We recently compiled a list of the Jim Cramer on the Magnificent Seven Stocks Plus Netflix. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOGL) stands against the other magnificent stocks in Jim Cramer’s list.
On Monday, Jim Cramer, host of Mad Money, discussed the ongoing success of major technology stocks, particularly the Magnificent Seven. He noted that these companies are proving their resilience in the market, no matter the circumstances, likening their performance to having a unique “Poltergeist 2 magic.”
Cramer pointed out that this latest rally for the Magnificent Seven differs from previous ones, as it is not merely a zero-sum game where gains for one group come at the expense of another. Instead, other sectors are also thriving, likely due to the influx of capital into the market.
“Unlike previous Mag 7 rallies, this one’s definitely not a zero-sum equation where the rest of the market does nothing. Other groups can roar, too, in this market, perhaps because there’s just a lot of money going around.”
He noted that the Federal Reserve’s rate cuts mean that cash is losing value, creating an environment ripe for growth. He mentioned that the staying power of the Magnificent Seven is truly unbelievable.
“We know these stocks will once again be hit by endless worries, giving you more opportunities to buy and more weakness before they snap right back and start climbing all over again.”
Cramer highlighted that this week marks the beginning of a crucial four-week earnings season, emphasizing that these quarterly reports hold significant weight for investors and the broader stock market. He acknowledged the current climate of anxiety, especially following the market’s impressive rally. He added:
“Why stress about how quickly the Fed will cut rates, Oh? God, I’m sick of that. What matters is they’re giving vast swaths of the economy a big boost and I doubt they’ll stop anytime soon.”
Cramer also observed that investors often gravitate toward underdogs in the market, suggesting that banks could be the next promising sector. In addition to banks, Cramer also mentioned the potential in pharmaceutical stocks, suggesting that investors might want to consider major players in that sector as well.
Our Methodology
For this article, we compiled a list of stocks that were discussed by Cramer during his episode of Mad Money on October 14. 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).
A user’s hands typing a search query into a Google Search box, emphasizing the company’s search capabilities.
Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 216
Talking about Alphabet Inc. (NASDAQ:GOOGL) in light of his “own it, not trade it” philosophy, Cramer said:
“Now I don’t feel the same way, candidly, about Alphabet and in part, that’s because the government has made it much harder to own it, with this antitrust lawsuit that’s aimed for a breakup, something I’m very much opposed to. I’m also concerned about Alphabet’s ability to keep putting up strong earnings. Company now has a less defensible position because it’s become more of a media business and that’s a very competitive space… So, the stock’s a comeback kid and I am so glad we own some for the Charitable Trust.”
Alphabet Inc. (NASDAQ:GOOGL) serves as the holding company formed from Google’s restructuring in 2015, with Google itself primarily recognized as a leading search engine. As a dominant player in the digital advertising sector, the company benefits significantly from its successful Google Search platform, which contributed over half of the company’s $84.7 billion in revenue during the second quarter. Google Cloud also reported great performance, achieving a 29% increase in year-over-year revenue growth in the same quarter.
However, Alphabet Inc. (NASDAQ:GOOGL) is facing significant legal challenges. The U.S. Department of Justice filed an antitrust lawsuit against the company in 2020, accusing it of engaging in monopolistic practices, including paying $26.3 billion in 2021 to companies to secure Google as the default search engine. Recently, there have been indications from the Justice Department suggesting a breakup of Google to address its perceived monopoly in search.
The Justice Department’s proposed remedies could drastically alter how users will access information online, potentially reducing Google’s revenues and allowing competitors to gain a foothold in the market. Additionally, these measures aim to prevent Google from extending its dominance into the growing field of artificial intelligence. There is also speculation that the Justice Department might seek to terminate Google’s payments that facilitate its default status on new devices.
Overall GOOGL ranks 4th on Jim Cramer’s list of magnificent stocks. While we acknowledge the potential of GOOGL 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 GOOGL 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.