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 The Boeing Company (NYSE:BA) 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).
A commercial jetliner parked at an airport, reflecting the companies success in aviation.
The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 42
Cramer expressed shock over how The Boeing Company (NYSE:BA) stock still gets bought despite its inefficient management. Here’s what he had to say:
“Here’s a shocker. No matter how poorly Boeing is run, and it’s become the benchmark for bad management, the big institutions are possibly Pavlovian about buying the stock. They can’t get enough of it. Boeing has to hope that the buyers can maintain their appetite through an already miserable pre-announced quarter because it needs to sell about $25 billion in stock to fix its balance sheet. And I’m betting that deal could come very, very quickly, maybe even the day the company reports. If you really want to own Boeing, save your powder until after the secondary offering, as it’ll most likely come at a nice discount.”
The Boeing Company (NYSE:BA) focuses on the design and manufacture of a range of products, including commercial jetliners, military aircraft, and satellites. The company has faced significant challenges for a while now. Recently, the machinist union has demanded a substantial 40% wage increase over four years, along with the reinstatement of a defined benefit retirement pension.
In response, the company reached a tentative agreement with the International Association of Machinists and Aerospace Workers, which offers a 35% general wage increase over the same period, a 4% annual bonus, and improved 401(k) matching, along with a $7,000 ratification bonus and enhancements to pension plans. This deal is crucial, as it is set to be voted on by union members on October 23, following a five-week strike that has halted production and created uncertainty for the company’s operations.
Amid these labor negotiations, The Boeing Company (NYSE:BA) grapples with financial pressures, facing over $50 billion in debt against just over $10 billion in cash reserves. Even if the company finalizes the agreement with the union, the expected increase in labor costs could further strain its finances.
Additionally, The Wall Street Journal reported on Sunday that Boeing may consider selling underperforming assets to bolster its cash position. Recent board meetings in Arlington, Virginia, have involved scrutinizing the performance of various divisions to address the ongoing crises.
In a recent move to generate funds, the company announced the sale of Digital Receiver Technology, a company specializing in wireless equipment for intelligence services, to Thales Defense & Security, a branch of Thales SA, a leading European defense electronics firm. The company has also expressed it could potentially raise up to $25 billion through a mix of stock and debt offerings, as its investment-grade credit rating faces challenges due to production delays, safety concerns, and ongoing labor strikes.
Overall BA ranks 19th on Jim Cramer’s list of stocks to watch. While we acknowledge the potential of BA 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 BA 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.