Jim Cramer, the host of Mad Money, recently discussed a market trend that’s been generating impressive gains, especially when investors target heavily shorted stocks. He explained the phenomenon as he said that investors find success by betting that these companies are in better shape than short sellers expect. According to Cramer, this approach has led to some significant wins in recent times. He pointed out the behavior of short sellers, noting that when things go wrong for them, they panic.
“The shorts always panic when their trades fall apart because, unlike longs, if you’re a short seller, you can lose a lot more than a hundred percent of your investment if the stock goes up too much.”
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Cramer also highlighted that while short sellers can profit when a company fails, it’s a risky game with significant asymmetry. He explained that while a stock’s price can only fall to zero, it has the potential to rise indefinitely. Cramer cautioned that although short sellers might be hoping for a stock’s downfall, they are equally vulnerable to the nightmare scenario of infinite losses if the stock price continues to climb.
In such situations, when short sellers run out of options, they are forced to buy back shares, which can send the stock price even higher. For shareholders, this scenario can be advantageous. While short sellers may be a threat when predicting a stock’s decline, their need to buy back shares can act like rocket fuel for the stock’s price when good news emerges.
“If you’re a shareholder, they’re your worst enemy when they’re talking about a stock going to zero. But once the stock starts soaring on any good news, the shorts are your best friend because their forced buying is like rocket fuel and they can’t stop the propulsion while you just get to go along for the ride.”
Jim Cramer’s Lightning Round: 9 Stocks in Spotlight
Our Methodology
For this article, we compiled a list of 9 stocks that were discussed by Jim Cramer during the recent episodes of Mad Money. We listed the stocks in ascending order of their hedge fund sentiment as of the third quarter, which was taken from Insider Monkey’s database of 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 Lightning Round: 9 Stocks in Spotlight
9. B&G Foods, Inc. (NYSE:BGS)
Number of Hedge Fund Holders: 15
Cramer recently called B&G Foods, Inc. (NYSE:BGS) a loser and said:
“… BGS is a total loser and has been a loser for many, many years and I cannot stand by the fact of even thinking that that dividend is safe. I used to speak to the company quite a bit. They have not been able to deliver in many, many quarters. So they’ve earned the Appalachian loser.”
B&G Foods (NYSE:BGS) is engaged in manufacturing and distributing a wide range of shelf-stable and frozen foods, along with household products, including canned and frozen vegetables, oils, spices, sauces, cereals, and other specialty items under various brands. In its third-quarter results, it reported a decline in net sales, which fell by $41.6 million, or 8.3%, reaching $461.1 million compared to $502.7 million in the same period of 2023.
According to Casey Keller, President and CEO of B&G Foods (NYSE:BGS), the decrease in sales trends was slower than expected, reflecting broader challenges within the center store packaged food industry. The primary reasons for the sales drop included the divestiture of the Green Giant U.S. shelf-stable business, a decline in unit volumes, and unfavorable foreign currency impacts.
8. Rocket Lab USA, Inc. (NASDAQ:RKLB)
Number of Hedge Fund Holders: 16
When Cramer was asked about his thoughts on Rocket Lab USA, Inc. (NASDAQ:RKLB), he said:
“You don’t need my thoughts on Rocket Lab. It’s one of those stocks that people are just gonna buy because they love the name, they love the business. It’s not a bad company by any means, but it is up 305%. I like to think that I missed it, but I know people can’t resist. It’s moth to flame, but I don’t know how close the moth is to the flame.”
Rocket Lab (NASDAQ:RKLB) is a company that offers a range of services, including rocket launches, spacecraft design and manufacturing, and on-orbit management solutions, primarily serving the space and defense industries. As of October, the company had completed 12 launches, surpassing the total number of launches in all of 2023, which stood at 10. This growth is reflective of a broader upward trend within the company, as it reported a 55% increase in sales year-over-year during the third quarter.
In the third quarter, the company set a new annual launch record with 12 Electron launches, and secured new contracts worth $55 million, reflecting a 67% price increase since its debut. The company also completed successful missions for three commercial satellite constellation operators and achieved a rapid 10-week turnaround for a November 2024 launch.
On the Neutron front, Rocket Lab (NASDAQ:RKLB) signed key agreements, including a contract with the U.S. Air Force to develop the Archimedes engine and made progress on Neutron’s infrastructure. The company also advanced its space systems division, delivering spacecraft for NASA’s ESCAPADE Mars mission and completing work on its $515 million contract with the Space Development Agency.
7. Intuitive Machines, Inc. (NASDAQ:LUNR)
Number of Hedge Fund Holders: 17
Cramer called Intuitive Machines, Inc. (NASDAQ:LUNR) stock a “hot stock” and commented:
“Now that stock is up a great deal. It’s kind of the polar opposite of Nvidia in that it makes no money. Matter of fact, you lose a lot of money. That said: Look, I know a hot stock when I see it. I’m not gonna fight the speculation for space anymore because everybody wants a piece of what Musk has for space, but he doesn’t have it yet. So I’m not gonna bless it, but I’m not gonna fight it.”
Intuitive Machines (NASDAQ:LUNR) is engaged in designing, manufacturing, and operating space products and services in the U.S., focusing on lunar exploration, satellite delivery, space station servicing, and lunar data services to support scientific and human activities on the moon. For the third quarter, the company reported significant growth, more than doubling its revenue compared to the previous year. The company’s revenue reached nearly $58.5 million, marking an increase of 359% year-over-year, with a year-to-date total of $173.3 million.
Despite this growth in revenue, the company posted a loss of approximately $55.5 million, in contrast to a profit of over $33 million during the same period in 2023. However, the company also saw an improvement in profitability, recording a positive gross margin of $4.1 million for Q3.
During the quarter, Intuitive Machines (NASDAQ:LUNR) was awarded a data services contract from NASA for the Near Space Network (NSN), which has a maximum potential value of $4.82 billion. This contract is a significant milestone for the company, enhancing its capabilities in data transmission for in-space communications and navigation. The quarter also concluded with the company holding a cash balance of $89.6 million, the highest cash balance at the end of a quarter in the company’s history.
6. CNH Industrial N.V. (NYSE:CNH)
Number of Hedge Fund Holders: 24
When a caller asked about CNH Industrial N.V. (NYSE:CNH), Cramer said:
“… Second rater, frankly… This company did not move even with Deere doing that well today. I wanna go with best of breed, best of breed is John Deere.”
CNH Industrial (NYSE:CNH) designs, manufactures, markets, and finances a wide range of agricultural and construction equipment, offering financing solutions for customers purchasing new and used machinery. Recently, Greenlight Capital’s David Einhorn shared his views on the company, highlighting his investment in the company. Speaking at CNBC’s Delivering Alpha conference, Einhorn described the agricultural machinery company as an undervalued asset that is currently flying under the radar.
According to Einhorn, the agricultural sector, particularly the equipment market, is nearing the end of a downturn. He pointed out that, while the agricultural equipment industry is currently experiencing low prices and a cyclical downturn, these conditions present an opportunity for potential growth once the cycle turns. As per his remarks, “It’s exactly the kind of situation that absolutely nobody cares about right now because it’s cheap, and the news over the next period of time isn’t going to be very good.”
Einhorn also noted the cyclical nature of the industry, referring to a period in which there was a boom in agricultural equipment purchases, which has since transitioned into a downturn. He stated that agricultural equipment sales are currently 20% below their historical average, a scenario that typically signals the end of a bearish cycle.
He further explained that, in the long term, the industry is likely to experience a rebound, with sales potentially exceeding average levels by 20% within a few years. According to Einhorn, this is a typical pattern for industries that operate on such cycles.
5. MicroStrategy Incorporated (NASDAQ:MSTR)
Number of Hedge Fund Holders: 25
Talking about MicroStrategy Incorporated (NASDAQ:MSTR), Cramer remarked:
“I’ve gotta tell you, it’s a Bitcoin play. I prefer to actually own Bitcoin. I know that Citron put some sort of short on it. All I can tell you is own Bitcoin. That’s a winner.”
MicroStrategy (NASDAQ:MSTR) provides AI-powered enterprise analytics software and services. It is also known for its involvement in Bitcoin development. Recently, it faced a setback in its stock performance after Citron Research announced its decision to bet against the company. According to a post made by Citron on X, the company has transitioned into a Bitcoin investment fund, and its business operations are no longer closely tied to its software offerings.
The post criticized the company’s increasing focus on Bitcoin investment, stating that the company’s market volume had become detached from Bitcoin’s underlying fundamentals. While Citron Research expressed continued confidence in Bitcoin’s future, the firm revealed that it had hedged its position with a short position on the stock.
On November 22, appearing on CNBC’s ‘Squawk Box’, Michael Saylor, CEO of MicroStrategy (NASDAQ:MSTR), described the company’s approach to generating revenue by focusing on its role as a Bitcoin Treasury company. He explained that the company earns money by selling the volatility of Bitcoin and reinvesting the proceeds back into the cryptocurrency.
He said that in addition, the company strips the volatility, risk, and performance from fixed-income securities, transferring those factors to common stocks. Saylor noted that critics who short the stock believe that if the premium on the equity disappears, the company won’t be able to make money.
However, he argued that they overlook the strategy where, when borrowing money at 6% and investing it in Bitcoin, the company stands to gain significantly. For example, if Bitcoin appreciates by 30% or even 60%, MicroStrategy could realize a 90% spread on Bitcoin, compared to an 80% spread.
4. Globe Life Inc. (NYSE:GL)
Number of Hedge Fund Holders: 33
Cramer expressed lukewarm sentiment about Globe Life Inc. (NYSE:GL), saying:
“Well, it’s kind of an interesting Medicare supplement insurance company… nothing wrong. It sells at eight times earnings. I’m gonna tell you it’s fine, it’s not exciting, it’s not boring, it’s just fine.”
Globe Life (NYSE:GL) offers life and supplemental health insurance products, as well as annuities, to lower middle- and middle-income families in the United States through its various subsidiaries. On November 14, the company declared a quarterly dividend of $0.2400 per share.
This dividend will be distributed to all holders of outstanding common stock as of the close of business on January 6, 2025, with payment scheduled for January 31, 2025. As of November 22, the stock’s yield was 0.87%. Matt Darden, Co-Chief Executive Officer recently highlighted the company’s consistent history of share repurchases, with approximately $10 billion of common stock bought back since the launch of its share repurchase program in 1986.
On November 18, Globe Life (NYSE:GL) further announced an extension to its stock repurchase program, authorizing the buyback of up to $1.8 billion worth of common stock. This new authorization supersedes a previous approval of $1.3 billion that was made earlier in the year on April 29, 2024.
3. Oscar Health, Inc. (NYSE:OSCR)
Number of Hedge Fund Holders: 45
When asked about Oscar Health, Inc. (NYSE:OSCR) during a recent lightning round, Cramer said:
“I have to tell you that until I saw that Mark Bertolini is the CEO, I didn’t really have much in store for this, but Bertolini is a winner and a hitter.”
Oscar Health. (NYSE:OSCR) is a U.S.-based health insurance company offering individual and small group plans, along with a technology platform, +Oscar, that supports value-based care and provides reinsurance products. The company has been under the leadership of Mark Bertolini, who became CEO a year ago. With him at the helm, it has made strides toward achieving profitability.
The company is no longer focusing on a single approach to growth. Instead, it is diversifying its efforts and has identified new growth opportunities, particularly in the Health Reimbursement Arrangement (HRA) space. This program allows smaller businesses to reimburse employees for insurance premiums and out-of-pocket expenses, and it has seen increasing adoption in recent years.
Bertolini aims to position Oscar Health. (NYSE:OSCR) as the leading choice for businesses offering Individual Coverage Health Reimbursement Arrangements (ICHRA), especially as more states enact laws to facilitate this type of employee benefit. Reflecting on the broader landscape, Bertolini noted a shift in the direction of policy at both the state and federal levels. He pointed out that policymakers are moving beyond efforts to “repeal and replace” existing systems and are instead focusing on creating solutions to improve the healthcare marketplaces and better serve the American population.
2. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 58
While Cramer acknowledged PepsiCo, Inc.’s (NASDAQ:PEP) CEO’s performance and the stock’s yield, he said it has become “too hard”.
“You know, I think Ramon Laguarta is doing such a good job but the odds are… If you have the Fed cutting rates, you shouldn’t own the stock. If you have the GLP-1s, you shouldn’t own the stock. If you have people saying that junk food is not good for you, you can’t own the stock and it’s just become just too darn hard. So even though it’s got a 3.5% yield, I do think it goes, unfortunately, I have to say it, I think it goes lower.”
PepsiCo (NASDAQ:PEP) is a global leader in the production, marketing, and distribution of a wide range of beverages and snack foods, offering products under popular brands like Lay’s, Gatorade, Pepsi, Doritos, Tropicana, and Aquafina. During CNBC’s Mad Dash, Cramer talked about the company and said:
“Well, PepsiCo has owned half of Sabra and for $500 million, they’re buying the other half. The reason why I mention this is because PepsiCo has been doing much to make its product lineup healthier. They’ve taken a lot of salt out, they’ve gone more natural colors and just as RFK Jr. is going after Fruit Loops, I think that Ramon Laguarta is positioning his portfolio to be able to say, look, we are doing what we can. And they added chips, by the way, for people who think that there’s not a lot of value. They’re fighting shrinkflation and I just think he’s being very forward. This acquisition shows me that not everybody is going in the wrong direction. So I just applaud this acquisition… But I guess it’s more of a metaphorical issue. I think that they’re doing what they can and that’s very smart. I told Ramon, you know, the stock is incredibly hard to own.”
On November 22, PepsiCo (NASDAQ:PEP) revealed that it had reached an agreement to acquire the remaining 50% stake in Sabra Dipping Company, LLC and PepsiCo-Strauss Fresh Dips & Spreads International GmbH, becoming the sole owner of both entities. These companies are responsible for producing Sabra and Obela products, which are known for their fresh dips.
1. Occidental Petroleum Corporation (NYSE:OXY)
Number of Hedge Fund Holders: 71
When Cramer was asked about Occidental Petroleum Corporation (NYSE:OXY), he questioned why Buffett was a buyer of the stock.
“I think it’s okay… it’s Warren Buffett’s oil. I don’t know why he anointed this one, but he’s anointed it, he got a very good preferred deal. Look, Coterra is the way I like to do this thing… And by the way, they are not climate deniers, all right. Coterra is run by Tom Jorden. The stock is really on a tear lately because people realize the last acquisition… brought… a lot more oil so that the portfolio between oil and natural gas is much more balanced. It’s a buy.”
Occidental Petroleum (NYSE:OXY) is involved in the acquisition, exploration, and development of oil and gas properties, as well as the production of chemicals and the transportation and marketing of oil, gas, and related products. According to Insider Monkey’s data, Berkshire Hathaway owned 255.28 million shares of the company worth $13.157 billion in the third quarter.
For the third quarter, it posted earnings of $0.98 per diluted share, significantly surpassing analysts’ expectations, largely due to its effective cost management practices. In terms of cash flow, Occidental Petroleum (NYSE:OXY) generated $3.8 billion in operating cash flow for the third quarter. The company’s production during the period averaged 1.4 million barrels of oil equivalent per day (BOE/d), surpassing the midpoint of its production guidance by 22,000 BOE/d.
While we acknowledge the potential of Occidental Petroleum Corporation (NYSE:OXY) 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 OXY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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