As Wall Street dives into the heart of earnings season, Jim Cramer has provided insights into market trends and earnings reports to watch in the upcoming week. Cramer remarked,

“It’s hard to believe, but this market’s now been up for six straight weeks. That’s right, despite interest rates running higher since mid-September, despite being on the verge of an election where both candidates want to pile on trillions of dollars of debt to an already unfathomable amount of borrowing, this market seems like it can’t help itself from going higher.”

Cramer highlighted the influence of the Federal Reserve, noting that ever since the rate cut on September 18, the market has largely trended upward. He emphasized that it is not solely the Fed driving this bullish sentiment, the earnings season has brought some remarkable quarterly results. With strong performance from banks kicking off the earnings cycle, Cramer posed the question of whether the rally could extend into a seventh consecutive week, suggesting following his game plan to assess this possibility.

On a separate note, addressing economic indicators, Cramer warned that if the economy continues to produce solid numbers, the likelihood of substantial rate cuts will diminish. While he believes that rates will eventually decline, he cautioned those shorting Treasurys, suggesting that they may be making a mistake.

Cramer noted a significant caveat, which is the upcoming election, and pointed out that both candidates are advocating potentially inflationary policies.

“Both candidates have pushed potentially inflationary policies. As I said at the top, if Trump can win enough of a majority to pass his huge tariffs, or Harris expands housing tax credits and de facto subsidy, they could push home prices higher. Then inflation might stage a comeback. But I’m not betting on that. I think both parties are terrified of being blamed for inflation, which almost single-handedly sunk Joe Biden’s presidency. No matter what the candidates campaign on, I don’t see their allies in Congress taking any chances with inflation beyond the usual unwillingness to balance the budget.”

He concluded that those betting against Treasurys have overreached, suggesting that their efforts to counter the Fed’s policies are unlikely to end well. Cramer observed that when a large number of investors align on one side of a trade, as seen currently, that group often ends up being incorrect.

Our Methodology

For this article, we compiled a list of 23 stocks that were discussed by Jim Cramer during his episode of Mad Money on October 18. 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 Game Plan: 23 Stocks to Watch

23. Southwest Airlines Co. (NYSE:LUV)

Number of Hedge Fund Holders: 23

Cramer recently mentioned Southwest Airlines Co. (NYSE:LUV) and its ongoing proxy battle with Elliott Management.

“Southwest Air is looking at a long and hard proxy fight because it hasn’t been willing to give in to the demands of Elliott Management, a very, very smart hedge fund. I think Southwest would have an easier time… if it reports a good quarter like we just got from United.”

Southwest Airlines (NYSE:LUV) is a well-known passenger airline that provides scheduled air transportation services throughout the United States and into select near-international markets. Bloomberg reported on Saturday, citing people familiar with the matter, that discussions have emerged between the company and Elliott Investment Management regarding potential settlement talks aimed at avoiding a proxy battle for control over the airline’s board.

Reports indicate that Elliott has proposed a plan to secure board seats without gaining full control, although there is uncertainty about the outcome of these negotiations. Elliott’s involvement has intensified in recent weeks, particularly after the firm acquired a $2 billion stake in Southwest, prompting calls for significant changes within the organization, including the replacement of CEO Bob Jordan. You can read a summary of Elliott Management’s recent investor letter here.

In response to Elliott’s demands and to reinvigorate its performance, Southwest announced a series of initiatives, such as revisions to its seating policy, the introduction of red-eye flights, new vacation packages, and a partnership with Icelandair. These moves were accompanied by a board refresh, with Executive Chair Gary Kelly set to retire from his role after the upcoming annual meeting, and plans to nominate four new board members.

In September, Southwest Airlines (NYSE:LUV) laid out its own plan for improvement, including the introduction of assigned seating slated for the second half of 2025, along with premium seating options and boarding upgrades. The airline is also focused on strengthening global partnerships and streamlining operations, acknowledging that these changes will require time to implement. It also provided a more optimistic outlook by raising its revenue forecast for the third quarter, now expecting an increase of 3%, an improvement over an earlier prediction of a 2% decline.

22. SAP SE (NYSE:SAP)

Number of Hedge Fund Holders: 31

During the episode of Mad Money, Cramer started his game plan for the week with SAP SE (NYSE:SAP). He said:

“… This is the German software giant… SAP has been delivering stellar results as it advises companies on tech strategies, including cloud enterprise resource planning and adopting artificial intelligence. They’re very good. They have a lot of ideas for you. A lot of companies love to sign up with them.”

SAP SE (NYSE:SAP) is a provider of a wide range of applications, technology, and services that support various business functions, including finance, human resources, and supply chain management.

SAP SE (NYSE:SAP) reported its third-quarter earnings result on October 21. In the quarter, it demonstrated strong business momentum, with the current cloud backlog increasing by 25% to €15.38 billion, and showing a 29% rise when adjusted for constant currencies. The acquisition of WalkMe contributed about 1% to this growth. Cloud revenue reached €4.35 billion, marking a 25% increase. The growth was largely driven by the Cloud ERP Suite, which saw revenue grow by 34% to €3.64 billion.

However, software license revenue experienced a decline, decreasing by 15% to €0.28 billion. In contrast, cloud and software revenue combined increased by 11% to €7.43 billion. Overall, total revenue rose by 9% to €8.47 billion. Free cash flow showed significant improvement in the third quarter, rising by 44% to €1.25 billion.

Although around €0.3 billion was allocated for restructuring efforts, the positive development primarily stemmed from increased profitability and reduced tax payments. Over the first nine months, free cash flow increased by 47%, reaching a total of €5.03 billion.