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 International Business Machines Corporation (NYSE:IBM) 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).
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International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 54
Cramer commended the CEO of International Business Machines Corporation (NYSE:IBM), saying:
“IBM also reports after the close, and I bet we’ll get another beat and raise quarter. Why? Because it’s become a beat-and-raise machine under CEO Arvind Krishna. Enough said.”
International Business Machines (NYSE:IBM) has long been a pioneer in the field of artificial intelligence, tracing its innovations back to the 1970s with breakthroughs such as the first speech recognition system and a programming language for self-learning robots. Recent analysis from IFI Claims highlighted that IBM made 1,591 AI-related patent applications, surpassing competitors like Google by a significant margin.
In line with a more focused patenting strategy announced last year, the company has concentrated its efforts on five key areas, with AI being a primary focus for future innovation. Since Arvind Krishna took over as CEO in 2020, the company has aligned its objectives around AI and cloud technologies, a direction that has proven effective as demand for AI solutions has surged over the past year.
In the second quarter, the company’s software division, which includes cloud and AI sales, generated revenue of $6.7 billion, reflecting a 7% increase. The division accounted for 43% of the company’s total revenue of $15.8 billion in the same period.
The introduction of the Watsonx generative AI platform in 2023 marked another significant step for International Business Machines (NYSE:IBM), securing over $2 billion in contracts shortly after its launch. While software is a vital component of the company’s offerings, CEO Arvind Krishna noted that the business is balanced, with approximately one-quarter coming from software and three-quarters from consulting engagements. Krishna emphasized that the company’s plan in AI positions the company well for future growth, as the technology continues to evolve and gain traction in the market.
Overall IBM ranks 10th on Jim Cramer’s list of stocks to watch. While we acknowledge the potential of IBM 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 IBM 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.