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 Vertiv Holdings Co (NYSE:VRT) 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 close-up of a group of technicians working on complex data center systems.
Vertiv Holdings Co (NYSE:VRT)
Number of Hedge Fund Holders: 92
Cramer recently called Vertiv Holdings Co (NYSE:VRT) a “pure-play’ and said:
“Data centers remain one of the hottest themes in the market, and if you’re looking for pure-play, go with Vertiv, which makes electrical equipment for these warehouses full of servers. Now that said, this stock is so red hot that it might not be able to rally on earnings unless it raises its forecast to unfathomable levels. Then again, Vertiv’s business is so strong, it’s so strong that unfathomable might be fathomable.”
Vertiv Holding (NYSE:VRT) is engaged in creating and maintaining essential digital infrastructure technologies and lifecycle services tailored for data centers, communication networks, and a range of commercial and industrial applications. After reporting a strong performance in the first half of the year, it gave an upward adjustment to its full-year sales guidance by $50 million, with $75 million of this growth attributed to organic development.
Alongside this, the company raised its full-year adjusted operating profit forecast by $85 million, now aiming for $1.435 billion. The increase is linked to a rise in sales volume and improved variable contribution margins anticipated in the latter half of the year, driven by improved productivity in both procurement and manufacturing processes.
Additionally, the company also adjusted its full-year guidance for operating margins, now projecting an adjusted operating margin of 18.7% at the midpoint. It is an increase of 100 basis points from previous estimates and 200 basis points above initial forecasts made during the November investor conference. Furthermore, the company’s forecasted adjusted diluted EPS for 2024 is set at $2.50 at the midpoint, representing over 40% growth compared to 2023, largely due to an increase in adjusted operating profit.
Vertiv Holding (NYSE:VRT) has been making significant strides in liquid cooling technology, positioning itself as an alternative to conventional energy management practices in data centers. In September, the company announced a significant expansion of its manufacturing capabilities in North America with the opening of a new facility in Pelzer, South Carolina. The site will add 215,000 square feet of production space and is expected to create up to 300 skilled jobs in the region.
The Pelzer facility will focus on the production of various infrastructure solutions, including integrated modular systems and modular power solutions, capitalizing on the company’s extensive portfolio of power, cooling, and IT infrastructure technologies designed for data centers.
Overall VRT ranks 1st on Jim Cramer’s list of stocks to watch. While we acknowledge the potential of VRT 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 VRT 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.