We recently compiled a list titled Jim Cramer’s Top 10 Stocks to Track for Potential Growth. In this article, we will look at where FedEx Corporation (NYSE:FDX) ranks among Jim Cramer’s top stocks to track for potential growth.
In a recent episode of Mad Money, Jim Cramer advised investors to hold onto their stocks, anticipating a rebound after the market’s downturn. This advice proved useful as the Dow rose by 484 points or 1.16% and the NASDAQ also climbed by 1.16%, indicating that selling during the market decline was not the best choice.
“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.”
Jim Cramer noted that the previous week was tough for economically sensitive and tech stocks, despite a mixed August employment report. This report suggested a balanced economic outlook, not too strong or weak, which initially seemed favorable for those hoping for Federal Reserve rate cuts. Despite this, Wall Street reacted negatively, shifting away from cyclical stocks to more recession-proof sectors like consumer goods and pharmaceuticals, with industries such as industrials and semiconductors being particularly affected.
Cramer observed that recession-proof stocks, such as pharmaceuticals and medical devices, have performed well recently but have seen significant gains, raising concerns about a potential correction.
“Today, 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.”
He highlighted that historically, when the Federal Reserve is about to cut rates, it signals a shift in investment strategy. With the Fed expected to ease rates soon, Cramer suggests investors consider moving away from recession-proof stocks and look into more cyclical companies that could benefit from economic stimulus. While investing in cyclical stocks during a downturn is challenging, the anticipated rate cuts could make these stocks more attractive. Cramer advises maintaining diversification but being ready to adjust investment strategies based on the economic outlook.
“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.”
Our Methodology
This article reviews a recent episode of Jim Cramer’s Mad Money, where he talked about several stocks. From there, we picked ten companies and discussed how hedge funds are investing in them. Finally, we rank these companies from those least owned to those most owned by hedge funds.
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).
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FedEx Corporation (NYSE:FDX)
Number of Hedge Fund Investors: 59
Jim Cramer believes that FedEx Corporation’s (NYSE:FDX) CEO, Raj Subramaniam, has done an impressive job in steering the company toward a long-term recovery. According to Cramer, this turnaround won’t lead to immediate or dramatic results, but it will unfold over several years. He suggests that investors consider buying FedEx Corporation’s (NYSE:FDX) stock before the company’s next earnings call, as he expects Subramaniam to present a compelling case for FedEx’s future growth. Cramer is confident that Subramaniam’s vision will provide a strong narrative, making it a worthwhile investment ahead of the conference.
“FedEx Corporation (NYSE:FDX)’s Raj Subramaniam has done a remarkable job. I believe it’s a multi-year turnaround—nothing that’s going to blow anyone away in the short term—but I think you should be in the stock ahead of the conference call because I believe he’s going to tell a very compelling story.”
FedEx Corporation (NYSE:FDX) is an attractive investment option due to its strong financial performance, effective cost-saving strategies, and solid market position. For fiscal 2025, FedEx Corporation (NYSE:FDX) projects impressive earnings with an EPS forecast of $18.25 to $20.25 and expects revenue growth in the low to mid-single digits. FedEx Corporation’s (NYSE:FDX)’s “DRIVE” transformation initiative aims to save $2.2 billion by optimizing its network and modernizing its fleet, boosting operational efficiency.
Additionally, FedEx Corporation (NYSE:FDX) plans to return substantial value to shareholders through $2.5 billion in stock repurchases and a 10% increase in dividends, showing confidence in its cash flow and future growth. Analysts are optimistic, with a 12-month price target averaging $317.78 and some estimates reaching $359, reflecting strong profitability and return on equity. Institutional interest and unusual options activity also suggest positive sentiment towards FedEx Corporation (NYSE:FDX)’s stock.
Longleaf Partners Fund stated the following regarding FedEx Corporation (NYSE:FDX) in its Q2 2024 investor letter:
“FedEx Corporation (NYSE:FDX) – Global logistics company FedEx was the top contributor for the quarter. Late in the quarter, FedEx reported strong fiscal year results, highlighting a year of strong cost management in a challenging revenue environment. Earnings per share (EPS) increased by 19%, and reduced capital expenditures narrowed the gap between EPS and FCF per share. With the increase in FCF, the company has become a significant share repurchaser, which is a welcome change.
The company also announced a strategic review of their Freight segment. Our appraisal has long accounted for the underappreciated value in FedEx’s less-than-truckload operations. A potential spin-off or sale could unlock substantial value, as comparable companies like Old Dominion trade at significantly higher multiples on revenue, cash flow, and earnings than those applied to FedEx Freight by the market and our appraisal today.”
Overall FDX ranks 5th on the list of Jim Cramer’s top stocks to track for potential growth. While we acknowledge the potential of FDX 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 FDX 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 was originally published on Insider Monkey.