the end of the reporting period, Axon Enterprise (NASDAQ:AXON) had secured $7.3 billion in future contracted revenue, a substantial increase from $5.2 billion the previous year.
7. Mohawk Industries, Inc. (NYSE:MHK)
Number of Hedge Fund Holders: 40
Mohawk Industries, Inc. (NYSE:MHK) is engaged in the design, manufacturing, sourcing, distribution, and marketing of flooring products targeted at both residential and commercial markets.
It offers a diverse range of products, including ceramic and porcelain tiles, natural stone materials, and quartz countertops. Its flooring portfolio features carpets, laminates, and luxury vinyl tiles, along with roofing panels and insulation boards. It markets its products under well-known brands like American Olean and Mohawk.
Part of Cramer’s SP 500’s 10 best performers in the third quarter, he talked about the company and said:
“When you think about what goes into construction, flooring is clearly a necessity and flooring is synonymous with a company called Mohawk Industries, the king of carpet, hardwood, and vinyl flooring, not to mention pretty much everything else you step on. Mohawk is a natural buy in a rate-cut cycle, which is why the stock jumped 41.5% last quarter. Again, this is well ahead of any turn in earnings.”
In response to current market conditions, Mohawk Industries (NYSE:MHK) is focusing on cost reduction and aligning its operations accordingly. To this end, it is implementing restructuring measures expected to generate annual savings of $100 million, with $20 to $25 million anticipated to be realized this year.
The upfront cash cost for these initiatives is projected at about $40 million, while the total cost may reach approximately $130 million. The timeline for executing these changes varies by project, with some extending into 2026.
Despite challenging market conditions globally, Mohawk Industries (NYSE:MHK) management reported that second-quarter results surpassed expectations. The commercial segment has continued to perform well, although some softness has been observed in the residential category. Management remains optimistic about long-term demand for the company’s products.
Ariel Investments stated the following regarding Mohawk Industries, Inc. (NYSE:MHK) in its Q2 2024 investor letter:
“In contrast, manufacturer and distributor of floorcovering products, Mohawk Industries, Inc. (NYSE:MHK) underperformed this quarter, as consumer demand and pricing remain under pressure due to secular headwinds in the housing market. In a difficult environment, management is successfully executing on cost savings and productivity initiatives, while also preparing the business for share gains as demand recovers. In our view, MHK’s healthy balance sheet and progress managing through economic cycles position the company to benefit from long-term growth in residential remodeling, new home construction and commercial projects.”
6. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holders: 44
Palantir Technologies Inc. (NYSE:PLTR) develops and deploys software platforms primarily for the intelligence community. Introducing the company, Cramer said:
“Palantir Technologies is a data analytics company that put up some good numbers but it’s better known as the stock with a huge following among individual investors.”
One of its key offerings, Palantir Gotham, is designed to help users uncover patterns that lie hidden within complex datasets. The company also provides Palantir Foundry, a platform that redefines operational processes for organizations across various sectors.
Another critical tool is Palantir Apollo, which manages software delivery and updates, alongside the Palantir Artificial Intelligence Platform (AIP), which grants users access to a variety of large language models.
Cramer expounded on Palantir (NYSE:PLTR), saying:
“Now, a little more than two weeks ago, the Wall Street Journal published this incredible piece headlined “ The Fanatic Amateur Investors Behind Palantir”, which gave some great insight into the avid fan base that rejoiced when this stock joined the S&P 500 last month. Yeah, they came in on top of the admission and helped the stock soar 46.9% for the quarter.”
Palantir (NYSE:PLTR) has invested considerable time and resources into developing sophisticated AI systems that assist government agencies in navigating vast amounts of data, allowing them to make informed choices.
Although a significant portion of revenue is generated from government contracts, the company has also made strides in extending its AI applications into the commercial sector in recent years. In the second quarter, revenue from U.S. government contracts reached $278 million. Moreover, revenue from the commercial segment surged by 33% during the same period, representing approximately 45% of the company’s total sales.
5. Kellanova (NYSE:K)
Number of Hedge Fund Holders: 45
Kellanova (NYSE:K), formerly known as Kellogg Company, operates in the snack and convenience food sector, delivering a wide range of products across North America, Europe, Latin America, Asia Pacific, the Middle East, Australia, and Africa.
In October 2023, Kellogg Company separated its North American cereal division, forming WK Kellogg, while the remaining brands and regions were rebranded as Kellanova. As per management, the spin-off would lead to a snack-focused business with greater growth potential.
As part of his list of the top performers on the S&P 500 over the past three months, Cramer commented:
“You’re always going to get a takeover in the top 10 but this one really came out of the left field. Kellanova, the snack food company created when the old Kellog broke itself up. It’s being bought by the privately held Mars for a huge $35.9 billion price tag. Now, almost no one saw this one coming because we’re constantly being told that snacks are a dying category thanks to the GLP-1 weight loss drugs. Mars clearly doesn’t think so, and nobody knows junk food better than they do and that’s why the stock of Kellanova was up almost 40%.”
In August, Mars, Incorporated announced plans to acquire Kellanova (NYSE:K) for $83.50 per share in cash, amounting to a total value of $35.9 billion, which includes the assumption of net leverage.
The acquisition represents a significant addition to Mars’s already extensive portfolio, which features well-established billion-dollar brands in snacking and confectionery, including SNICKERS and M&M’S.
The acquisition will also broaden Mars’s health and wellness snacking portfolio, incorporating products like RXBAR and NutriGrain that align with current global trends. It is expected to resonate well with consumers increasingly focused on health-conscious choices.
The completion of the transaction hinges on Kellanova’s (NYSE:K) shareholder approval and other customary closing conditions, including regulatory approvals, with expectations set for closure within the first half of 2025.
4. CBRE Group, Inc. (NYSE:CBRE)
Number of Hedge Fund Holders: 54
CBRE Group, Inc. (NYSE:CBRE) functions as a commercial real estate services and investment company operating in the U.S., the U.K., and internationally. Its Advisory Services segment offers strategic advice for leasing office, industrial, and retail spaces, along with property sales, mortgage financing, management services, and valuation.
The Global Workplace Solutions segment provides facilities management and project management services under the Turner & Townsend brand. The Real Estate Investments segment delivers investment management services under the Trammell Crow Company and Telford Homes brands.
During Mad Money’s episode, in relation to the company, Cramer said:
“We’ve gotten used to people coming on air and warning us about the looming demise of commercial real estate. Well, someone better tell the people at CBRE, which does everything from commercial real estate advisory and transaction services to valuation property management. The fact that this stock could be up almost 40% for the quarter tells me, maybe we should think twice before being so negative on commercial real estate.”
In the second quarter, CBRE Group (NYSE:CBRE) made significant acquisitions totaling approximately $290.9 million, primarily focused on Direct Line Global, a leading provider of technical facilities management services catering to data center owners and operators.
The acquisition strengthens the company’s service offerings, especially for some of the world’s largest technology companies in hyperscale, co-location, and enterprise markets.
Additionally, the giant acquired a provider of local facilities management technical services based in Canada during Q2, further broadening its capabilities in that region. During the quarter, CBRE Group (NYSE:CBRE) also announced plans to merge its project management business with Turner & Townsend.
The new combined business is expected to be reported as a distinct business segment starting in 2025. The integration is expected to create a premier project, program, and cost management business, with over 20,000 employees serving clients across more than 60 countries.
Third Avenue Management stated the following regarding CBRE Group, Inc. (NYSE:CBRE) in its first quarter 2024 investor letter:
“Data Center Services: As data centers have evolved into a distinct sub-set of many real estate mandates, the services provided for “more traditional” property types have expanded into this niche sector. As a result, some of the leading real estate services companies (including Fund holdings CBRE Group, Inc. (NYSE:CBRE), JLL, and Savills plc) have dedicated teams with the capabilities to support facilities management, leasing, advisory, investment sales, and other solutions. Such activity requires limited capital investment but can generate meaningful recurring revenues and transactional fees. For example, CBRE manages approximately 700 data centers globally and has advised on more than $6.0 billion of data center transactions.”
3. Builders FirstSource, Inc. (NYSE:BLDR)
Number of Hedge Fund Holders: 59
Builders FirstSource, Inc. (NYSE:BLDR) is a manufacturer and supplier of building materials. It offers a wide range of manufactured components and construction services. The company caters primarily to professional homebuilders, subcontractors, remodelers, and individual consumers in the U.S. construction industry. During the episode, Cramer advised not to hesitate and wait. He said:
“… the pure play housing supplier for the pros is actually Builder First Source, a niche wholesaler that we’ve featured on the show repeatedly. [The] stock was up 40.1% in the quarter. Again, you cannot wait for Builder First Source to put up big numbers before you buy it, this is an obvious rate-cut winner so you got to get in ahead of time.”
As reported by Research and Markets, the U.S. construction industry is projected to grow by 5.6% in 2024, reaching a total value of $1.27 trillion. It has a projected annual growth rate of 4.7% through 2028, potentially hitting $1.53 trillion. Additionally, lower interest rates may stimulate demand for real estate, drive infrastructure investments, and boost consumer spending.
Builders FirstSource (NYSE:BLDR) has consistently pursued growth through an emphasis on value-added products and services. The approach is seen in recent acquisitions aimed at strengthening market position and expanding geographic reach.
In July, the company announced the acquisition of Western Truss & Components based in Flagstaff, Arizona, and CRi SoCal, located in Orange County, California. Such transactions are in line with its disciplined merger and acquisition strategy, which focuses on improving customer retention and extending leadership in value-added and specialty solutions.
During a recent earnings call, management expressed confidence in the health of the company’s M&A pipeline, indicating a continued ability to acquire in a fragmented market.
Bonhoeffer Capital Management stated the following regarding Builders FirstSource, Inc. (NYSE:BLDR) in its Q2 2024 investor letter:
“Public Leverage Buyouts are public companies that use leverage to boost equity returns from historically stable cash flow businesses. Our broadcast TV franchises, leasing, building products distributors and dealerships fall into this category. One trend we find particularly compelling in these firms is growth creation through acquisitions which provides synergies and operational leverage associated with vertical and horizontal consolidation. The increased cash flow from acquisitions and subsequent synergies are used to repay the debt and repurchase stock, and the process is repeated. This strategy’s effectiveness is dependent upon the spread between the interest rates of their loans and the cash returns from the core business and acquisitions. Over the past few months, long-term interest rates have been declining and short-term rates are expected to follow so a large and growing spread is available to firms. An example is Builders FirstSource, Inc. (NYSE:BLDR) which has a high return on capital. One way to measure future expected returns are post-synergy cash flow ratios paid for acquisitions. Another way to measure future growth in expected returns is via incremental return on incremental invested capital (“RoIIC”)
Many of our holdings used the acquisition/buyback model described above. Some of these firms have also used modest leverage to magnify the returns of equity to 20% and above over the past five to ten years using the acquisition/buyback model. These firms include: Terravest, Asbury Automobile, Ashtead, Autohellas, BFS, and Millicom. In addition, many of these firms are buying back stock and the modest current valuations make these buybacks accretive…” (Click here to read the full text)
2. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 92
Vistra Corp. (NYSE:VST) operates as an electricity retail and power generation company. It provides electricity and natural gas services to residential, commercial, and industrial clients.
The company’s operations include a wide range of activities, including electricity generation, wholesale energy trading, commodity risk management, fuel production, and logistics management.
With a generation capacity of about 41,000 megawatts, it serves around 5 million customers through a diverse portfolio that includes natural gas, nuclear, coal, solar, and battery energy storage facilities. During his episode of Mad Money, Cramer said:
“We’ve seen this insatiable demand for clean energy for data centers and the hyperscalers that use them.”
Technology companies are seeking dependable energy sources that also align with climate commitments. The recent agreement between Constellation Energy and Microsoft to revive the Three Mile Island nuclear plant exemplifies this trend.
Good news for the company came in July. Vistra (NYSE:VST) received crucial regulatory approval to extend the operational lifespan of the Comanche Peak Nuclear Power Plant, allowing it to function until 2053, which adds an additional two decades to its initial licenses.
The facility comprises of two units and has a total capacity of 2,400 megawatts. Since its inception in 1990, Comanche Peak has successfully generated over 582 million megawatt-hours of clean, emission-free electricity.
Cramer went on to talk about the performance of the stock and said:
“Vistra was up 37.9% for the quarter. It’s now up 218% for the year, hard to imagine a boring old utility making that kind of move but carbon-free electricity has become one of the hottest commodities out there.”
Moreover, in 2024, Vistra (NYSE:VST) completed its acquisition of Energy Harbor, expanding its customer base by an additional 1 million retail clients. The transaction also contributed 4,000 megawatts of nuclear generation capacity to its portfolio, complementing the existing 36,702 megawatts at the end of 2023, which includes 2,400 megawatts from nuclear sources.
Fidelity Growth Strategies Fund stated the following regarding Vistra Corp. (NYSE:VST) in its Q2 2024 investor letter:
“An overweight stake in utility company Vistra Corp. (NYSE:VST) (+24%) was the top individual relative contributor. In Q1, the Texas-based independent power producer completed its acquisition of Ohio-based nuclear fleet operator Energy Harbor. The new Vistra, with its expanded geographic footprint, is in strong position to gain from the buildout of AI-capable data centers, which require enormous amounts of power to run. It is expected that local grids in the U.S. will need to invest heavily over the coming years to improve their power infrastructure and meet growing demand. In the nearer term, firms may choose to contract with independent power producers, like Vistra, rather than rely on the local provider.”
1. GE Vernova Inc. (NYSE:GEV)
Number of Hedge Fund Holders: 92
GE Vernova Inc. (NYSE:GEV) offers a broad spectrum of offerings related to electricity generation, transmission, orchestration, conversion, and storage. The company emerged from the integration of General Electric’s divisions focused on power, wind, and electrification.
Cramer was originally worried about General Electric’s spin-off into 3 parts, which led to the formation of GE Vernova. However, he described the company’s transformation as “ugly duckling into dynamite squad”.
The company has a global footprint and an impressive installed base of over 55,000 units, which contributes to a consistent stream of service revenue. The firm’s current portfolio includes a substantial and expanding backlog of onshore and offshore wind development projects, anticipated to fuel steady progress in the coming years.
A clear sign of the company’s operational efficiency was seen in the offshore segment alone, as nearly $800 million from the backlog was successfully converted to revenue in the first half of the year. Cramer commented:
“Turns out, GE Vernova had nothing to worry about. In fact, the spin-off came at the perfect time. [The] stock was a home run, zooming 48.7% in the third quarter as power generation’s become a phenomenal growth story.”
GE Vernova (NYSE:GEV) has ambitious plans for its Power segment, aiming to ramp up production. It is pushing to deliver between 70 to 80 heavy-duty gas turbine units annually starting in 2026. It is a significant increase from the current output of about 55 units per year.
In the second quarter, the company’s Power orders surged by 30%, with equipment orders more than doubling compared to the same quarter last year. The quarter emerged as one of the most significant in terms of orders over the past three years, evidence of strong market interest and the company’s competitive positioning.
Furthermore, GE Vernova (NYSE:GEV) sees substantial growth in its Electrification segment. The company forecasts that its backlog of electrification equipment will exceed significantly by the end of 2024 from the $6.4 billion reported at the end of 2022. It is expected to be driven by a surge in demand for grid-related technologies.
Carillon Tower Advisers stated the following regarding GE Vernova Inc. (NYSE:GEV) in its Q2 2024 investor letter:
“GE Vernova Inc. (NYSE:GEV) is a global electric power company that was recently spun out of a much larger industrial conglomerate. The company’s shares performed well in their first quarter as a standalone company, primarily as a result of the increasing outlook for power demand growth, both domestically and abroad. We believe GE Vernova is well positioned to capitalize on this growing trend across its various products and services, but most notably within its large-scale gas turbine equipment and related services, as well as in its high-voltage electrical transmission products.”
While we acknowledge the potential of GE Vernova Inc. (NYSE:GEV) as an investment, our conviction lies in the belief that 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 GEV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
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