The host of Mad Money, Jim Cramer, shared his insights on the persistent issue of inflation. He emphasized that companies need to lower their prices to entice consumers in today’s economic climate. Cramer pointed out the hesitation many companies exhibit in reducing prices.
Cramer said:
“Companies are so reluctant to take prices down because they don’t want to hurt their treasured gross margins but I think it may be time for a giant reset.”
While prices may have stabilized and no longer surged as they once did, Cramer warned that this does not imply they are decreasing. He believes many companies are failing to recognize the necessity for price rollbacks.
He gave a few examples from the liquor industry, where some producers have said that declining sales shifts are because of consumer preferences toward healthier lifestyles rather than acknowledging high prices.
Cramer went on to say:
“Funny enough, if you keep prices low, you can indeed make it up in volume because the consumer is a lot smarter than some of these companies are ever willing to admit.”
Cramer mentioned that both consumers and Wall Street are responding positively to companies that have opted for discounts or price reductions. He talked about the decision by McDonald’s to extend its $5 value meal, which has successfully attracted lower-income customers, and it led to an increase in its stock value.
Cramer mentioned that giants like Amazon, Costco, and Walmart have seen substantial stock gains this year. Cramer believes that businesses willing to reduce prices can compensate for their margins through increased sales volume.
Cramer speculated:
“I think we’ll look back on 2024 as the year when consumers took matters in their own hands and actually said no to inflated prices.”
He warned that companies that fail to adapt may face dire consequences, including leadership changes and plummeting stock prices. Talking about the consequences, he said:
“The result? Fired CEOs and crushed stock prices for all those who refused to heed the thunder, the thunder of those angry consumers who finally just said no to the scourge of inflation.”
10 Stocks From Jim Cramer’s Lightning Round
Our Methodology
For this article, we compiled a list of 10 stocks that Jim Cramer talked about during the lightning rounds of his Mad Money episodes on October 1 and 2. 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 Latest Lightning Round: 10 Stocks to Watch
10. NANO Nuclear Energy Inc. (NASDAQ:NNE)
Number of Hedge Fund Holders: 2
NANO Nuclear Energy Inc. (NASDAQ:NNE) is focused on advancing microreactor technology, with key projects that include the development of two reactors, ZEUS, a solid-core battery reactor, and ODIN, which utilizes a low-pressure coolant system.
In addition to its reactor initiatives, the company is establishing a high-assay low-enriched uranium fabrication facility, aimed at supplying fuel for the nuclear reactor sector. The facility will also support fuel transportation and provide consulting services in the nuclear domain.
When asked about the company, Cramer said “I am aware of it. Let’s just be honest… That company loses a lot of money”.
Currently, NANO Nuclear Energy (NASDAQ:NNE) is facing scrutiny due to allegations of securities fraud, especially related to claims of misleading investors. A lawsuit has been filed against the company and its executives. It claims that the company has committed violations of the Securities Exchange Act of 1934.
The lawsuit says that misleading statements were made regarding the company’s progress in securing regulatory approvals for its microreactor technology and the fuel fabrication plant. It further alleges that timelines presented for commercialization were not only overly optimistic but also possibly unachievable. Concerns have also been raised about the company’s overall financial health and growth potential, suggesting that these were overstated in communications with investors.
9. SiTime Corporation (NASDAQ:SITM)
Number of Hedge Fund Holders: 18
SiTime Corporation (NASDAQ:SITM) is engaged in designing, developing, and marketing silicon timing solutions. It offers its products across various global markets, including Taiwan, Hong Kong, the United States, Singapore, and internationally.
The company’s product portfolio includes resonators, clock integrated circuits, and a range of oscillators, which cater to various sectors such as communications, data centers, automotive, industrial applications, the Internet of Things (IoT), mobile technology, consumer electronics, and aerospace and defense.
When asked about the company during the lightning round, Cramer said “Just hold it…Let’s hold on to it, it’s a good story”.
SiTime’s (NASDAQ:SITM) timing solutions are integral to emerging technologies, addressing the needs of artificial intelligence, data centers, automated driving, IoT applications, and 5G networks.
Management has commented that the company is in the nascent stages of transforming the estimated $10 billion timing market, which signals significant potential for growth and innovation.
In the second quarter, it reported revenue of $43.9 million, which surpassed management’s guidance of $40 million to $42 million.
Additionally, both operating profit and earnings per share exceeded expectations. Additionally, every end market served by the company saw growth in the second quarter, with increases in both sequential and year-over-year metrics reaching double digits.
SiTime’s (NASDAQ:SITM) management forecasts that bookings for the latter half of 2024 appear strong. They expect continued sequential growth for both the third and fourth quarters. Geographically, revenue projections for 2024 signal strong performance across all major regions, with expectations for double-digit growth in revenues from Greater China, North America, and Europe.
Wasatch Global Investors stated the following regarding SiTime Corporation (NASDAQ:SITM) in its Q2 2024 investor letter:
“SiTime Corporation (NASDAQ:SITM) also contributed to strategy performance during the quarter. The company develops silicon-based timing components, which are superior to less-expensive quartz-based components. SiTime’s components have many applications in advanced computing. The stock was down early in the year when SiTime lowered earnings guidance based on temporarily weak consumer demand and bloated inventories. But we visited the company in Santa Clara, California, and came away from our visit even more optimistic that consumer demand could rebound. Additionally, we gained confidence in SiTime’s product differentiation and long-term competitive advantages over legacy quartz-based timing solutions. As a result, we bought more shares and increased our position size. During the second quarter, the stock was up based on exceptionally strong earnings and news that SiTime expects to see consistent demand from Apple, Inc. and other companies involved in the proliferation of AI.”
8. NIO Inc. (NYSE:NIO)
Number of Hedge Fund Holders: 20
NIO Inc. (NYSE:NIO) is engaged in the design, development, manufacturing, and sale of smart electric vehicles in China, offering a range of five and six-seater electric SUVs as well as smart sedans.
It differentiates itself through its comprehensive power solutions, which include Power Home for home charging, Power Swap for battery swapping, as well as both Power Charger and Destination Charger options. Additionally, the company offers a mobile charging service, Power Mobile.
Upon being asked about the company, Cramer said “I want you to hold on”.
Recently, NIO (NYSE:NIO) announced a significant cash injection of $1.9 billion. The investment comes from a group of strategic investors based in Shanghai, which includes Hefei Jianheng New Energy Automobile Investment Fund Partnership, Anhui Provincial Emerging Industry Investment Co., and CS Capital Co.
Together, the investors will contribute approximately 3.3 billion yuan, or about $470.6 million, to the subsidiary, NIO China. Alongside this investment, the company has committed to injecting 10 billion yuan, or roughly $1.43 billion, to acquire newly issued shares in NIO China.
It will increase its controlling interest in the subsidiary to 88.3%, while the remaining 11.7% will be held by strategic investors and existing shareholders.
The financial arrangement will be executed in two phases, with 70% of the funds expected to be delivered by November 2024, and the remaining 30% scheduled for December 2024. According to NIO’s (NYSE:NIO) press release, this strengthened financial foundation is designed to improve its long-term capabilities in technology, product development, services, and community engagement.
7. AMN Healthcare Services, Inc. (NYSE:AMN)
Number of Hedge Fund Holders: 21
AMN Healthcare Services, Inc. (NYSE:AMN) is engaged in delivering workforce solutions and staffing services tailored to healthcare facilities throughout the United States. The company operates through three segments, Nurse and Allied Solutions, Physician and Leadership Solutions, and Technology and Workforce Solutions.
Through the Nurse and Allied Solutions segment, it offers services, including travel nurse staffing, local and international placements, as well as allied staffing solutions.
The Physician and Leadership Solutions segment provides a range of services, including locum tenens staffing, interim leadership staffing, executive searches, and permanent physician placements.
Through the Technology and Workforce Solutions segment, the company addresses needs for language services, vendor management systems, and workforce optimization solutions. It offers its services through brands such as Nursefinders, HealthSource Global Staffing, and B.E. Smith.
During his Mad Money episode, Cramer mentioned the previous CEO of the company, Susan R. Salka, and said:
“…since she left, the party’s over. Now, of course, labor costs are not good but she had control over these things, and I don’t think the company’s doing that well.”
Under Salka’s leadership, AMN Healthcare (NYSE:AMN) expanded to become the largest total talent solutions provider in the healthcare workforce sector. This period saw the successful integration of over 20 acquisitions.
AMN Healthcare (NYSE:AMN) management’s recent financial projections point to challenges ahead, with forecasted revenue for the third quarter of 2024 expected to be 20-23% lower compared to the previous year, and 8-10% lower sequentially.
Specifically, the Nurse and Allied Solutions segment is projected to see a decline of 32-34% year-over-year. Furthermore, revenue from the Technology and Workforce Solutions segment is forecasted to decrease by 10-12% year-over-year.
During the second quarter’s earnings call, management commented that current market dynamics reveal that many large clients are reducing their reliance on contingent labor due to strong permanent hiring trends and decreased employee attrition.
6. Littelfuse, Inc. (NASDAQ:LFUS)
Number of Hedge Fund Holders: 30
Littelfuse, Inc. (NASDAQ:LFUS) designs and manufactures electronic components. Within the Electronics segment, it produces a wide range of products, including fuses and diodes, catering to critical markets such as automotive and telecommunications.
Its Transportation segment specializes in circuit protection solutions specifically for heavy-duty vehicles and agricultural applications. Meanwhile, the company’s Industrial segment is dedicated to safety devices aimed at improving renewable energy systems and factory automation processes. It serves over 100,000 end customers across various industries.
The stock is trading at a forward PE multiple of 31, an over 30% premium compared to its sector median. With regards to the company, Cramer said:
”…It’s got a huge multiple for its growth rate, and that is worrisome to me. I’m going to have to say we got to come back with something that is less expensive.”
While the stock is expensive, Littelfuse (NASDAQ:LFUS) reported an operating cash flow of $69 million in the second quarter, contributing to a year-to-date free cash flow generation of $92 million, which shows a remarkable conversion rate of 98%.
The company has also effectively managed its inventory, reducing both inventory days and dollar amounts, which has positively impacted its cash flow. Management has a strong focus on financial health, hence the company ended the quarter with $562 million in cash and maintained a net debt-to-EBITDA ratio of 1.6 times.
Management continues to emphasize achieving a 100% free cash flow conversion rate for the year, which is in line with their long-term strategic goals. Littelfuse (NASDAQ:LFUS) plans to prioritize free cash flow for acquisitions while also returning capital to shareholders through dividends and share buybacks.
In the first half of 2024, the company has already returned $73 million to shareholders. Since its inception in 1927, it has demonstrated a strong capacity for cash generation, evidenced by a consistent 12% compounded annual growth rate in its dividend.
5. Archer-Daniels-Midland Company (NYSE:ADM)
Number of Hedge Fund Holders: 35
Archer-Daniels-Midland Company (NYSE:ADM) is involved in the procurement, processing, and marketing of agricultural commodities and ingredients, with operations spanning regions such as the United States, Europe, and Brazil.
The company runs through three segments, Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition. It manages a wide range of products, including soybean meal, vegetable oils, sweeteners, animal feed, and specialty food ingredients, along with offering commodity brokerage services that support its extensive role within the agricultural supply chain.
Mentioning Archer-Daniels-Midland (NYSE:ADM), Cramer said “I think it is a value trap”.
According to a consensus of 12 analysts, the EPS is expected to decrease by a little over 23% year-over-year in 2024. In 2025, the company’s EPS is expected to be 22.5% below 2023 levels.
Additionally, in the second quarter, the company faced significant challenges, resulting in a nearly 12% decline in revenue, totaling $22.25 billion.
The Ag Services and Oilseeds segment was particularly affected, experiencing a steep 56% drop in profits. The Nutrition segment also reported a decline, with profits decreasing by 36%.
The company attributed the struggles in Ag Services and Oilseeds to several factors, including reduced selling activity from farmers due to a smaller crop in Mato Grosso, rising logistics costs from take-or-pay contracts, increased supply from Brazil and Argentina, and narrowing soybean crush margins.
The economic pressures contributed to a decline in Archer-Daniels-Midland (NYSE:ADM) earnings, which fell to $1.03 per share compared to the previous year, primarily driven by lower crush and origination margins.
Earnings before taxes for the second quarter amounted to $596 million, a 47% decrease, which was linked to lower pricing, reduced execution margins, and increased unallocated corporate costs.
Diamond Hill Capital stated the following regarding Archer-Daniels-Midland Company (NYSE:ADM) in its Q2 2024 investor letter:
“We exited three positions in Q2, including Generac Holdings, NXP Semiconductors and Archer-Daniels-Midland Company (NYSE:ADM). Agricultural commodities and products company Archer-Daniels-Midland recently announced a nutrition-segment accounting issue — while it didn’t require a restatement of consolidated financials, we think it may be the proverbial canary in the coal mine. As we consequently lost our confidence in the management team, we exited our position.”
4. Peloton Interactive, Inc. (NASDAQ:PTON)
Number of Hedge Fund Holders: 38
Peloton Interactive, Inc. (NASDAQ:PTON) runs a connected fitness platform. It offers a variety of fitness equipment, including the Peloton Bike, Bike+, Tread, Tread+, Guide, and Row. Cramer commented on the company, saying “…Take the loss”.
Peloton’s (NASDAQ:PTON) journey has been marked by challenges, particularly following the surge in demand during the coronavirus pandemic, which significantly raised its profile in the fitness industry. As the pandemic began to wane, the company faced a tough transition.
In its fiscal fourth quarter, it reported an operating loss of $63.3 million, which was down from the previous year’s loss of $225.8 million. Revenue for the quarter reached $643.6 million, slightly increasing from $642.1 million a year earlier.
Analysts have highlighted the company’s efforts to turn around the business. For instance, on October 1, BMO Capital maintained a Market Perform rating and a $6.50 price target on Peloton (NASDAQ:PTON). The recent discussions with the company’s management were described as “upbeat”.
The firm highlighted the efforts to balance the pursuit of sustainable profits while also focusing on avenues for growth. Conversations included topics such as new product developments, pricing strategies, and operational efficiencies, as well as the ongoing search for a new CEO and initiatives aimed at expanding the brand’s presence in the market.
On August 26, Baird analyst Jonathan Komp raised the price target on the company stock to $4.75 from $4 and kept a Neutral rating. The firm noted that fourth-quarter revenue and adjusted EBITDA exceeded expectations. Additionally, its guidance for adjusted EBITDA and free cash flow for fiscal 2025 was significantly higher than consensus estimates.
The analysts expressed optimism about the financial advantages expected from the company’s move toward profitability and the potential announcement of a new CEO in the near future.
Patient Capital Management stated the following regarding Peloton Interactive, Inc. (NASDAQ:PTON) in its first quarter 2024 investor letter:
“Peloton Interactive, Inc. (NASDAQ:PTON) declined in the first quarter, hitting its lowest per share valuation in late March since becoming a public company. The company has taken drastic action to right-size the extremely bloated cost structure, expand sales channels (Amazon, Dick’s Sporting Goods), and test other ways to reinvigorate growth. The company is hyper focused on reaching positive free cash flow generation, but the path was pushed out. We continue to believe the value of the business lives in the high-margin, sticky subscription piece of the business. We think at current valuation, the company will either successfully turn things around or be a take-out target.”
3. Diamondback Energy, Inc. (NASDAQ:FANG)
Number of Hedge Fund Holders: 44
Diamondback Energy, Inc. (NASDAQ:FANG) is an independent oil and natural gas company, primarily engaged in the acquisition, development, exploration, and exploitation of unconventional onshore reserves within the prolific Permian Basin of West Texas.
The company concentrates its efforts on the Spraberry and Wolfcamp formations in the Midland Basin, as well as the Wolfcamp and Bone Spring formations in the Delaware Basin, extending its reach into New Mexico. In addition to its upstream activities, it also manages midstream infrastructure assets located in both the Midland and Delaware Basins.
When asked about the company, Cramer said “Diamondback’s a little too much oil for me”.
In October, Diamondback Energy (NASDAQ:FANG) provided an update regarding its production and capital expenditure expectations for the third quarter of 2024, which contained adjustments resulting from its merger with Endeavor Energy Resources, L.P., finalized on September 10.
The merger is anticipated to allow the company to achieve operational efficiencies, cut costs through the elimination of overlapping rigs, and optimize production methodologies.
Previously, Endeavor has emphasized rapid production growth, which has contributed to the swift depletion of its resources in the highly productive Midland Basin. The good news is that Diamondback Energy (NASDAQ:FANG) is committed to generating free cash flow, which positions the newly merged entity to moderate production levels and prolong the viability of its high-quality assets.
For the upcoming quarter, the company projects oil production to fall between 319,000 and 321,000 barrels per day, while total production is expected to range from 565,000 to 569,000 barrels of oil equivalent per day. It has also set a cash capital expenditure guidance of $675 million to $700 million for Q3 2024.
Diamond Hill Capital stated the following regarding Diamondback Energy, Inc. (NASDAQ:FANG) in its first quarter 2024 investor letter:
“Though valuations have increased, we continue identifying high-quality companies we believe the market is overlooking. We accordingly initiated four new positions in Q1: Generac Holdings, Diamondback Energy, Inc. (NASDAQ:FANG), Johnson Controls International and Humana. FANG is a scaled, low-cost energy exploration and production company in one of the US’s most prolific shale basins. The company focuses on cost efficiency and prudent, sustainable management of its assets, and we believe the company is well-positioned for free cash-flow generation over the long term. Further, we have confidence in the management team, which we believe is well-aligned with shareholders. We initiated a position in FANG at a compelling price relative to our estimate of intrinsic value in February, just ahead of the company’s announced and attractive acquisition of Endeavor.”
2. McKesson Corporation (NYSE:MCK)
Number of Hedge Fund Holders: 70
McKesson Corporation (NYSE:MCK) is a Texas-based company that offers healthcare services. It operates through several segments. The U.S. Pharmaceutical segment distributes a wide range of pharmaceutical products and offers support services to community-based oncology practices and pharmacies. The RxTS segment addresses medication challenges by connecting patients, pharmacies, and healthcare providers.
Meanwhile, its Medical-Surgical Solutions segment provides medical-surgical products and logistics to healthcare providers. Lastly, the International segment extends the company’s reach by serving wholesale and retail customers across Europe and Canada.
Cramer mentioned the company and said:
“It’s time to buy it. You know they’re not just a middleman. They do a lot of good things and I think the stock has had way too big a hit. It’s now selling at a below-market multiple. I’m ready to start buying. Don’t buy all at once. Buy in a pyramid style.”
In its fiscal 2025 first quarter, McKesson (NYSE:MCK) reported revenue of $79.28 billion, which fell short of analysts’ expectations of $82.53 billion. However, adjusted EPS reached $7.88, which exceeded forecasts of $7.21.
In terms of shareholder returns, it distributed $609 million, comprising $527 million in share repurchases and $82 million in dividends.
In August, McKesson (NYSE:MCK) announced its intent to acquire a controlling interest in Community Oncology Revitalization Enterprise Ventures, LLC (Core Ventures). It involves a cash purchase of approximately $2.49 billion for a roughly 70% ownership stake.
Once the acquisition is finalized, Core Ventures will be integrated into McKesson’s Oncology platform, with its financial results incorporated into the U.S. Pharmaceutical segment.
Alluvium Asset Management stated the following regarding McKesson Corporation (NYSE:MCK) in its Q2 2024 investor letter:
“McKesson Corporation (NYSE:MCK), the drug distributor, was up 8.9%. We wrote in our March report (after it reported third quarter earnings and returned 16.1%) that we would defer updates until the full year result was released, and that we anticipated an increase to our valuation. And indeed that is what happened, with our estimates of “owner’s earnings” increasing by low double digits and our valuation increasing by 15%. Although it trades at a premium of 13% to that valuation, we are very much aware of our conservatism and feel comfortable in maintaining our 7.1% position.”
1. Humana Inc. (NYSE:HUM)
Number of Hedge Fund Holders: 71
Humana Inc. (NYSE:HUM) offers medical and specialty insurance products in the U.S. It provides a range of medical and supplemental benefit plans tailored for individual clients. Among its responsibilities is the administration of the Limited Income Newly Eligible Transition prescription drug program, in partnership with the Centers for Medicare and Medicaid Services (CMS).
Additionally, the company holds contracts to deliver Medicaid, dual-eligible, and long-term support services across various states. Talking about Humana (NYSE:HUM), Cramer said “You know what, if you can’t price the product, get out of the business. Sorry, that’s the way I feel”.
Recently, the company reported a significant decrease in the number of members enrolled in its Medicare Advantage plans that received four stars and above in the CMS Star Ratings system. Within the Star Ratings system, the Centers for Medicare and Medicaid Services (CMS) grants annual bonus payments to plans rated four stars or higher. Plans that achieve better ratings can qualify for larger bonuses.
Citing preliminary 2025 MA Star Ratings data, the company mentioned that there are approximately 1.6 million members, or around 25% of the total enrollment in plans rated four stars or higher, a stark decline from nearly 94% in 2024.
On October 2, BofA analyst Kevin Fischbeck downgraded the company stock to Underperform from Neutral with a price target of $247, down from $376.
Diamond Hill Capital stated the following regarding Humana Inc. (NYSE:HUM) in its Q2 2024 investor letter:
“Other top Q2 contributors included Humana Inc. (NYSE:HUM) and Boston Scientific Corporation. Shares of health insurance company Humana rebounded from their recent downturn, which was tied to investors’ concerns about weaker-than-expected Medicare Advantage rates for 2025 and was the byproduct of an overall difficult operating environment.”
While we acknowledge the potential of Humana Inc. (NYSE:HUM) 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 HUM 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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