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 The Home Depot, Inc. (NYSE:HD) 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 The Home Depot, Inc. (NYSE:HD) Is The ‘Sweet Spot’
The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 86
The Home Depot, Inc. (NYSE:HD) is a leading home improvement retailer. The company provides a diverse selection of products, including building materials, home improvement items, lawn and garden supplies, décor, and facilities maintenance products. Cramer likes the company, especially with the mortgage rate rising. He commented:
“Well, I think that Home Depot.. is really the sweet spot because you also have the remodel renovate that happens when you have these terrible hurricanes… A more pointed way to be involved right here with that mortgage rate back up is indeed with Home Depot.”
In response to changing consumer behaviors, particularly as rising costs have led many to postpone home improvement projects, The Home Depot (NYSE:HD) has pivoted its focus towards serving contractors and professionals in the field. A key move in this direction was the acquisition of SRS Distribution for $18 billion in June.
The acquisition is expected to improve the company’s offerings in roofing, landscaping, and pool equipment. Management estimates that this deal will significantly broaden the company’s market potential, expanding it to an estimated total of $1 trillion.
On October 9, Loop Capital upgraded The Home Depot (NYSE:HD) to Buy from Hold with a price target of $460, up from $360. The upgrade is owed to observations from store checks showing that demand in the home improvement sector may have stabilized after a period of decline, as per the firm.
Although the upcoming quarter may face challenges due to disruptions from hurricanes, the analyst suggests that investors are likely to remain optimistic about future demand growth. The swift resolution of the port strike has also contributed to this favorable outlook and the analyst is “pleased” with it.
Diamond Hill Capital stated the following regarding The Home Depot, Inc. (NYSE:HD) in its Q2 2024 investor letter:
“Other bottom Q2 contributors included Caterpillar and The Home Depot, Inc. (NYSE:HD). Similarly, home improvement retailer Home Depot faces growing concerns about the consumer spending environment — particularly for home improvement expenditures. However, we believe the company’s long-term prospects and multi-year fundamental outlook are unchanged.”
Overall, HD ranks 7th on our list of stocks discussed by Jim Cramer. While we acknowledge the potential of HD 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 HD 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.