In this article, we’ll explore the Top 10 Stocks on Jim Cramer’s Radar.
Jim Cramer often reflects on how he would reform the American education system if it were up to him. According to him, one major change would be to incorporate personal finance education into high school curriculums. He compares this to mandatory health classes that teach practical skills, like dissection, which he finds less relevant compared to financial literacy.
In a recent episode of Mad Money, Cramer emphasizes that understanding money is crucial, and not caring about it doesn’t make someone virtuous; rather, it can lead to real-life problems like poor credit affecting personal and financial decisions, such as buying a car or a house. He notes that while conventional wisdom says money can’t buy happiness, being financially broke is undeniably challenging.
“If everyone in this country lost their minds and decided to turn America into Cramerica, you better believe I would make some changes. So, what would the 18th premiere of Jim Cramer look like? Hey, for those of you who didn’t get that reference, Google is your best friend. But because this is a show about money, let’s stick to the more mainstream elements of the Cramerican regime. For starters, it drives me nuts that we don’t really teach our young people how to handle their money. Would it be so crazy if you had to take a class on personal finance before you could graduate from high school? I mean, like those awkward health classes where they show you how to dissect a frog. I mean, come on!
So, can I just take a moment to speak some words that we all believe but very rarely get to say in polite conversation? Look, money’s important. It’s really important. And caring about the state of your finances does not make you seem like some sort of superficial bourgeois monster. Say you’ve got a lousy credit score and you want to get married—congratulations, you’ve just inflicted your horrible credit on your new spouse. Now neither you nor your partner will be able to qualify to buy a car or a home or perhaps even just get a darn credit card.”
Reflecting on his own experiences, Cramer recalls living in a car while still managing to save for retirement, which he views as a significant accomplishment. He encourages young people to invest early to achieve financial freedom and avoid dependency on their next paycheck. Through the CNBC Investing Club, he aims to guide young investors in managing their finances effectively.
“These things matter in life. They say money can’t buy happiness, but I’ve always found that piece of cliche conventional wisdom to be dubious at best. Because, hey, listen, being broke is a major buzzkill, as I know firsthand from the time I spent living in my ’78 Ford Fairmont for six months in California. I wish I had an expert to guide me through all this stuff back then. Although I still put money away for retirement while living in my car, I took it out of my homeowner’s budget.
So let me answer one of the most important questions out there: What the heck should young people do with their money? First, foremost, and always, you need to invest. That’s the only way you’re going to be able to achieve financial freedom. And by freedom, I mean living a life where you’re not totally dependent on the next paycheck. Teaching you how to do this is one of the reasons I actually put so much time and energy into creating the CNBC Investing Club. I’m always thrilled when I see younger members taking an active hand in managing their own money.”
Jim Cramer observes that many people begin saving and investing too late, complicating their financial lives more than necessary as they age. He also notes that younger individuals often feel they have plenty of time, sometimes starting to invest before they’re truly prepared. Cramer believes there are more prudent uses for their money at that stage.
“Too many people start saving and investing too late, making their lives a lot more difficult than they need to be as they get older. But I also know many young people feel that they have all the time in the world. Some start investing before they’re truly ready when there are, in fact, better things for them to do with their money.”
Cramer then offers three key lessons for young investors, especially recent college graduates. First, he stresses the importance of saving money, even if it’s not intuitive. He suggests investing in the stock market as a way to save, which can be more engaging than just keeping money in a savings account or CD. Investing helps keep your money from being spent impulsively because accessing it requires selling stocks.
Second, Cramer advises young investors to embrace higher risk in their portfolios. In their 20s, they can afford to take risks with speculative stocks or options because they have many years to recover from mistakes. In contrast, older investors should adopt more conservative strategies, focusing on safer investments like bonds and utilities. Cramer criticizes the idea of young investors holding a significant percentage of bonds, emphasizing that they should be more aggressive in their investments.
Lastly, Cramer challenges the notion that student loan debt should prevent young people from investing. He notes that student loan interest rates are generally lower than credit card debt and advises starting investments even while managing student loans. He also suggests that delaying student loan payments could be advantageous due to potential future loan forgiveness programs.
“Here’s the bottom line for young people just out of college: investing is a great way to trick yourself into saving money you might otherwise spend. Beyond that, remember when you’re young, you can afford to take a lot more risk with your portfolio. It’s never too soon to start contributing to your 401k or IRA, especially an IRA.”
Our Methodology
This article reviews a recent edition of Jim Cramer’s Morning Thoughts, where he covered various stocks. We highlight ten prominent companies he mentioned and analyze how hedge funds view these stocks. The article ranks these companies based on their level of hedge fund ownership, from the least to the 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).
Top 10 Stocks on Jim Cramer’s Radar
10. Southwest Airlines Co. (NYSE:LUV)
Number of Hedge Fund Investors: 23
Southwest Airlines Co. (NYSE:LUV)’s stock has risen following two major news events. Activist investor Elliott Management now holds enough shares to call a special meeting, which has boosted investor confidence. Additionally, Evercore ISI upgraded Southwest Airlines Co. (NYSE:LUV) to an outperform rating, citing optimism about the company’s new revenue strategies. Jim Cramer notes that such endorsements can drive stock prices higher by signaling strong future prospects.
“Southwest Airlines shares are getting a lift after a one-two punch of news. Activist investor Elliott Management now owns enough of Southwest stock to call a special meeting, Reuters reported. Meanwhile, Evercore ISI upgraded the stock to a buy-equivalent outperform rating, citing optimism on Southwest’s new revenue initiatives, among other reasons.”
Southwest Airlines Co. (NYSE:LUV) is an appealing investment due to its strong market position and financial stability. As a leading domestic carrier in the U.S., Southwest Airlines Co. (NYSE:LUV) operates a large network of over 100 destinations, benefiting from its low-cost operations and point-to-point network to maintain a significant market share. The airline’s solid balance sheet, featuring minimal debt, provides a safety net during economic downturns, while its disciplined cost management, including fuel hedging, helps it remain profitable even in tough times.
With air travel demand rebounding post-pandemic, Southwest Airlines Co. (NYSE:LUV) is well-positioned to capitalize on increased passenger traffic. Southwest Airlines Co. (NYSE:LUV)’s focus on leisure travel, which has recovered faster than business travel, along with its expanding route network, is likely to drive additional revenue growth. Moreover, Southwest Airlines Co. (NYSE:LUV)’s history of returning value to shareholders through share buybacks and dividends is expected to continue as its financial performance improves, making it attractive to income-focused investors.
Southwest Airlines Co. (NYSE:LUV)’s operational efficiency, characterized by fast turnaround times and high aircraft utilization, boosts its profitability. Southwest Airlines Co. (NYSE:LUV)’s commitment to customer satisfaction, demonstrated by its no-frills approach, free checked bags, and lack of change fees, fosters strong customer loyalty and sets it apart from competitors.
9. Novartis AG (NYSE:NVS)
Number of Hedge Fund Investors: 30
Jefferies has downgraded Novartis AG (NYSE:NVS)’s stock from buy to hold after a 20% increase in its price this year. Analysts still have a positive long-term outlook for Novartis AG (NYSE:NVS), but they think it will take until next year for Novartis’ upcoming drug approvals and launches to attract investor attention. Jim Cramer points out that while the downgrade reflects a short-term view, it doesn’t change the overall positive expectations for Novartis AG (NYSE:NVS)’s future performance.
“Jefferies downgraded Novartis to hold from buy after the pharmaceutical stock’s 20% year-to-date run. While analysts still like its long-term outlook, they believe it will take time next year for Novartis’ next batch of approvals and launches to get the attention of investors.”
Novartis AG (NYSE:NVS) is an attractive investment due to its strong drug pipeline and focus on growth areas. Novartis AG (NYSE:NVS) is developing several promising treatments, especially in oncology, immunology, and gene therapy. Key drugs like Kisqali for breast cancer and Zolgensma for spinal muscular atrophy are expected to significantly boost revenue. To sharpen its focus on high-margin products, Novartis AG (NYSE:NVS) is selling off non-core assets, including its generics division, Sandoz. This strategy aims to enhance shareholder value by concentrating on its more profitable medicines.
Financially, Novartis AG (NYSE:NVS) shows robust performance with a solid balance sheet and strong cash flow, which supports ongoing investments in research and development, as well as strategic acquisitions. Novartis AG (NYSE:NVS) has a good track record of rewarding shareholders through dividends and share buybacks, making it appealing to income-focused investors. With an expanding global presence, particularly in emerging markets, Novartis AG (NYSE:NVS) is well-positioned in key therapeutic areas like oncology, cardiology, and ophthalmology.
Additionally, Novartis AG (NYSE:NVS) is investing in advanced technologies such as digital health, artificial intelligence, and data analytics to improve drug development and patient outcomes. These innovations are expected to enhance efficiency, increase the success rate of clinical trials, and support personalized medicine, setting the stage for sustained long-term growth.
Aristotle Capital International Equity Strategy stated the following regarding Novartis AG (NYSE:NVS) in its Q2 2024 investor letter:
“We have been investors in the Swiss pharmaceutical company Novartis AG (NYSE:NVS) for over a decade, having first purchased shares in 2011. During our holding period, the company has undergone significant changes. Vasant (“Vas”) Narasimhan was promoted to CEO in 2018 and, we believe, has positively influenced the company’s culture and helped shift the business more toward innovative medicines.
Examples include the sale of Novartis’s consumer (over-the-counter) joint venture; the divestiture of its vaccines and animal health businesses; the spinoff of Alcon, a global leader in the treatment of eye diseases and eye conditions (also an International Equity holding); and most recently, the spinoff of generics manufacturer Sandoz. As part of its portfolio transformation, Novartis has been able to improve its margins and gain share of branded pharmaceuticals. With many catalysts having neared completion, we decided to sell Novartis to fund the purchase of what we believe is a more optimal investment in Roche.”