We recently compiled a list of the Jim Cramer’s Game Plan: 23 Stocks to Watch. In this article, we are going to take a look at where Texas Roadhouse, Inc. (NASDAQ:TXRH) stands against the other stocks to watch according to Jim Cramer.
As Wall Street dives into the heart of earnings season, Jim Cramer has provided insights into market trends and earnings reports to watch in the upcoming week. Cramer remarked,
“It’s hard to believe, but this market’s now been up for six straight weeks. That’s right, despite interest rates running higher since mid-September, despite being on the verge of an election where both candidates want to pile on trillions of dollars of debt to an already unfathomable amount of borrowing, this market seems like it can’t help itself from going higher.”
Cramer highlighted the influence of the Federal Reserve, noting that ever since the rate cut on September 18, the market has largely trended upward. He emphasized that it is not solely the Fed driving this bullish sentiment, the earnings season has brought some remarkable quarterly results. With strong performance from banks kicking off the earnings cycle, Cramer posed the question of whether the rally could extend into a seventh consecutive week, suggesting following his game plan to assess this possibility.
On a separate note, addressing economic indicators, Cramer warned that if the economy continues to produce solid numbers, the likelihood of substantial rate cuts will diminish. While he believes that rates will eventually decline, he cautioned those shorting Treasurys, suggesting that they may be making a mistake.
Cramer noted a significant caveat, which is the upcoming election, and pointed out that both candidates are advocating potentially inflationary policies.
“Both candidates have pushed potentially inflationary policies. As I said at the top, if Trump can win enough of a majority to pass his huge tariffs, or Harris expands housing tax credits and de facto subsidy, they could push home prices higher. Then inflation might stage a comeback. But I’m not betting on that. I think both parties are terrified of being blamed for inflation, which almost single-handedly sunk Joe Biden’s presidency. No matter what the candidates campaign on, I don’t see their allies in Congress taking any chances with inflation beyond the usual unwillingness to balance the budget.”
He concluded that those betting against Treasurys have overreached, suggesting that their efforts to counter the Fed’s policies are unlikely to end well. Cramer observed that when a large number of investors align on one side of a trade, as seen currently, that group often ends up being incorrect.
Our Methodology
For this article, we compiled a list of 23 stocks that were discussed by Jim Cramer during his episode of Mad Money on October 18. 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).
View of kitchen staff working together to deliver an extraordinary dining experience.
Texas Roadhouse, Inc. (NASDAQ:TXRH)
Number of Hedge Fund Holders: 42
Cramer likes Texas Roadhouse, Inc. (NASDAQ:TXRH) and highlighted the public’s love for its economical meal prices.
“More clockwork love, Texas Roadhouse. Everybody seems to love this favorite restaurant chain. Got $11 dinner everybody’s raving about. Put it up there with Brinker and Wingstop as winner, winner, chicken dinner.”
Texas Roadhouse (NASDAQ:TXRH) is a well-established casual dining chain that operates both domestically and internationally, offering a diverse menu centered around high-quality steak and Southern-inspired dishes. The company also franchises restaurants under the names Texas Roadhouse, Bubba’s 33, and Jaggers. On October 15, Evercore ISI analyst David Palmer raised the price target on the stock to $200 from $195 and maintained an Outperform rating.
The adjustment came because of a broader trend observed in the restaurant industry, where effective marketing strategies have proven successful. The analyst noted that top-performing establishments continue to thrive, indicating a growing list of winners amid varying market conditions. Following adjustments to third-quarter sales forecasts, the firm is also revising earnings per share estimates and refining projections for same-store sales growth.
As Texas Roadhouse (NASDAQ:TXRH) looks toward future quarters, management remains optimistic about sustaining growth momentum. During the first four weeks of the third quarter, the company reported an 8.0% increase in comparable restaurant sales. It expects moderate commodity cost inflation of about 2% for the remainder of the year while maintaining an effective tax rate of around 14.5%. Capital expenditures for the year are projected to range between $360 million and $370 million.
Overall TXRH ranks 20th on Jim Cramer’s list of stocks to watch. While we acknowledge the potential of TXRH 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 TXRH 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.