On Tuesday, Jim Cramer, host of Mad Money, shared his thoughts on the market’s recent volatility and offered advice to investors regarding earnings reports. He cautioned against making trades based solely on immediate stock reactions following earnings announcements, as many of these movements might not be justified.
“The absurdity of earnings season has arrived. It didn’t take long, did it? People are already doing stupid things. And you know what? I gotta point them out to you so that you don’t make the same mistakes.”
Cramer emphasized his mission to guide individuals toward becoming more thoughtful investors, rather than impulsive traders. He noted that the Dow Jones Industrial Average dropped 325 points, while the S&P 500 declined by 0.76%, and the Nasdaq Composite fell 1.01%.
Cramer referred to this phenomenon as part of what he calls the quarterly repricing process, which is the earnings season. He explained that, typically, most stocks tend to move in tandem with the S&P 500 unless a significant event alters the market. In the absence of such an event, stock movements are often influenced by external factors that may have only a tenuous connection to a company’s actual future performance. He further clarified his perspective and stated:
“Now, I want to make one thing clear. I’m not saying that everybody’s a moron. I’m saying there are details that inform people are looking for benchmarks we’ve accepted going into earnings. Yet for the first few moments of trading, there’s just obviously oblivious action based on who knows what. It’s definitely not the key metrics. It’s definitely not the homework.”
Ultimately, Cramer described this chaotic trading behavior as a clumsy way for Wall Street to reassess stock prices in relation to their peers, driven by a flurry of parsed headlines during earnings season. He expressed relief that this sort of disorganized trading only occurs four times a year, even as he acknowledged that this is a crucial period when a stock can become detached from the S&P 500.
Concluding his thoughts, Cramer emphasized:
“Yet, if you’re not a professional, you should not be involved in this process. There are so many people playing with so much money, professionals who pay people fortunes to figure this stuff out. Let them fight to set the price. For regular investors like you, trying to trade that initial post-earnings action is just an easy way to lose money, four times a year, like clockwork.”
Cramer’s 12 Lightning Round Stocks
Our Methodology
For this article, we compiled a list of 12 stocks that were discussed by Cramer during lightning rounds of Mad Money’s episodes on October 14, 15, and 16. 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: 12 Stocks to Watch
12. Cassava Sciences, Inc. (NASDAQ:SAVA)
Number of Hedge Fund Holders: 3
Talking about Cassava Sciences, Inc. (NASDAQ:SAVA), Mad Money’s host said:
“Well, I remember they do have an Alzheimer’s trial, but Lily has an Alzheimer’s formulation that is very good. And Lily does have the edge on everybody else. Let’s leave it like that.”
Cassava Sciences (NASDAQ:SAVA) is a clinical-stage biotechnology company focused on developing treatments for neurodegenerative diseases. The primary therapeutic candidate is simufilam, a small molecule drug that has completed its Phase 2 clinical trial and is now advancing into Phase 3 testing. In addition to simufilam, it is also working on SavaDx, an investigational diagnostic tool designed to identify Alzheimer’s disease through a blood-based biomarker.
Recently, Cassava Sciences (NASDAQ:SAVA) faced scrutiny from the U.S. Securities and Exchange Commission (SEC) regarding statements made about a Phase 2b clinical trial of simufilam in 2020. Following the investigation, the company reached a settlement agreement with the SEC concerning allegations of negligence in its disclosures. As part of the settlement, the company has agreed to pay $40 million in cash, while neither admitting nor denying the allegations.
The company has reiterated its earlier forecast, estimating that with this settlement, net cash utilization for operations is expected to range between $80 million and $90 million in the latter half of the year. Furthermore, it forecasts that it will conclude the calendar year 2024 with available cash between $117 million and $127 million.
On October 8, H.C. Wainwright upgraded the company stock to Buy from Neutral with a $116 price target, making a note of the settlement with the SEC. The analyst believes this settlement alleviates any concerns that could pose a significant long-term obstacle to the potential growth of the stock. Additionally, the firm estimates that a topline readout from the 52-week RETHINK-ALZ Phase 3 study, expected by the end of 2024, will serve as a positive catalyst.
11. Clover Health Investments, Corp. (NASDAQ:CLOV)
Number of Hedge Fund Holders: 9
When a caller inquired about Clover Health Investments, Corp. (NASDAQ:CLOV), Cramer said:
“Oh, man… I just don’t want to go there. I know that it’s a good company, but I just don’t want to hurt anybody. I’m sorry.”
Clover Health (NASDAQ:CLOV) is a provider of Medicare Advantage plans across the United States. The company also offers Clover Assistant, a cloud-based platform that empowers physicians to identify and manage chronic diseases at an early stage while delivering personalized, data-driven insights for patient care.
On October 10, the company announced a significant achievement regarding its Star ratings from the Centers for Medicare and Medicaid Services (CMS). The rating for its PPO Medicare Advantage plans has been elevated to 4 Stars for 2025, which will have implications for payment in 2026. In addition, the HMO Medicare Advantage plan received a rating of 3.5 Stars. Additionally, more than 95% of Clover’s Medicare Advantage membership utilizes its PPO plans, highlighting the company’s strong market presence.
CMS evaluates each plan annually based on healthcare quality and drug plan performance, assigning a Star rating that ranges from 1 to 5. Clover Health’s (NASDAQ:CLOV) overall rating for this measurement year reflects exceptional outcomes across several criteria, including Medication Adherence, the Healthcare Effectiveness Data and Information Set (HEDIS), and the Consumer Assessment of Healthcare Providers and Systems (CAHPS). Particularly significant is the company’s impressive score of 4.94 out of 5 Stars on HEDIS, which assesses the effectiveness of plans in delivering preventive screenings and managing various health conditions, such as diabetes, cancer, and heart disease.