We recently published a list of 10 Stocks Jim Cramer is Talking About. In this article, we are going to take a look at where International Business Machines Corporation (NYSE:IBM) stands against other stocks Jim Cramer is talking about.
On a recent episode of Mad Money, Jim Cramer suggests that perhaps we are misjudging the retail sector. He argues that the debate over whether consumers are sick, well, frugal, or stressed might be misguided. According to Cramer, consumer behavior doesn’t shift dramatically overnight; people don’t suddenly change from being sick to well within a single quarter. As we look ahead to the Fed’s discussion at Jackson Hole on Friday, with the market averages rising by 56 points and the S&P 500 increasing by 42%, it’s clear we need to reassess our views on the consumer’s state.
“Maybe we’re looking at retail all wrong. Perhaps this whole discussion about whether the consumer is sick, well, frugal, or stressed is just a big pile of manure. The consumer doesn’t change their behavior overnight; they don’t get sick and then recover within a single quarter. As we consider what the Fed will discuss on Friday at Jackson Hole, with the averages inching up 56 points and the S&P 500 advancing 42%, we need to rethink the great debate about the state of the consumer.”
Jim Cramer points out that understanding consumer behavior is crucial for predicting when the Fed might cut interest rates. He explains that the Fed needs to lower rates before the economy worsens to the point of needing urgent intervention. However, the Fed can’t act if the economy is performing well.
“This debate is central to what the market needs to see for rate cuts. We first need to understand that the Fed has to start cutting interest rates before the economy deteriorates to a point where they need to scramble to fix things. However, they can’t act if the economy is doing fine. The aggregate retail sales data is inconclusive, so we often try to extrapolate from individual retailers. Taken together, these retailers seem to suggest that the consumer is fickle and perhaps tapped out.”
Jim Cramer argues that the current debate about consumer behavior might be misguided. He believes that consumers are not as fickle as some suggest. Instead, they are shopping at stores led by successful retail CEOs like Ron Vachris, Doug McMillon, Ernie Herman, and Brian Cornell.
“Tonight, I’m arguing that the consumer is not fickle at all. People are shopping, and they’re shopping at places where great retail CEOs are making a difference, like Ron Vachris at Costco, Doug McMillon at Walmart, Ernie Herman at TJX, and Brian Cornell at Target. These are the places people are choosing to shop. The consumer isn’t frugal or tight-fisted; they’re simply shopping where they prefer, and these outstanding merchants are drawing them in.”
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International Business Machines Corp. (NYSE:IBM)
Number of Hedge Fund Investors: 54
Jim Cramer believes that International Business Machines Corp. (NYSE:IBM) is performing well, largely due to the strong leadership of Arvind Krishna. He suggests that holding onto International Business Machines Corp. (NYSE:IBM) stock or even buying more could be a good strategy.
“I think IBM is doing great. Arvind Krishna has done a remarkable job with IBM. I would hold on to it or consider buying more.”
International Business Machines Corp. (NYSE:IBM) is set for substantial growth thanks to its strategic shift towards hybrid cloud and AI. The 2019 acquisition of Red Hat significantly strengthened International Business Machines Corp. (NYSE:IBM)’s hybrid cloud platform, crucial as the global cloud market continues to expand. This acquisition enhances International Business Machines Corp. (NYSE:IBM)’s ability to manage and integrate workloads across various cloud environments. Moreover, International Business Machines Corp. (NYSE:IBM)’s AI capabilities, especially with its Watson platform, are well-positioned to meet the increasing demand for AI-driven insights and automation.
International Business Machines Corp. (NYSE:IBM)’s impressive performance in cloud and cognitive software, as shown by strong Q2 2023 earnings, highlights its successful move from traditional businesses to high-margin, modern technologies. International Business Machines Corp. (NYSE:IBM) also appeals to investors with its solid dividend yield and share buybacks, reflecting its commitment to returning capital while investing in growth.
Diamond Hill Capital Long-Short Fund stated the following regarding International Business Machines Corporation (NYSE:IBM) in its first quarter 2024 investor letter:
“Among our bottom Q1 contributors short positions in Dick’s Sporting Goods, International Business Machines Corporation (NYSE:IBM) and Palomar Holdings. Though we believe the quality and durability of IBM’s free cash flow-generating capabilities remain questionable, investor sentiment has improved amid optimism for the company’s still-nascent AI product suite.”
Overall IBM ranks 7th on our list of stocks Jim Cramer is talking tbout. While we acknowledge the potential of IBM 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 IBM 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.