In this article, we will take a detailed look Jim Cramer’s Latest Mad Money Episode: Top 10 Stocks to Watch.
Jim Cramer in a latest program on CNBC made the case for investing in individual stocks to enjoy bigger gains when compared to investing in just the broader market index funds. Cramer said that while it’s “easy” to just park your money in index funds and let the market do the work, investing in individual stocks can give you some “serious gains.”
“I think you should own more than just an index fund because buying individual stocks with special characteristics is how you can rack up some really serious gains. That includes often scoring speculative stocks. Far too often, we become snobs when we talk stocks. So many experts think that if you venture past the index, you could fall off some sort of intellectual cliff that makes any gains null and void. It’s as if the huge swath of points you could have gained simply don’t count. But that, people, is nonsense.”
Cramer said banks do not “care” where the money comes from and neither should investors. He urged investors to not always avoid speculation.
“I come tonight to praise speculation. Here, I’m the only one on TV who actually does this, believe it or not, and to show you how well you could have done if you picked some high flyers for your portfolio and simply held them for the long ride, along with your prosaic, precious index funds.”
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 the latest programs of Jim Cramer aired on CNBC and picked 10 stocks he’s talking about. With each company 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. Trump Media and Technology Group Corp (NASDAQ:DJT)
Number of Hedge Fund Investors: 9
Here is what Jim Cramer said about DJT when he was asked about the stock in a recent program on CNBC:
“This thing is a very hard stock to value, and maybe it is a keep sake because I can’t figure out how to put a number to it. That said, it sure does trade like crazy one, does it”
Perhaps the biggest bull case for DJT was Donald Trump becoming US President again. However, Trump Media & Technology Group (NASDAQ:DJT)’s core business is not impressive.
The platform has struggled to attract advertisers, despite reports of more than 2 million active users on Truth Social. A significant factor behind Trump Media & Technology Group (NASDAQ:DJT)’s revenue dip is a decline in web traffic. Despite an uptick in political betting odds for Trump’s potential presidency, this hasn’t sparked a rise in user numbers on the platform. During the spring and early summer, as his chances of a presidential win grew, CNBC noted that Truth Social’s traffic still slipped.
In its latest earnings reported in August, Trump Media & Technology Group (NASDAQ:DJT) posted a 30% drop in net sales year-over-year to $836,900, while operating losses grew from $3.8 million last year to $18.7 million.
9. SoundHoud AI Inc (NASDAQ:SOUN)
Number of Hedge Fund Investors: 15
Jim Cramer was recently asked about SOUN. Here is what he said:
“I was quite surprised that this stock got as crushed as it did. The quarter wasn’t really that bad. I think if you buy this stock between 5 and 6, you get a nice trade.”
SoundHound shares fell recently despite the company reporting impressive third-quarter 2024 financial results and raising its full-year revenue forecast.
“SOUN raised its FY24 revenue forecast and provided more details on its FY25 projections, as the company expands its target market and is well-positioned to benefit from the increasing demand for its voice-enabled ecosystem, which is expected to drive both growth and profit margins,” stated Wedbush analysts, led by Daniel Ives, in a note to investors.
One of the reasons why SOUN fell is the details around its acquisitions.
In its 10-Q filing, SoundHound AI revealed some surprising details, particularly regarding the impact of its recent acquisitions. The company had announced a deal with Amelia during the quarter and completed its acquisition of SYNQ3 at the beginning of the year, meaning the reported metrics do not fully reflect organic or pro forma growth.
Initially, the Q3 guidance indicated that Amelia would only provide a modest boost to revenues. SoundHound AI had claimed significant progress with voice AI ordering deals in the restaurant sector and boasted a large backlog of over $723 million from automotive voice AI contracts.
However, when factoring in the contributions from Amelia and SYNQ3, the actual pro forma numbers are more concerning. Revenues for Q3 dropped 15%, falling to $33.7 million from $39.7 million in the same quarter last year.
8. American Water Works Company Inc (NYSE:AWK)
Number of Hedge Fund Investors: 24
Jim Cramer was recently asked about AWK. Here is what he said:
“I think it’s fine. It’s consistent. When interest go down, this tends to go down with it. But take a look at the long term this one is pretty darn terrific I like it.”
American Water’s growth strategy is heavily focused on acquisitions, which has been a key factor driving the momentum of its stock price. According to Tracxn.com, the company has made 14 acquisitions, mainly targeting municipalities and small, privately owned waste and water management utilities. However, the company’s long-term debt has been increasing, surpassing $12.5 billion as of June 2024, compared to $11.7 billion at the end of 2023 and $10.92 billion in 2022.
The company’s debt-to-equity (D/E) ratio was 1.3 in June, marking the lowest ratio in a decade, though still above the industry average of 1.18 for regulated water utilities. Over the past 10 years, the company’s average D/E ratio has been 1.43. However, the company faces a liquidity challenge, as it had just $48 million in cash on hand at the end of June.
Aristotle Capital Value Equity Strategy stated the following regarding American Water Works Company, Inc. (NYSE:AWK) in its Q2 2024 investor letter:
“American Water Works Company, Inc. (NYSE:AWK): Founded in 1886 and headquartered in New Jersey, American Water Works is the largest and most geographically diverse water (~92% of regulated sales) and wastewater (~8%) utility in the United States. The company serves a population of approximately 14 million people across 14 states, with operations that span 53,700 miles of pipe, 540 water treatment plants, 1,200 groundwater wells, 1,700 pumping stations and 74 dams. The company expects to invest between $16 billion and $17 billion from 2024‐2028 as it replaces and upgrades infrastructure (often decades old) to improve the efficiency and sustainability of its operations.
High-Quality Business: Some of the quality characteristics we have identified for American Water Works include: · Stable and predictable revenues due to the essential need for water and its structure as a regulated monopoly with long‐term service contracts; · A history of growing cash returns to shareholders (~8.0% annualized dividend increases over the past five years); · Economies of scale that provide advantages in pursuing new customers via acquisitions; and · Constructive relationships with regulators that support timely cost recovery and the ability to gain approval for continued investments…” (Click here to read the full text)
7. Altria Group Inc (NYSE:MO)
Number of Hedge Fund Investors: 36
A caller recently asked Jim Cramer whether he agrees that Altria Group Inc (NYSE:MO) is undervalued. Cramer agreed with the caller but said he could not recommend the stock.
“Altria is undervalued—Altria is. However, I can’t recommend it because I’m not going to recommend tobacco stocks. I have a long history of not recommending them because I just don’t think I should endorse something that is so bad for people.”
Altria Group Inc (NYSE:MO) is a high-yield dividend stock. Amid the decline in the usage of traditional tobacco products globally, Altria Group Inc (NYSE:MO) is swiftly diversifying its revenue stream away from traditional tobacco with its e-vapor product NJOY and nicotine pouches.
In June, the FDA approved four NJOY menthol-flavored e-cigarette products, making them the first non-tobacco flavored e-cigarettes to gain FDA marketing authorization.
In Q3 2024, NJOY saw a 15.6% year-over-year rise in consumables shipment volume, while device shipments tripled to 1.1 million units. Meanwhile, the on! nicotine pouch brand grew its market share to 8.9% in Q3, up 2 percentage points from the previous year. The company also noted a 40% year-over-year increase in repeat purchasers for on!.
6. Boeing Co (NYSE:BA)
Number of Hedge Fund Investors: 42
In a latest lightning round segment of his program on CNBC, Jim Cramer recommended investors to stay away from Boeing Co (NYSE:BA).
“This thing broke down so badly. There are only two of them. This company’s going to lose money for a long time. I prefer not to be in a stock that is going to lose a lot of money for a long time.”
This was a shift from Cramer’s recent comment where he recommended investors to buy the stock on the dip.
“Welcome to the world of duopoly. The worse the financials might be, the better the buy, because as soon as the strike is over and they raise some money, they will be back on the road to profitability. The company is in awful shape, but only two companies can make commercial aircraft. And Boeing is one of them. The demand for planes is off the charts. They will be fine once they raise the cash.”
Jim Cramer was previously bullish on Boeing Co (NYSE:BA). Why? The new CEO was the main reason.
Kelly Ortberg has a degree in Mechanical Engineering, and brings a technical background to the role, a shift from the accounting-focused leadership that investors have found concerning.
Boeing Co (NYSE:BA) is also increasing production rates, having already increased output and reactivated its third 737 MAX assembly line. The company has submitted a comprehensive plan to the FAA, aiming to surpass the current cap of 38 MAX airplanes per month. While these measures will not immediately impact earnings, they signal Boeing Co (NYSE:BA)’s commitment to sustainable growth.
On the certification front, Boeing Co (NYSE:BA) is progressing with solutions for the 737 MAX 7 and MAX 10, and has entered a new phase in the 777X certification campaign. These developments are seen as positive.
Boeing Co (NYSE:BA) has made progress with the 737 MAX program. Boeing Co (NYSE:BA) has reduced traveled work, leading to cleaner fuselages and improved quality and reliability. Boeing’s submission of a comprehensive safety and quality plan to the FAA marks an important milestone. Production has increased from a low single-digit rate in the first quarter to 25 airplanes per month in June and July, though still short of the target of 38 airplanes per month by year-end. This increase suggests progress in managing manufacturing quality.
However, because of worker strikes impact and credit ratings in danger, Boeing Co (NYSE:BA)’s journey back to normality will be long and hard.
5. Honeywell International Inc (NASDAQ:HON)
Number of Hedge Fund Investors: 50
Jim Cramer in a latest program on CNBC “welcomed” Elliott Management’s activism around Honeywell International Inc (NASDAQ:HON), saying a potential break-up of the conglomerate would bode well for the business.
“If Honeywell breaks itself up into an aerospace play and an automation play, you’ll get a simplified two-company solution that will make the resulting business much easier to manage. I think that’s undeniable. Plus, as Elliot points out, this market thirsts for pure-play aerospace companies, and Honeywell fits the bill perfectly. Their aerospace division dominates the cockpit for both Boeing and Airbus. That’s why I welcome Elliot’s intervention.”
Cramer said he’s been selling Honeywell International Inc (NASDAQ:HON) shares for his charitable trust but after Elliott’s move, he intends to keep the rest of his stake.
“We pretty much gave up on Honeywell because of its endless missteps and excuses. At our club meeting on Thursday, we intended to talk about why we were dumping the stock after a long period of frustration. But now, Elliot’s come along with a great plan that allows for better execution. With the smartest activist hedge fund willing to get his hands dirty, we’re going to keep the rest of our Honeywell position, betting that Elliot will be able to unlock value here. Suddenly, this poorly run company has a potentially immense source of upside.”
Cramer explained the reasons why he was investing in the stock in the first place:
“Not that long ago, Honeywell decided to spin off its legacy chemicals business and focus on the company’s three megatrends: aerospace, automation, and the energy transition. I applauded that move because it simplified the group of disparate businesses. At the same time, the company told us earnings would come in at the high end of their forecast, and that’s why we told CNBC Investing Club members that we were encouraged by the tone of their comments. But we were wrong.”
4. Salesforce Inc (NYSE:CRM)
Number of Hedge Fund Investors: 117
Talking about stocks that are getting too much “love,” Cramer said in a recent program on CNBC that Salesforce Inc (NYSE:CRM)’s rally is “unsustainable” and the stock needs a break. However, he’s bullish on the stock and said his charitable trust owns a stake in it.
“Speaking as a big believer in Salesforce, which we own for the Charitable Trust forever, I think the stock’s been on an unsustainable tear. It needs a breather … Again, I adore Salesforce—I just wish the stock would digest its gains here because this kind of straight-up rally makes me nervous. I like stair-step movements.”
Salesforce Inc (NYSE:CRM) is on investors’ radar because of its AI acquisitions. The company recently agreed to acquire AI voice agent firm Tenyx. This acquisition follows Salesforce’s strategic partnership with Workday to develop an AI-powered assistant for employees. The company has also agreed to buy SaaS data protection startup Own for $1.9 billion in cash.
Wall Street expects $11.12 per share in profits for Salesforce Inc (NYSE:CRM) next year, representing a 10% year-over-year increase. For the current financial year, profits are expected to grow by 23%, with estimates trending upwards. Based on these forecasts, Salesforce trades at a forward price-to-earnings ratio of 22, which is attractive given the AI-related growth catalysts.
Polen Focus Growth Strategy stated the following regarding Salesforce, Inc. (NYSE:CRM) in its Q3 2024 investor letter:
“In the third quarter, we purchased new positions in Apple and Oracle and eliminated our small positions in Nike and Salesforce, Inc. (NYSE:CRM). We exited our position in Salesforce to fund better opportunities in Shopify and MSCI. Salesforce is seeing slower revenue growth than we would have expected, given the weakening macroeconomic environment. Furthermore, since its core end markets in customer relationship management (“CRM”) and Service are fairly mature, a lower growth level versus our expectations could persist for some time.”
3. Broadcom Inc (NASDAQ:AVGO)
Number of Hedge Fund Investors: 130
Commenting about Broadcom in a latest program on CNBC, Jim Cramer said:
“I am also pulling for Broadcom. I think Broadcom should do well. I don’t know whether Cisco is going to hurt it today with its light guidance because I think Broadcom is doing very very well.”
Broadcom Inc (NASDAQ:AVGO) continues to be a leader in the AI ASCI and networking chips market. Broadcom Inc (NASDAQ:AVGO) has 3nm AI ASIC chip deals with Alphabet and Meta in addition to many other tech giants aiming massive spending for AI hyperscaling.
The company’s Ethernet business is also strong amid partnerships with Arista Networks (ANET), while the company is also collaborating with Dell (DELL), Juniper (JNPR), and Super Micro (SMCI) in the networking business and other segments.
Baron Opportunity Fund stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q3 2024 investor letter:
“We continued to build our position in Broadcom Inc. (NASDAQ:AVGO), a global technology leader that designs, develops, and supplies a broad range of semiconductor and infrastructure software solutions. As AI continues to proliferate, we believe hyperscalers – such as Meta, Microsoft Azure, Google Cloud Compute, and Amazon Web Services, to name just a few – will increasingly deploy custom accelerator chips for their AI workloads as they can be more cost-effective and energy-efficient than using NVIDIA’s general-purpose GPUs. Broadcom has a leading position partnering with hyperscalers to develop these custom chips, with its AI customer accelerator business up 3.5-times year-over-year in its most recently reported quarter, and a goal of at least $8 billion in custom accelerator revenues for this fiscal year. Additionally, VMware continues to perform better than expected as Broadcom is implementing its product simplification and subscription revenue model strategy. Further, its non-AI related semiconductor business, which tends to be more cyclical, is in the early stages of a recovery. Combined, all these factors will drive strong revenue and earnings growth over the next several years.”
2. Microsoft Corp (NASDAQ:MSFT)
Number of Hedge Fund Investors: 279
Answering a question about Microsoft Corp (NASDAQ:MSFT) and the declines it faced after its latest quarterly results, Cramer said:
“It should not take a beating. I thought they did a good job, the sellers were bullheaded. You know what, the stock is starting to make you and me look good.”
Microsoft Corp (NASDAQ:MSFT) shares recently fell after the company reported its latest quarterly results. Analysts believe most of the revenue beat came from PC segment, while investors were paying more attention to AI and Azure. Azure’s 34% growth met expectations, though guidance for next quarter fell short, projecting between 31% and 32% growth—1 percentage point below forecasts. This dip is attributed to delays in data center capacity from third-party providers, though Azure’s consumption trends remained steady.
Investors hoping for a rebound in IT spending were likely disappointed, as stable Azure consumption suggests no significant uptick in the second half of the year. In addition, the lower-than-expected Q2 guidance underscored tempered growth expectations.
AI services, however, contributed a robust 12 points to Azure’s growth, a steady continuation from the previous quarter. Microsoft’s management confirmed strong demand for AI services, although supply constraints are limiting further expansion. Microsoft Corp (NASDAQ:MSFT) anticipates AI-related revenues, including M365 Copilot and Azure AI, could reach $10 billion annually by next quarter—making it one of the fastest-growing segments in Microsoft Corp (NASDAQ:MSFT)’s history.
Baron Opportunity Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q3 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is the world’s largest software and cloud computing company. Microsoft was traditionally known for its Windows and Office products, but over the last five years it has built a $147 billion run-rate cloud business, including its Azure cloud infrastructure service and its Office 365 and Dynamics 365 cloud-delivered applications. Shares gave back some gains from strong performance over the first half of this year. For the fourth quarter of fiscal year 2024, Microsoft reported a strong quarter with total revenue growing 16%, in line with the Street; Microsoft Cloud up 22%; Azure up 30%; 43% operating income margins; and 36% free cash flow margins. Core Azure growth came in one point shy of expectations, however, due to a soft European market and continued constraints on AI compute capacity. In the same vein, while Microsoft reiterated its fiscal 2025 targets of double-digit top-line and operating income growth, quarterly guidance called for Azure growth to slow a bit before accelerating in the back half of the fiscal year, as capital expenditures increase, yielding an expansion of AI compute capacity. We believe this investment is a leading indicator for growth, with more than half of the spend related to durable land and data center build outs, which should monetize over the next 15-plus years. We remain confident that Microsoft is one of the best-positioned companies across the overlapping software, cloud computing, and AI landscapes, and we remain investors.”
1. Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Fund Investors: 308
Jim Cramer in a latest program explained why he’s bullish on Amazon.
“The catalyst for Amazon.com Inc (NASDAQ:AMZN) is that they are crushing it this holiday season. These guys are doing so many things right. That last quarter was tremendous. But the key is Europe. That’s the delta that’s going to move it higher.”
Amazon.com Inc (NASDAQ:AMZN) threw it out of the park with its latest quarterly results amid strong Cloud growth. Amazon Web Services has generated $27.5 billion in revenue, marking a 19% year-over-year increase. The segment’s operating income is expanding at nearly 2.5 times the rate of its revenue growth, boosting Amazon.com Inc (NASDAQ:AMZN)’s overall operating income. At this pace, AWS is on track to deliver $110 billion in annualized revenue. If it maintains its ~20% growth rate, AWS could reach $125-130 billion in revenue in FY 2025.
For the ongoing quarter, Amazon.com Inc (NASDAQ:AMZN) expects revenue between $181.5 billion and $188.5 billion, implying growth of up to 11%. Amazon.com Inc (NASDAQ:AMZN)’s stock currently trades at a forward P/E of 32.9, higher than the big tech average of 25.5. If Amazon.com Inc (NASDAQ:AMZN) grows its earnings per share (EPS) by an average of 25% annually over the next three years, it could achieve an EPS of around $9.25 by FY 2027 (up from an estimated $4.74 in FY 2024). Applying a 35x P/E ratio in line with Amazon.com Inc’s (NASDAQ:AMZN) historical average suggests a fair stock value of over $300. The primary catalyst for this target would be AWS’s robust operating income growth.
Polen Focus Growth Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2024 investor letter:
“The largest absolute detractors were Alphabet, Airbnb, and Amazon.com, Inc. (NASDAQ:AMZN). Amazon’s position as a notable detractor speaks more to the size of the position than the magnitude of the underperformance, as the company delivered a solid set of results during the quarter.
We trimmed our positions in Amazon, Alphabet, and Microsoft during the quarter. As we have previously, we trimmed Amazon slightly to bring the weight back to 15% for risk management purposes. We remain very positive on our investment thesis of strong revenue growth and even stronger earnings and free cash flow growth continuing over the next few years.”
While we acknowledge the potential of Amazon.com Inc (NASDAQ:AMZN), 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 AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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