In this article, we will take a detailed look at Jim Cramer’s December Portfolio: Top 10 Stocks to Watch.
Jim Cramer in a latest program on CNBC talked about the evolution of AI and how the technology has come from being ignored as “hype” to now completely changing everyday lives for many. Cramer mentioned the AI solutions offered by Marc Benioff’s company and said the technology is actually exceeding expectations “dramatically.” [read Marc Benioff’s latest comments here]
Cramer mentioned the comments of Benioff on his company’s new AI-powered solutions:
“Suddenly, though, we have Agent Force, and with it, Marc said, I quote, “We’re unleashing this new year of digital labor force for every business and every industry.” He went on to say, quote, “The implications are just simply profound. Now people ridicule me for saying how much we need AI, but Marc says, quote, ‘For decades, economic growth depended on expanding the human workforce. It was all about getting more labor,’ end quote. Not anymore—not with agents powered by AI who, as you’re stating, can work faster, doing tedious things but essential jobs that nobody wants.
And there it is—you hear that Marc got 200 deals in the first week of Agent Force alone, lots of brand-name companies too. Do you know there are thousands more in the pipeline? Real customers, real money, tangible. That’s an insane amount of business to do,” Cramer said.
READ ALSO Jim Cramer’s Latest Lightning Round: 11 Stocks to Watch and Jim Cramer on AMD and Other Stocks
For this article, we watched some latest programs of Jim Cramer and picked 10 stocks he was talking about. With each stock we have mentioned the number of hedge fund investors. 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).
10. Lumen Technologies Inc (NYSE:LUMN)
Number of Hedge Fund Investors: 26
Jim Cramer was asked by a caller on CNBC about the declines of Lumen Technologies Inc (NYSE:LUMN). Cramer said the stock is not done going down and recommended investors to avoid it.
“It should be down. It should be down; it doesn’t have—it’s to me, this is kind of the stock that we should never have gone up. This is digital solutions for business purposes. It should never have gone up as much as it did, and it’s going to come back down. It’s not done going down. It went too high, it’s up way too much, and I want you to avoid it.”
Third Point Management stated the following regarding Lumen Technologies, Inc. (NYSE:LUMN) in its Q3 2024 investor letter:
“While some economic activity has been showing signs of slowing, the defensive composition of the current high yield market with a high mix of higher quality credit and short duration has let the rates tailwind overwhelm such concerns. The lowest quality sectors of the market have performed best, fueled by both soft/no landing expectations, as well as two positive events in the beleaguered telecom space. Telecom/cable have been poor performers year to date due to overhang from the growth of FWA (aka “wireless cable”) and increased fiber building, however the sector re-rated materially on two deals. First, Lumen Technologies, Inc. (NYSE:LUMN) announced that its Level 3 (LVLT) subsidiary was doing a fiber infrastructure build to support AI growth. Our aversion to secular decline (most of LUMN is melting copper infrastructure) kept us out of the situation but the AI fairy dust resulted in a massive rerating of LUMN debt and equity. These higher security prices in turn facilitated several moves to refinance portions of the capital structure and extend the runway.”
9. Dover Corp (NYSE:DOV)
Number of Hedge Fund Investors: 32
Jim Cramer was recently asked about Applied Industrial. He instead recommended Dover Corp (NYSE:DOV) and said he likes the stock “very, very much.”
A few months back, Jim Cramer said the following on CNBC:
“I think the market is underestimating Dover Corp (NYSE:DOV), hence why we’re building our position for the charitable trust.”
Dover Corp’s (NYSE:DOV) business offers products and services via five segments: engineered products, clean energy & fueling, imaging & identification, pumps & process solutions and climate & sustainability technologies. Each segment’s revenue is over $1 billion on an annual basis. In 2023 the company’s full-year free cash flow came in at $1.1 billion, nearly double the previous year’s figure. This increase was due to effective working capital management and reduced capital expenditures. The free cash flow conversion rate has risen above 90%.
8. LyondellBasell Industries NV (NYSE:LYB)
Number of Hedge Fund Investors: 38
Jim Cramer was asked about LyondellBasell Industries NV (NYSE:LYB) in a latest program on CNBC. He recommended owning the stock.
“I agree with you. I think at these prices, you do not want to ignore this stock. I’d buy some now, and if it goes down to 78%, I would buy more.”
This was a change from earlier this year when Cramer said he could not recommend the stock.
When asked about LyondellBasell, Cramer had said that while it’s a very “well-run company” it’s not a stock he’s recommending.
LyondellBasell Industries NV (NYSE:LYB)’s profitability is driven mainly by its Olefins & Polyolefins (Americas) and Intermediates & Derivatives segments. However, the company’s margins are being dragged down by its Olefins & Polyolefins (Europe, Asia & International) and Refining segments, which generate substantial revenue but contribute little to EBITDA.
LyondellBasell Industries NV (NYSE:LYB) plans to improve the performance of the Olefins & Polyolefins segment in Europe, Asia, and international markets. This is evident from the company’s capital expenditures in these regions and its recent acquisition of a 35% stake in the NATPET polypropylene joint venture in Saudi Arabia. EBITDA margins in these segments have been in the red or at low single digits for several quarters, so exiting refining and improving the international O&P segment could significantly boost overall profitability.
7. BlackRock Inc (NYSE:BLK)
A caller recently asked Jim Cramer about BlackRock Inc (NYSE:BLK). Cramer reiterated that he is still bullish on BlackRock Inc (NYSE:BLK) for the long term.
“I look at the long term with this, and the reason I was happy to buy it here is because I don’t care about the near term on this stock. I think if you buy something that Larry Fink (BlackRock CEO) is running and you wait, you just own it over many years. Not everything can be, you know, like a pasta in the trust. Not everything’s going to go up at once. Some things are just going to be very solid for when things go down—you can buy more of it. And that’s BlackRock.”
In another program last month, Cramer said the following about BLK:
“I’ve got to tell you Northern Trust is very good but I’ll tell you one that we’ve been buying for the travel trust, which is BlackRock, and I think it’s better. I think it’s got better growth and more consistent management.”
6. ON Semiconductor Corp (NASDAQ:ON)
Number of Hedge Fund Investors: 45
Jim Cramer recently said during the Lightning Round segment of his program on CNBC that he cannot recommend ON Semiconductor Corp (NASDAQ:ON) because of the slowdown in the auto industry.
“ON Semiconductor Corp (NASDAQ:ON) is in a very difficult situation because it’s an industrial, what we call Internet of Things semiconductor. Those stocks are all going lower because they all have auto exposure, and the auto is no place to be. The auto industry is slowing down…so I’m going to say it’s got to go even lower still. And I can’t recommend it as painful as that is, because it is cheap.”
Aristotle Atlantic Large Cap Growth Strategy stated the following regarding ON Semiconductor Corporation (NASDAQ:ON) in its Q2 2024 investor letter:
“We sold ON Semiconductor Corporation (NASDAQ:ON) and have become more cautious on the global automotive market, especially for electric vehicles, which we believe will see a period of slower sales due to both new infrastructure requirements and consumers becoming more knowledgeable about the potential costs and issues with owning EVs. In addition, the market is becoming a lot more competitive on the supply side, with many new models being launched simultaneously, which we believe will lead to pricing pressures for the OEMs, which could create pricing headwinds for suppliers such as ON Semiconductor. While we see global EV penetration as continuing to increase over the next decade, supported by government incentives, we remain cautious in the near term and believe we are entering a period of lower sales trends following the explosive growth of the past three years.”
5. Dollar General Corp (NYSE:DG)
Number of Hedge Fund Investors: 45
Jim Cramer in a latest program on CNBC talked about BofA’s bullish note on Dollar General Corp (NYSE:DG) and said he believes the stock is bottoming.
“It looks like the stock is bottoming. I happen to like a lot of what they’re doing—they’re getting much more realistic. And I think you have to start discounting the idea that China could hurt them very badly. We had Five Below do better. I think Dollar General Corp (NYSE:DG) is the next to do better. What can I say? There’s a lot of miracles happening.”
Residents of many rural and lower-income areas often do not have easy access to large retailers like Target, Walmart, or Costco. In these regions, dollar stores frequently serve as the primary option for purchasing affordable, basic household necessities.
Dollar General is the largest dollar store group in the USA by store count, with approximately 20,300 stores currently operating. Dollar stores generally have higher gross profit margins and operating margins compared to big-box retailers such as Walmart and Target. Historically, Dollar General and Dollar Tree have generated gross profit margins of around 30% to 31%, compared to Walmart’s 25% and Target’s 28%. However, margins have taken a hit over the past several months amid competition and inflation crisis. As inflation cools, analysts are bullish on the stock for the long term. Dollar General has a better-than-average chance of emerging as a relative winner. My expectation for Dollar General in this scenario is that the group’s operating margins might improve from FY24E levels but eventually settle at a new level below the historical ~8% operating profit margin.
Broyhill Asset Management stated the following regarding Dollar General Corporation (NYSE:DG) in its Q3 2024 investor letter:
“Shares of Dollar General Corporation (NYSE:DG) lost 36% in Q3. Dollar General has historically proven to be a safe haven for investors in uncertain times as consumers trade down and increase their spending with the retailer. While inflation has certainly put pressure on DG’s core customer in recent years, the retailer has seemingly lost market share to larger competitors. The most recent earnings report highlighted this dynamic, contrary to our expectation for a weaker economic environment to benefit the company.”
4. CVS Health Corp (NYSE:CVS)
Number of Hedge Fund Investors: 63
Talking about CVS Health Corp (NYSE:CVS), Jim Cramer said in a recent program on CNBC that he’s waiting to see where the stock bottoms and said he sees “maybe” another bad quarter for the company.
“I’ve been waiting to see where it could bottom, and Deutsche Banks taking the leap might be a little too early because there could be one more bad quarter. But it’s worth talking about, and I think it’s good. It’s better than Honeywell, which is down five, because they don’t know how to tell the story.”
Cramer said CVS Health Corp (NYSE:CVS) new CEO David Joyner is doing a “good job.”
What ails CVS Health Corp (NYSE:CVS) is the rising competition. CVS has expanded beyond retail, particularly after acquiring Aetna in 2018, but retail and pharmacy sales still account for around 50% of its total revenue. The pharmacy services segment is facing growing competition from non-traditional retailers like Kroger, Walmart, and Costco, as well as from new disruptors like Mark Cuban’s Cost Plus Drugs and Amazon, which has expanded into healthcare and pharmaceutical sales.
Retail margins are also under pressure, with competitors offering cheaper prescriptions and household goods. CVS Health Corp (NYSE:CVS) market share in pharmacy services has only grown modestly, from 23.8% in 2017 to 25.7% in 2023, despite significant acquisitions. CVS Health Corp (NYSE:CVS) has spent $96.6 billion on deals like Aetna, Signify Health, and Oak Street Health. Meanwhile, CVS’s long-term debt has risen sharply, from $25.1 billion in 2017 to $65 billion, and shares outstanding have grown at an annual rate of 3.5%.
Coho Relative Value Equity Strategy stated the following regarding CVS Health Corporation (NYSE:CVS) in its Q2 2024 investor letter:
“While we believe each of those companies is performing in line with or better than our expectations and that the moves lower are unjustified, both CVS Health Corporation (NYSE:CVS) and Nike reported disappointing performance in recent results. In CVS’ case, management gave an optimistic outlook to 2024 at its December Investor Day, which we believed was consistent with our expectations. Unfortunately, management misestimated its medical loss ratio and the anticipated profitability in its book for Medicare Advantaged lives. This triggered a position paper violation, as the company’s financial flexibility now looks constrained in both 2024 and 2025.”
3. Marvell Technology Inc (NASDAQ:MRVL)
Number of Hedge Fund Investors: 70
Jim Cramer in a latest program discussed Marvell Technology Inc’s (NASDAQ:MRVL) latest earnings and said the company is winning because of its custom chip design deals with big companies like Amazon, Google and Microsoft.
“I also tell you that Marvell Technology Inc (NASDAQ:MRVL) has these companies—they have Meta, they have Google, they have Microsoft. They are in a game, set, match against everybody else.”
Cramer also said Marvell CEO Matt Murphy is the “most competitive guy I can come across.”
Marvell Tech Inc (NASDAQ:MRVL) is rapidly positioning itself as an AI-first company, with its custom silicon business accounting for 73% of Q3 revenues, up from 39% during the same period last year. Marvell has a five-year agreement with Amazon (AMZN) AWS, helping Amazon design its Trainium and Inferentia ASICs, and providing a range of optical interconnect products.
Marvell Tech Inc (NASDAQ:MRVL) is now focusing on the AI opportunity, as evidenced by the recent restructuring charges, and is progressing through the design phase of its 2nm platform.
Artisan Mid Cap Fund stated the following regarding Marvell Technology, Inc. (NASDAQ:MRVL) in its Q2 2024 investor letter:
“During the quarter, we initiated new GardenSM positions in CCC Intelligent Solutions, Marvell Technology, Inc. (NASDAQ:MRVL) and Insmed. Marvell Technology is a semiconductor company offering networking, secure data processing and storage solutions to customers worldwide. We believe Marvell has among the broadest range of intellectual property in technological areas (e.g., high-bandwidth data switching and storage applications) that position it well for the growing requirements of data centers, wireless networks and autos. Several of the company’s product lines (e.g., custom silicon, optical connectivity and switching) are benefiting from the growth of AI data centers. And we believe a significant opportunity exists for the company to help design and manufacture cost-effective custom data center chips that would help cloud providers reduce their reliance on expensive graphics processing units (GPUs). Furthermore, like many other semiconductor companies, a portion of its business may be poised for a cyclical recovery after the industry’s recent inventory correction.”
2. Exxon Mobil Corp (NYSE:XOM)
Number of Hedge Fund Investors: 86
Jim Cramer was recently asked about ExxonMobil. He recommended investors stay away from the stock and said it’s overvalued when compared with Chevron.
“I think Exxon Mobil Corp (NYSE:XOM) is overvalued versus Chevron. Now, that has been the wrong call to make in 2024. Until recently, these stocks, by the way, are not stocks you want to own because they are actually high-priced, high-earning multiple stocks with yields that are not as great—only because the stocks are still too high.”
Exxon continues to manage its debt effectively, lowering its debt-to-market-cap ratio to 13.5% from 16.7%. The company’s debt-to-equity ratio remains well below that of its peers, while its liquidity ratios significantly exceed the industry median.
Recent acquisitions and expansion into areas like carbon capture, hydrogen, and renewable fuels should keep the company stable, even if oil prices slump. At the Barclays Energy-Power Conference, Exxon Mobil Corp (NYSE:XOM) CEO emphasized the company’s focus on decarbonization, including the Baytown hydrogen project, which is set to be the world’s largest low-carbon hydrogen facility by 2029.
According to Goldman Sachs, oil demand won’t peak until 2034, even with the push for electric vehicles and green energy. Goldman forecasts peak oil demand at 110 million barrels per day by 2034, potentially rising to 113 million barrels by 2040 if EV adoption is slower.
1. Apple Inc (NASDAQ:AAPL)
Number of Hedge Fund Investors: 158
In a recent program on CNBC, Jim Cramer talked about a Morgan Stanley note on Apple Inc (NASDAQ:AAPL) that discussed how the Cupertino company’s stock could move higher than Nvidia’s. Cramer reiterated his old mantra of staying invested in Apple.
“I think the iPhone upgrade cycle is elongated. This has been my plan for why you’ve got to stay with Apple Inc (NASDAQ:AAPL). Don’t trade Apple; just own Apple, because it’s going to be elongated. And David, the big final thing is competition—a lessening headwind to iPhone demand in China, where Tim Cook is now. China has just been a gigantic headwind.”
Recently, Apple Inc (NASDAQ:AAPL) reclaimed a top-5 position in China’s smartphone market, with its 15.6% market share still down from last year, especially against Huawei, which surged with over 40% growth. Xiaomi also continues to challenge Apple Inc (NASDAQ:AAPL)’s competitive edge. Notably, the iPhone 16 had only about three weeks of Q3 sales, yet didn’t lift Apple Inc (NASDAQ:AAPL)’s market share for the quarter, despite expectations for initial sales to be strong.
Mar Vista Strategic Growth Strategy stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q3 2024 investor letter:
“Apple Inc. (NASDAQ:AAPL) stock was strong in the quarter as investors viewed the company’s generative AI roadmap and iPhone 16 product cycle positively. The market was reminded of the strength of the Apple ecosystem as management demonstrated how generative AI solutions would be integrated into its iOS 18 operating system, which was broadly released in the iPhone 16 late in calendar Q3. We believe Apple’s generative AI-enabled products should spur a meaningful iPhone upgrade cycle and create new avenues of monetization through its app store and advertising offerings. We believe this will support intrinsic value growth that will range between high single digits and low double-digits over our investment horizon.”
While we acknowledge the potential of Apple Inc (NASDAQ:AAPL), 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 AAPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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