In this article, we’ll explore Jim Cramer’s 10 Best Stock Picks for Investors Right Now.
In a recent episode of Mad Money, Jim Cramer discussed how the slowing economy might lead the Federal Reserve to ease its policies. He expects the Fed to cut interest rates, but it’s unclear whether the reduction will be 25 or 50 basis points. This decision is crucial as it could significantly impact the market.
“At last, the economy has slowed enough that the Fed can take its foot off the brakes and step on the gas. That’s why we’re starting our game plan in the middle of next week when the Federal Reserve renders its verdict: 25 or 50 basis points. We don’t typically have a lot of drama in this business, but this one counts as a nail-biter because we really don’t know how big the rate cut will be. We just know they’re going to cut.”
Cramer pointed out that Friday’s market performance was strong, with the Dow gaining 297 points, the S&P rising by 0.54%, and the Nasdaq increasing by 0.65%. This marked the best two weeks of the year for the S&P and the Nasdaq, suggesting that the market might be anticipating a larger rate cut of 50 basis points. Stocks sensitive to interest rates, particularly in housing, surged in response.
“Today’s rally saw the Dow gaining 297 points, the S&P advancing 0.54%, and the Nasdaq climbing 0.65%, capping off the best two weeks of the year for both the latter two indices. The S&P and the Nasdaq suggest the Fed might actually go for 50. That’s a double rate cut. I know this because the stocks most sensitive to interest rates, particularly housing and housing-related names, soared today.”
Cramer also cautioned that if the housing market rally continues, it could lead to a sell-off if only a 25 basis point cut is announced. He pointed out that traders are currently pricing in a higher chance of a 50 basis point cut, according to the CME Group’s FedWatch tool. If the Fed opts for a smaller cut, traders who bought in anticipation of a larger reduction might sell off their stocks, potentially causing market volatility.
“To use a little NFL fantasy football lingo, they soared presumably in anticipation of something huge from Jay Powell and company. All aboard! I still find myself betting on a quarter-point cut, though. It’s not that we don’t need a half-point cut, as the economy is slowing pretty quickly, especially for the lower-income cohort. However, I’ve always believed that the Fed should be measured when it cuts rates at this stage of the business cycle.
The biggest risk is that inflation might flare up again if you cut too much, and a 50 basis point cut all at once makes that a lot more likely. Plus, a double rate cut signals that something may be very wrong with the economy—something we don’t know about, something lurking. So going for 50 could inspire panic, and there’s simply no reason for the Fed to take that chance when it can simply hit us with a series of thoughtful 25 basis point cuts that neither reignite inflation nor cause panic.”
Jim Cramer warned that if the housing market rally keeps going, it might lead to a sell-off if the Federal Reserve announces only a 25 basis point rate cut. If the Fed delivers a smaller cut, traders who anticipated a bigger reduction might start selling their stocks, which could lead to increased market volatility.
“Now, if the housing rally continues at this pace, these stocks run the risk of being too hot to handle for a mere 25 basis point cut, and we’ll get a sell-off in response. Keep in mind how the CME Group’s FedWatch tool, which tracks interest rate expectations based on the Fed Funds Futures Market, indicates that traders are now pricing in a much higher probability of a double rate cut, currently at 45%. That’s much higher than it was a week ago. These traders could indeed be disappointed if the Fed decides to be more measured. They could be your enemy come Wednesday at 2 p.m. as they dump what they bought incorrectly, and that is what happens. That’s what traders do, they let the stocks go.”
Finally, Jim Cramer believes that this week is critical for the market. He advised that if the market declines after a 25 basis point cut, investors should remember the strong performance of the past week. This week’s gains could be a sign of more positive developments as the Federal Reserve continues to ease its monetary policy.
“When I look at next week, I can only conclude that we’re finally at the moment we’ve all been waiting for. So let me give you the bottom line: if we sell off on a 25 basis point rate cut, remember this phenomenal week, because there will be plenty more like it as the easing process continues and progresses.”
Our Methodology
This article summarizes a recent post of Jim Cramer’s Morning Thoughts, where he discussed various stocks. We’ve selected and examined the ten most notable companies he mentioned and ranked them based on their ownership levels by hedge funds, from least owned to most owned.
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).
Must-See: Jim Cramer’s 10 Best Stock Picks for Investors Right Now
10. Ollie’s Bargain Outlet Holdings Inc. (NASDAQ:OLLI)
Number of Hedge Fund Holders: 27
Jim Cramer explained his ongoing concerns about Nike (NYSE:NKE) by pointing out a recent example from Ollie’s Bargain Outlet Holdings Inc. (NASDAQ:OLLI). The store’s new flyer features an “Activewear Blowout,” with items like a Puma hoodie, a unisex jacket, and a micro fleece pullover priced at $14.99, compared to Nike (NYSE:NKE)’s similar items that can cost up to $67.99.
“Here’s why I continue to dislike Nike: Ollie’s Bargain Outlet new flier has an “Activewear Blowout,” Puma hoodie, unisex jacket and micro fleece pullover for $14.99 versus “theirs” up to $67.99.”
Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) offers a strong investment opportunity due to its impressive financial performance and strategic position in the value retail market. In Q2 2024, Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI)’s saw a 12.4% increase in net sales year-over-year, reaching $578.4 million, and a 5.8% rise in comparable store sales, marking nine consecutive quarters of growth.
Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI)’s earnings per share of $0.79 surpassed expectations, showcasing its operational efficiency despite inflationary pressures.Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI)’s plans to open 50 new stores in fiscal 2024, capitalizing on its ability to source discounted closeout inventory. This expansion is backed by effective expense management and rising demand for bargain-priced goods.
With Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) raising its fiscal year guidance and analysts, including Goldman Sachs, increasing their price target to $115, Ollie’s is well-positioned to benefit from the growing trend toward value retail. Strong customer loyalty and continued store growth further enhance Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI)’s attractiveness as an investment with a promising outlook.
9. Walgreens Boots Alliance Inc. (NASDAQ:WBA)
Number of Hedge Fund Holders: 35
Jim Cramer reported that TD Cowen has noted Walgreens Boots Alliance Inc. (NASDAQ:WBA) is falling behind on its restructuring efforts. Walgreens Boots Alliance Inc. (NASDAQ:WBA) plans to close 2,000 underperforming locations, but so far only 1,000 have been shut down. The process of closing these stores has turned out to be more challenging than initially expected.
“TD Cowen said the restructuring of Walgreens Boots Alliance is behind schedule. The drugstore and pharmacy chain is trying to close 2,000 underperforming locations. So far, only 1,000 have been actually closed as it proves harder to shutter underperformers than previously thought.”
Walgreens Boots Alliance Inc. (NASDAQ:WBA) presents a strong investment opportunity due to its strategic growth in healthcare services, solid retail pharmacy performance, and robust international expansion. Walgreens Boots Alliance Inc. (NASDAQ:WBA) is significantly increasing its presence in healthcare through VillageMD and Shields Health Solutions, which contributed to a 7.6% revenue increase in its U.S. Healthcare segment. VillageMD’s expansion enhances Walgreens Boots Alliance Inc. (NASDAQ:WBA)’s role in primary care.
In retail, despite challenges, the U.S. pharmacy business has shown resilience, with a 4.4% year-over-year sales increase driven by prescription growth and higher branded drug prices. Internationally, Walgreens Boots Alliance Inc. (NASDAQ:WBA)’s Boots UK segment is performing well, with a 6.0% rise in comparable retail sales and a 13.8% boost in online sales.
Walgreens Boots Alliance Inc. (NASDAQ:WBA) is also managing cost pressures effectively and improving profitability through ongoing cost-cutting measures, achieving positive EBITDA in its healthcare segment. Walgreens Boots Alliance Inc. (NASDAQ:WBA)’s high dividend yield of around 5% and its perceived undervaluation make it attractive to income-focused investors. As Walgreens Boots Alliance Inc. (NASDAQ:WBA) continues to shift towards healthcare and leverage its international growth, it offers a compelling long-term investment opportunity with the potential for further gains if earnings forecasts improve.
Ariel Appreciation Fund stated the following regarding Walgreens Boots Alliance, Inc. (NASDAQ:WBA) in its Q2 2024 investor letter:
“Alternatively, shares of retail drugstore operator, Walgreens Boots Alliance, Inc. (NASDAQ:WBA), underperformed following an earnings miss and significant reduction to full year guidance, largely due to continued weakness in its U.S. retail business. In response, management announced a multi-year plan for the U.S. business to reduce the retail footprint, invest in the customer experience, align the retail and healthcare businesses for enhanced go-to-market capabilities and simplify the healthcare portfolio.
Meanwhile, the company continues to execute on its cost savings initiatives to optimize profitability and is using excess capital to prioritize the sustainability of its operations and balance sheet. Over the medium-term, we expect a re-rating in shares as WBA’s new CEO rebuilds the leadership team and earns credibility by executing on previously articulated strategic imperatives as well as margin.”
