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 Lam Research Corporation (NASDAQ:LRCX) 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 technician operating an automated semiconductor processing machine with laser accuracy.
Lam Research Corporation (NASDAQ:LRCX)
Number of Hedge Fund Holders: 84
Talking about how ASML’s poor forecast shook up the semiconductor industry, Cramer discussed Lam Research Corporation (NASDAQ:LRCX).
“… Now, Lam Research is a much better company than ASML. I think it’ll tell a good story. I think it’s got a healthy buyback. Very risky, though. If it’s just only because expectations have been lowered here, it might work. But the problem with Lam is, is that what happens if ASML is at all right, then Lam won’t pop. But that’s not that big a risk.”
Lam Research (NASDAQ:LRCX) designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the production of integrated circuits. In its annual filing, the company identified Micron, Samsung, SK Hynix, and Taiwan Semiconductor Manufacturing as its primary customers, highlighting its strong ties within the semiconductor industry.
According to McKinsey & Company, global investments in semiconductor fabrication facilities are projected to reach around $1 trillion by 2030. Additionally, much of this investment is focused on Asia and the United States. During the August earnings conference call, CEO Timothy Archer discussed the potential growth driven by artificial intelligence applications.
As the use of AI expands, particularly with inferencing at the edge, there is an expected rise in demand for low-power DRAM and NAND storage in enterprise PCs and smartphones. This trend aligns with the company’s capabilities, suggesting that investments in AI-enabled edge devices will significantly benefit the company.
In May, Lam Research (NASDAQ:LRCX) announced a 10-for-1 stock split alongside a $10 billion share buyback program that adds to existing repurchase authorizations. It allows for repurchases in both public and private markets, including the use of derivative contracts and structured agreements, with no fixed termination date, although it may be suspended or discontinued at any time.
Overall LRCX ranks 4th on Jim Cramer’s list of stocks to watch. While we acknowledge the potential of LRCX 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 LRCX 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.