In this article, we’ll explore Jim Cramer’s Top 10 Hottest Stock Picks.
In a recent post of Jim Cramer’s Morning Thoughts, he highlighted the impact of recent economic data on market sentiment. The S&P 500 is poised to fall for the fourth day in a row, following a weaker-than-expected August jobs report. The report revealed that the U.S. economy added 142,000 jobs last month, falling short of the Dow Jones estimate of 161,000.
“The S&P 500 is tracking for a fourth straight day of declines after the highly anticipated August jobs report came up short. Bond yields also moved lower on the report. The U.S. economy added 142,000 jobs in August, less than the Dow Jones estimate of 161,000, while the unemployment rate ticked down to 4.2% as expected.” Cramer said.
Despite this shortfall, the unemployment rate dropped to 4.2%, aligning with predictions. Additionally, the job gains for June and July were revised downwards. As a result, traders are now split between anticipating a standard 25 basis point interest rate cut and a more substantial 50 basis point reduction at the Federal Reserve’s upcoming meeting on September 18.
“Job gains in the June and July reports were also revised down Friday. Traders were split roughly evenly between a traditional 25 basis point interest rate cut and a larger 50 basis point reduction at the Federal Reserve’s policy meeting on Sept. 18.”
“We Got What We Wanted, But the Market Crashed”
In a recent episode of Mad Money, Jim Cramer discussed how September 6 turned out to be a disappointing trading day. Despite hopes from bullish investors for a weak non-farm payrolls report that would encourage the Federal Reserve to cut rates, the actual report met these expectations.
“What an ugly day. Just hideous. We came into today knowing we’d have a critical non-farm payrolls report. If you were a bull, you wanted to see weaker-than-expected hiring with wages pretty much in line, because that’s what the Fed needs to see before it can start cutting rates. Voila, we got exactly what we wished for. Maybe we should have been careful, though, because as soon as we got what we wanted, the bulls vanished and the sellers came out of the woodwork, crushing practically everything.” Said Cramer.
Jim Cramer pointed out that September is historically a weak month for the market due to significant profit-taking. Although it might seem circular to link September’s weakness to profit-taking, it’s more reasonable than attributing it solely to fears of a severe economic slowdown. Cramer emphasized that, despite the market’s dips, big tech companies, especially those involved in key trends like data centers and accelerated computing—should be considered as buying opportunities during these times.
“This market has a September problem. Come September, we’re always hit with a tremendous amount of profit-taking, which is why it’s the weakest month of the year. I know that’s somewhat circular reasoning—we sell because we’ve always sold—but it makes more sense than saying people sold tech because they fear a hard landing. Tech, especially big tech, is something you buy, not sell, into weakness if you’re worried about a more severe slowdown.
Why? Well, because big tech is all about powerful secular themes that can keep going even during a recession—and we’re not getting one. I’m talking about the data center, accelerated computing—they’re not going anywhere. Nevertheless, when anything jars the big tech themes of the moment, the market’s reaction is swift, harsh, and horrible.”
Jim Cramer Urges Investors: “Do Not Abandon Ship”
Jim Cramer discussed the upcoming release of the Consumer Price Index (CPI) on Wednesday, which will offer new insights into inflation. He noted that if inflation stays steady or falls, the Federal Reserve will have more room to cut interest rates, which could help prevent a recession and address concerns from many sellers. Cramer encouraged investors to remain confident and avoid abandoning their positions due to these uncertainties.
“Wednesday, we get another read on inflation—this time from the Consumer Price Index. What can I say? As long as inflation stays the same or goes lower, the Fed has plenty of leeway to cut interest rates and prevent a recession—the thing so many sellers are worried about. That’s why I keep telling you, please do not give up the ship here.”
Our Methodology
The article reviews Jim Cramer’s recent Morning Thoughts, where he recommended various stocks. It highlights ten companies he featured and examines how hedge funds perceive these companies. The list ranks these companies from the least owned to the most owned by hedge funds.
At Insider Monkey we are obsessed with 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 Top 10 Hottest Stock Picks
10. Stanley Black & Decker Inc. (NYSE:SWK)
Number of Hedge Fund Holders: 24
Morgan Stanley has given Stanley Black & Decker Inc. (NYSE:SWK) an “equal weight” rating with a price target of $107. Jim Cramer mentioned that they own Stanley Black & Decker Inc. (NYSE:SWK) for the trust, viewing it as a potential beneficiary from future Federal Reserve interest rate cuts.
“Stanley Black & Decker got an equal weight hold rating and a $107 price target from Morgan Stanley. We own it as a play on Fed interest rate cuts.”
Stanley Black & Decker Inc. (NYSE:SWK) is an attractive investment due to its improved earnings outlook, effective cost-cutting measures, and strong cash flow. Stanley Black & Decker Inc. (NYSE:SWK) has raised its full-year 2024 adjusted earnings per share (EPS) forecast to $3.70 to $4.50, showing confidence in its cost-saving and supply chain improvements. Even though revenue declined by 3% year-over-year in Q2 2024, Stanley Black & Decker Inc. (NYSE:SWK) exceeded expectations with an adjusted EPS of $1.09, thanks to strong margin management. Stanley Black & Decker Inc. (NYSE:SWK)’s supply chain transformation is expected to save up to $1.5 billion by the end of 2024, and $2 billion by 2025.
With a P/E ratio of around 23.42, Stanley Black & Decker Inc. (NYSE:SWK) is considered attractively valued relative to its earnings potential. Stanley Black & Decker Inc. (NYSE:SWK) is also focusing on reducing short-term debt and generating significant free cash flow, which will improve financial flexibility and support further debt reduction and shareholder returns. Despite some revenue challenges, Stanley Black & Decker Inc. (NYSE:SWK)’s restructuring efforts, enhanced profitability, and strong market position, especially in its Tools & Outdoor segment, support a positive outlook.
9. MicroStrategy Incorporated (NASDAQ:MSTR)
Number of Hedge Fund Holders: 26
Barclays initiated coverage on MicroStrategy Incorporated (NASDAQ:MSTR) with a “buy” rating and a price target of $146 per share, highlighting the company’s unique business model tied to cryptocurrency. Jim Cramer pointed out that, in his view, MicroStrategy Incorporated (NASDAQ:MSTR) is essentially a bet on the crypto market.
“Barclays likes MicroStrategy, starting the stock with a buy-equivalent and a $146-per-share price target. The analysts cite MicroStrategy’s unique business model that taps into crypto. I think it is just a play on crypto.”
MicroStrategy Incorporated (NASDAQ:MSTR) presents a strong investment case due to its significant Bitcoin holdings, recent index inclusions, and innovative blockchain projects. As of Q2 2024, MicroStrategy Incorporated (NASDAQ:MSTR) owns 226,500 BTC, valued at around $14.7 billion, and has recently added 12,222 BTC to its portfolio. This substantial Bitcoin investment offers direct exposure to potential cryptocurrency gains, appealing to Bitcoin investors. MicroStrategy Incorporated (NASDAQ:MSTR)’s recent inclusion in the Russell 1000 Index and the MSCI World Stock Index enhances its credibility and may attract more institutional interest.
Additionally, MicroStrategy Incorporated (NASDAQ:MSTR) is advancing blockchain technology with initiatives like the “Orange Protocol,” which focuses on decentralized identification on the Bitcoin network. Despite a Q2 2024 net loss of $123 million and a 7% drop in revenue, MicroStrategy Incorporated (NASDAQ:MSTR)’s 10:1 stock split and “Bitcoin Yield” performance indicator reflect its commitment to shareholder value. MicroStrategy Incorporated (NASDAQ:MSTR)’s planned $2 billion equity offering for further Bitcoin purchases underscores its focus on expanding its Bitcoin holdings.
Artisan Small Cap Fund stated the following regarding MicroStrategy Incorporated (NASDAQ:MSTR) in its Q2 2024 investor letter:
“Regarding MicroStrategy Incorporated (NASDAQ:MSTR), our decision to avoid this company comes down to a lack of conviction in its franchise characteristics. The stock has worked this year due to a rebound in the price of bitcoin. Since 2020, MicroStrategy has been focused on converting its cash and cash equivalent holdings, as well as issuing debt, to fund the purchase of bitcoin, which now makes up most of the company’s value.”