We recently compiled a list of the Jim Cramer Wants You to Check These 10 Stocks. In this article, we are going to take a look at where Rivian Automotive Inc. (NASDAQ:RIVN) stands against the Jim Cramer-approved stocks.
Jim Cramer noticed a strange pattern during the recent winning streak last week. According to Cramer, when a company reported earnings that were better than expected, its stock price would rise significantly. Even if the results were just a bit better than feared, the stock still went up. Conversely, if a company posted disappointing earnings, the market largely ignored it, believing it was just a temporary setback because the Fed might soon cut interest rates. This led to continued buying. However, this trend changed today as reality began to take hold.
“You see, we had a very odd pattern during the winning streak. It was a bit of Pangloss and a nip of Camelot. When a company reported a better-than-expected quarter, it was great. When a company reported a quarter that was just better than feared, the stock still rose. And when a company reported a bad quarter, we decided that it was the last bad quarter because the Fed was about to cut rates, so it was no big deal—buy anyway. In other words, companies could do no wrong, but not today. Today, we had a bit of a reckoning, a dose of reality.”
Jim Cramer pointed out that Tuesday’s market drop was anticipated because the S&P had been rising for eight straight days, and a ninth day would have been unusual, something not seen since 2004. The day was challenging, with the Dow falling 62 points and the S&P dropping 2%, which felt like a bigger loss. This raises concerns about whether the market can continue to rise, especially since negative news finally led to a decline after a strong eight-day rally.
“We were due for today’s modest pullback—the S&P had been up for eight straight days, and nine straight would have put us in rarefied territory. We haven’t seen that kind of winning streak since 2004. Today’s session was rough, with the Dow off by 62 points and the S&P dipping 2%, like losing 33%. We have to wonder if the market still has the momentum to go higher because today we got bad news, and guess what—stocks actually went down. That didn’t happen much during the 8-day gain.”
Jim Cramer observed that the market had been in a phase where strong performance drove stock prices up, and even poor results were overlooked because of the belief that the Fed would intervene. However, after seven days of gains, he suggested that this optimistic trend might be ending. The market has now reached a point where stocks no longer automatically benefit from positive bias.
“People had been reporting a perfect market scenario where good performance led to stock gains, and poor performance was cushioned by expectations that the Fed would step in to save the day. But after seven relentlessly positive days, we have to accept that stocks may no longer get the benefit of the doubt. We’ve reached a point where the market is sufficiently elevated, and we’re back to business as usual—where the good stocks rise, and the bad ones fall. At these high levels, we can’t just dismiss the bears with “heads I win, tails you lose.” There’s a return to rationality, and rationality is the enemy of a market where everything rallies indiscriminately.”
Cramer also mentioned that many investors are hoping for the Fed to step in during their meeting at Jackson Hole on Friday. If those expectations aren’t met, there could be significant selling pressure, particularly on a summer Friday. He noted that Lowe’s recently suffered because the market might be entering a phase where multiple rate cuts are necessary, but there’s no clear indication that such cuts are on the way. Without them, the company may struggle to turn its business around quickly.
“It doesn’t help that many expect the Fed cavalry to show up on Friday when they head to Jackson Hole. If things don’t go as expected, there could be a lot of selling, especially since it’s a summer Friday.”
Our Methodology
In this article, we analyzed a recent episode of Jim Cramer’s Mad Money and selected ten stocks he talked about. We also included information on how hedge funds feel about each stock and ranked them based on the number of hedge funds that own them, from the fewest to the most.
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).
A state-of-the-art electric vehicle charging at a station at a suburban mall.
Rivian Automotive Inc. (NASDAQ:RIVN)
Number of Hegde Fund Investors: 37
When a viewer asked Jim Cramer about Rivian Automotive Inc. (NASDAQ:RIVN), he explained that the company has solid long-term potential due to its significant backing, which reduces the risk of running out of money in the short term. Cramer noted that, while Rivian Automotive Inc. (NASDAQ:RIVN) will face challenges in scaling up its operations, he is not focusing on short-term fluctuations.
“I think Rivian has a strong long-term potential because they have significant backing and therefore are unlikely to run out of money in the short term. However, it will be a rocky road as they have many challenges to overcome to ramp up their operations. I’m not going to focus on short-term movements, but for someone like you, Henry, who has a long-term horizon, this might be a good investment opportunity.”
Rivian Automotive Inc. (NASDAQ:RIVN) is poised for significant growth, driven by its successful expansion of production facilities. Rivian Automotive Inc. (NASDAQ:RIVN) has increased its production capacity at its Normal, Illinois plant and is building a new facility in Georgia, which will add the ability to produce 250,000 vehicles annually by 2025. Rivian Automotive Inc. (NASDAQ:RIVN)’s strong order backlog, including a notable 100,000 electric delivery vans from Amazon.com, Inc. (NASDAQ:AMZN), highlights substantial revenue potential and client confidence. Consumer demand is also robust, with over 90,000 pre-orders for the R1T and R1S models showing a positive market response.
Strategic investments from Ford Motor Company (NYSE:F) and T. Rowe Price (NASDAQ:TROW), along with partnerships such as with Meridian Audio for premium sound systems, bring valuable capital and industry expertise. Rivian Automotive Inc. (NASDAQ:RIVN)’s ongoing research and development, including its advanced quad-motor system and the introduction of more affordable EV models, strengthens its competitive edge. Additionally, Rivian Automotive Inc. (NASDAQ:RIVN)’s commitment to sustainability through carbon-neutral manufacturing and the use of sustainable materials meets growing consumer and regulatory expectations.
Meridian Hedged Equity Fund stated the following regarding Rivian Automotive, Inc. (NASDAQ:RIVN) in its first quarter 2024 investor letter:
“Rivian Automotive, Inc. (NASDAQ:RIVN) is a US-based manufacturer of electric vehicles, namely the R1T pickup truck and R1S SUV. They also have exposure to the commercial vehicle market with their electric delivery vans (EDVs) that are sold to companies like Amazon. The company has faced challenges amid the broader slowdown in electric vehicle demand and rising interest rates. This has contributed to Rivian underperforming expectations over the past few quarters. Rivian has also incurred losses as it continues to invest in the development of its products and manufacturing capabilities. We own Rivian in a hedged structure, which provides a significant margin of safety. Despite the near[1]term challenges, several factors provide optimism that Rivian can emerge as a long-term winner in the EV market. Rivian’s balance sheet is strong, with a substantial cash position that enables the company to continue investing in its growth and navigate through the current economic headwinds. Rivian is also unveiling the R2, which is a smaller and more affordable EV platform that will open the company’s products to a wider customer base. Lastly, Rivian’s investment in the enhancement of its production capabilities should improve the company’s manufacturing efficiency and drive a path to profitability. We continue to hold the company in a hedged structure.”
Overall RIVN ranks 9th on our list of the stocks Jim Cramer wants you to check out. While we acknowledge the potential of RIVN as an investment, our conviction lies in the belief that under the radar 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 RIVN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.