We recently published a list of Jim Cramer Thinks These 10 Stocks Deserve Your Attention. In this article, we are going to take a look at where Norfolk Southern Corp. (NYSE:NSC) stands against other stocks that Jim Cramer thinks deserve attention.
In a recent episode of Mad Money, Jim Cramer advised investors to hold off on selling stocks, anticipating a rebound once the market’s downturn ended. This strategy proved effective as the average investor saw gains, with the Dow rising by 484 points or 1.16%, and the NASDAQ also climbing by 1.16%. This performance suggests that selling during Friday’s decline was not the best move.
“Last week, I advised you to hold off on selling everything and just wait, as I believed that once the pain ended, we would see a rebound. The average investor saw gains, with the Dow up 484 points, or 1.16%, and the NASDAQ also climbing 1.16%. While it might not be a full recovery, it shows that selling into Friday’s downturn wasn’t the best strategy.”
The previous week was challenging for economically sensitive stocks and tech stocks, despite the August employment report showing modest growth and a downward revision for July. The recent report seemed favorable for those hoping for Federal Reserve rate cuts, as it presented a balanced scenario of neither too strong nor too weak. Nonetheless, Wall Street reacted negatively, with investors moving away from cyclical stocks in favor of recession-proof sectors like consumer goods and pharmaceuticals. Industrials and semiconductors were particularly affected.
Jim Cramer observed that on Monday, recession-proof stocks such as pharmaceuticals, drug wholesalers, and medical devices continued to perform strongly. However, this trend is concerning as these stocks have surged significantly and might be due for a correction.
“Recession-proof stocks like pharmaceuticals, drug wholesalers, and medical devices continued to perform well, which is dangerous as these stocks have seen parabolic gains and could be due for a correction.”
According to Cramer, historically, when the Federal Reserve is about to cut rates, it’s a signal to shift investment strategies. With the Fed moving towards easing and a rate cut expected next week, Cramer suggests it’s time to reconsider holding recession-proof stocks. Instead, investors should look at more cyclical companies that could benefit from economic stimulation. While investing in cyclical stocks during a downturn can be challenging, anticipating a positive impact from the Fed’s rate cuts could make these stocks attractive.
“Historically, when the Fed is about to start cutting rates, we know that it’s time to shift focus. With the Fed leaning towards easing and an expected rate cut next week, it’s time to consider moving away from recession-proof stocks and investing in more cyclical companies. While it’s challenging to buy cyclical stocks during a slowdown, anticipating that the Fed will boost the economy can make them strong investment opportunities. It’s important to maintain diversification but be ready to adjust as needed.”
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A bird’s eye view of a long freight train rumbling along the tracks.
Norfolk Southern Corp. (NYSE:NSC)
Number of Hedge Fund Investors: 50
Jim Cramer highlighted that Norfolk Southern Corp. (NYSE:NSC) is investigating CEO Alan Shaw over claims of an inappropriate workplace relationship, as reported by CNBC. Norfolk Southern Corp. (NYSE:NSC) confirmed the investigation into Shaw, who has played a key role in leading the turnaround of the railroad. While Shaw has been credited for effectively managing the company’s response to the toxic train derailment in Ohio, Cramer expressed uncertainty about whether Norfolk Southern Corp. (NYSE:NSC) remains a buy given the ongoing probe.
“Norfolk Southern is investigating CEO Alan Shaw over allegations of an inappropriate workplace relationship, CNBC reported Sunday. The company later confirmed the probe into Shaw, who has been behind the turnaround at the great railroad. It’s not clear whether the stock can still be bought here. Shaw has done a very strong job after the toxic train derailment in Ohio.”
A positive outlook on Norfolk Southern Corp. (NYSE:NSC) is supported by its strong financial performance, strategic operational improvements, and consistent shareholder returns. In Q2 2024, Norfolk Southern Corp. (NYSE:NSC) exceeded earnings expectations with an EPS of $3.06, surpassing the forecast of $2.86, and generated $3.04 billion in revenue, showing resilience in a challenging freight market.
Norfolk Southern Corp. (NYSE:NSC) is focused on improving efficiency, targeting an operating ratio of 64%-65% for the second half of 2024, and expanding its rail services to connect Mexican manufacturing with the Southeastern U.S. Norfolk Southern Corp. (NYSE:NSC)’s long-term strategy includes investing in service quality and productivity, and the recent resolution of a major $600 million lawsuit enhances its growth prospects.
Norfolk Southern Corp. (NYSE:NSC)’s strong dividend history—having increased payments for seven consecutive years with a yield of around 2.42%—demonstrates financial stability and appeals to income-focused investors.
The London Company Large Cap Strategy stated the following regarding Norfolk Southern Corporation (NYSE:NSC) in its Q2 2024 investor letter:
“Norfolk Southern Corporation (NYSE:NSC) – NSC pre-announced weaker results in early April. Revenue declined in its latest quarter driven by lower fuel surcharges, an unfavorable product mix, and lower intermodal ancillary fees. Costs continued to rise. Activist involvement may lead to lower costs in the future. Added to the position following recent weakness in the shares. We believe the competitive advantages are intact and valuation is attractive.”
Overall, NSC ranks 8th on our list of Jim Cramer Thinks These 10 Stocks Deserve Your Attention. While we acknowledge the potential of NSC, 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 the ones on our list 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.