We recently published an article titled, Jim Cramer’s Best Performers List: Top 10 Picks. In this article, we are going to take a look at where Mohawk Industries, Inc. (NYSE:MHK) stands against other stocks in Jim Cramer’s best performers list.
During Mad Money’s episode on October 1, host Jim Cramer urged investors to remember the market’s strong performance over the past quarter, making note of the rising tensions in the Middle East, which led to a decline in major stock indices on Tuesday.
He pointed out that the landscape has shifted beyond just the major technology companies, and shed light on the top performers of the S&P 500. Cramer observed that the last three months have witnessed what he described as “the revenge of the little guy companies.” He said:
“When you look at the 10 best performers of the third quarter, we discover that this formerly narrow market has totally changed its stripes.”
Cramer emphasized that the current market rally is driven by companies that are often overlooked. He said:
“It is a remarkable list that represents a real broadening out of the winners. Some would say it’s a sign of where we’re headed. I might not go that far, but clearly, we need to start digging a lot deeper to find winners going forward.”
In his recent commentary, Cramer highlighted that the major winners of the third quarter were unexpectedly obscure, primarily comprising a group of ten stocks focused on power generation and interest rate cuts.
He pointed out that these stocks diverged from the well-known Magnificent Seven and traditional FAANG names, with an absence of fast-growing medical or cybersecurity companies, many of which have faced challenges recently.
Cramer suggested that investors look to the bottom of the S&P 500 for insights into market trends. He noted that Super Micro finished last for the quarter, plummeting 49%. It serves as a reminder that backing the wrong AI investment can lead to significant losses. Despite this, Cramer emphasized the need for the market to focus on new stocks for long-term growth rather than relying on past leaders.
Our Methodology
For this article, we compiled a list of 10 stocks that Jim Cramer mentioned during his episode of Mad Money on October 1. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
Why are we interested in 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).
Jim Cramer Thinks Mohawk Industries, Inc. (NYSE:MHK) ‘Is A Natural Buy In A Rate-cut Cycle’
Mohawk Industries, Inc. (NYSE:MHK)
Number of Hedge Fund Holders: 40
Mohawk Industries, Inc. (NYSE:MHK) is engaged in the design, manufacturing, sourcing, distribution, and marketing of flooring products targeted at both residential and commercial markets.
It offers a diverse range of products, including ceramic and porcelain tiles, natural stone materials, and quartz countertops. Its flooring portfolio features carpets, laminates, and luxury vinyl tiles, along with roofing panels and insulation boards. It markets its products under well-known brands like American Olean and Mohawk.
Part of Cramer’s SP 500’s 10 best performers in the third quarter, he talked about the company and said:
“When you think about what goes into construction, flooring is clearly a necessity and flooring is synonymous with a company called Mohawk Industries, the king of carpet, hardwood, and vinyl flooring, not to mention pretty much everything else you step on. Mohawk is a natural buy in a rate-cut cycle, which is why the stock jumped 41.5% last quarter. Again, this is well ahead of any turn in earnings.”
In response to current market conditions, Mohawk Industries (NYSE:MHK) is focusing on cost reduction and aligning its operations accordingly. To this end, it is implementing restructuring measures expected to generate annual savings of $100 million, with $20 to $25 million anticipated to be realized this year.
The upfront cash cost for these initiatives is projected at about $40 million, while the total cost may reach approximately $130 million. The timeline for executing these changes varies by project, with some extending into 2026.
Despite challenging market conditions globally, Mohawk Industries (NYSE:MHK) management reported that second-quarter results surpassed expectations. The commercial segment has continued to perform well, although some softness has been observed in the residential category. Management remains optimistic about long-term demand for the company’s products.
Ariel Investments stated the following regarding Mohawk Industries, Inc. (NYSE:MHK) in its Q2 2024 investor letter:
“In contrast, manufacturer and distributor of floorcovering products, Mohawk Industries, Inc. (NYSE:MHK) underperformed this quarter, as consumer demand and pricing remain under pressure due to secular headwinds in the housing market. In a difficult environment, management is successfully executing on cost savings and productivity initiatives, while also preparing the business for share gains as demand recovers. In our view, MHK’s healthy balance sheet and progress managing through economic cycles position the company to benefit from long-term growth in residential remodeling, new home construction and commercial projects.”
Overall, MHK ranks 7th on our list of Jim Cramer’s best performers. While we acknowledge the potential of MHK as an investment, our conviction lies in the belief that 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 MHK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.