Jim Cramer, the host of Mad Money, recently expressed his concerns about the uncertain economic outlook for 2025, particularly in relation to corporate earnings and the stock market’s expectations for the upcoming year. He highlighted the important question at the heart of the market’s direction: Will corporate earnings grow as Wall Street is predicting?
According to Cramer, analysts are projecting a 12.2% growth in earnings for the S&P 500 this year, followed by 11.9% growth in 2026 though that is still a long way off. Cramer emphasized that these growth estimates, if realized, would be impressive and one of the main reasons why investors are willing to pay nearly 22 times this year’s earnings for the S&P 500. He added:
“Now, that’s a big premium versus its average forward multiple of 17.7 times earnings over the past decade. Buyers are comfortable paying up because they believe in across-the-board corporate earnings growth of about 12%.”
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Cramer went on to question if the market could even handle a higher growth rate of 24%, which some investors might find acceptable, but he also acknowledged the uncertainty about whether that is achievable. Cramer hopes that earnings growth can be driven by factors such as a strong consumer base, increased capital spending, deregulation, and a rebound in international markets, particularly China, following the pandemic. He added:
“Perhaps starting in 2026, additional tax cuts could provide another easy tailwind for corporate growth but there are also things that could trip us on that path to 12% earnings growth… like tariffs, higher interest rates, or worse, an erosion of consumer spending.”
As earnings season unfolds, Cramer believes that we’ll get a clearer picture of what to expect for 2025. Over the next few weeks, companies will report their fourth-quarter results and offer initial guidance for the full year.
He explained that if any of them issued disappointing forecasts, it could lead to a downward revision of earnings estimates, which would be a significant negative development for the market. He also added that such an outcome could result in investors paying too high a price for stocks relative to their earnings potential, which would be bad news for the averages.
Jim Cramer’s Lightning Rounds: 9 Stocks in Focus
Our Methodology
For this article, we compiled a list of 9 stocks that were discussed by Jim Cramer during the episodes of Mad Money aired on January 10 and 15. 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 Rounds: 9 Stocks in Focus
9. Anavex Life Sciences Corp. (NASDAQ:AVXL)
Number of Hedge Fund Holders: 8
Cramer emphasized that Anavex Life Sciences Corp. (NASDAQ:AVXL) stock is a spec as he said:
“Okay, they’re after some brain stuff and I, you know, I was the spokesperson for the American Brain Foundation for a while. There’s nothing tougher than brain. It’s a good spec, 11 bucks, but understand it is indeed a spec.”
Anavex Life Sciences (NASDAQ:AVXL) is focused on developing therapeutics for central nervous system diseases, including Alzheimer’s, Parkinson’s, and rare neurological disorders, along with clinical trials for treatments targeting schizophrenia, dementia, and cancer. While Cramer expressed a little reluctance about the stock recently, this is what he said in 2022:
“This is another one that I kind of like, I’ve got to tell you. … I do not like losses in tech, but in biotech, I can accept the fact that they have a good pipeline.”
8. Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS)
Number of Hedge Fund Holders: 20
When a caller asked about Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS), Cramer said, “Modern military, modern defense, I like the story very much. I think you’re in good shape.”
Kratos Defense & Security Solutions (NASDAQ:KTOS) provides advanced technologies for defense and national security, including unmanned systems, propulsion systems, satellite technologies, and communication and defense solutions. Cramer’s sentiments for the company have not strayed as, in May 2024, he said, “I like defense contractors…I think you stay on it, maybe even buy more.” Since May 2024, the stock has gained over 55%.
