We recently published an article titled, Jim Cramer on Netflix and Other Stocks. In this article, we are going to take a look at where American Express Company (NYSE:AXP) stands against other stocks discussed by Jim Cramer.
Recently, Mad Money’s host, Jim Cramer addressed what he called a “ridiculous plethora of sell-side downgrades,” noting that the Dow Jones Industrial Average fell by 0.94%, the S&P 500 decreased by 0.96%, and the Nasdaq Composite dropped by 1.18% on Monday. While he acknowledged the session’s poor performance, he cautioned that paying too much attention to downgrades can be detrimental for long-term investors.
Cramer urged investors not to get overly influenced by the negative sentiment on Wall Street and emphasized the importance of staying committed to strong companies, even when their stock prices experience volatility. He recounted the history of the bull market, stating:
“When I look at the history of this incredible bull market, and it has been an incredible bull market, it’s littered with buy-to-hold, hold-to-sell, buy-to-hold, hold-to-sell. These downgrades scare you out of amazing stocks at levels that may temporarily be too high, but will recover later. If you listen to the downgrades, though, you’ll never recover with it.”
In discussing the challenges investors face, Cramer pointed out that many get rattled by analyst downgrades and might sell their shares in solid companies, which can make it difficult to buy back in later.
“In the last decade, the toughest thing to do is to hold on to good stocks. But analysts and commentators love to take aim at big long-term winners. Their jeremiads have scared so many people out of some amazing gains.”
He observed that complacency can be prevalent on Wall Street, with bullish investors often overlooking risks while bearish ones miss out on potential opportunities. For those considering action based on a downgrade, Cramer advised waiting for a bounce to sell, but he noted that timing such moves is “incredibly hard,” even for seasoned traders.
Cramer emphasized that when analysts downgrade stocks that have already taken a hit and overlook positive aspects, it can create a challenging environment. However, he believes it is still possible to profit. Here’s what he said:
“I need you to understand that when analysts downgrade after stocks have already been hammered, when really good investors ignore the positives, then, it may be a grim time. But not so grim that we can’t make money by focusing on the fundamentals of the companies. And not just the economy, the Fed, interest rates and oil.”
Our Methodology
For this article, we compiled a list of 15 stocks that were mentioned by Jim Cramer during his episodes of Mad Money on October 7 and October 8. 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).
Cramer Says American Express Company (NYSE:AXP) Is A Premium Global Credit Card Company
American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 68
American Express Company (NYSE:AXP) is a world-famous payments provider, extending a wide range of financial services that include credit and charge cards, banking solutions, and expense management services. In a recent episode of Mad Money, Cramer addressed JPMorgan’s recent downgrade of the stock from Buy to Hold, arguing that the company often rebounds quickly from such downgrades. He criticized the timing, given a potential rate-cutting cycle, and cautioned that selling now might lead to missing future gains. He said:
“.. JP Morgan downgrades the stock from buy to hold. America’s best, they say, ‘represents the asymmetric risk associated with a stock trading near the high end of its valuation range with limited upside to estimates.’ So they say, go elsewhere.
Do you know how many times Amex has been downgraded and gotten right off the canvas a few days later? Do you know how many times it’s bounced back almost immediately? This is the premium global credit card company in the world, and you’re downgrading ahead of a rate-cutting cycle. How about some history, for heaven’s sake?
I say if you sell it at $276, I hope you can get back in, I don’t know, at $264. If it reports a so so quarter, maybe you can do that. You might leave it, but you may never get back in. And therefore you might miss a much bigger bevy of points, which is what I’m worried about.”
Renowned for its prestigious brand, American Express (NYSE:AXP) has cultivated a reputation that appeals particularly to affluent consumers. Many individuals are willing to pay substantial annual fees for the privilege of carrying an American Express card, drawn in by the premium benefits and exclusive services associated with the brand.
In the second quarter, American Express (NYSE:AXP) reported a significant 44% increase in net income compared to the same period last year, which points to strong financial performance. The company achieved a record revenue of $16.3 billion, which marked an 8% rise in growth. Adjusted earnings per share also saw an impressive 21% increase, reaching new heights amidst a backdrop of favorable trends.
The positive trajectory has instilled confidence in management regarding future performance, leading to revised revenue forecasts for the full year. The company forecasts revenue growth between 9% and 11%, with adjusted EPS expected to range from $13.30 to $13.85, a significant upgrade from earlier estimates.
Overall, AXP ranks 8th on our list of stocks discussed by Jim Cramer. While we acknowledge the potential of AXP 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 AXP 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.