We recently published an article titled, Jim Cramer’s Latest Stock Picks. In this article, we are going to take a look at where GE Vernova Inc. (NYSE:GEV) stands against other stock picks by Jim Cramer.
On Monday, Jim Cramer of Mad Money took a closer look at the market’s recent movements, reassuring investors that rising bond yields shouldn’t cause excessive worry. He noted that bond yields have surged significantly since the Federal Reserve cut rates last month, a trend that might seem counterintuitive. Cramer acknowledged that bonds were behind Monday’s “ugly action in the big caps”.
The Dow fell by 344 points, the S&P slipped by 0.18%, while the Nasdaq managed a slight gain of 0.27%. Cramer emphasized that while bonds play a crucial role, they aren’t the sole factor influencing the market’s performance, despite what some may claim. He expressed his frustration with those who panic at the sight of rising interest rates, suggesting that such reactions are misguided. Cramer pointed out that the stock market has experienced a remarkable rally.
“The stock market has had a fabulous run, even as bond yields have crept up almost the entire time. They love to ignore that glaring fact, the bears. Every day is groundhog day for them. They see interest rates go up higher, so they panic themselves and they are trying to panic us.”
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Cramer proceeded to break down the arguments typically made by bond bears, who often use long-term interest rates as a weapon against the Fed. He criticized their simplistic approach, where rising rates are blamed on the Federal Reserve while falling rates somehow earn them credit. According to him, the Fed’s recent decision to cut rates by 50 basis points was necessary.
“… Here’s the simple truth, did the Fed need to do a double rate cut moving 50 basis points and not 25? Yes. Yes, they had to do it if they wanted to be sure that the proverbial plane didn’t crash.”
He firmly stated that Jerome Powell, the Fed Chair, is simply fulfilling his duties responsibly, and those who continuously express skepticism will ultimately be proven wrong. Addressing the notion that a rate cut would trigger inflation, Cramer pointed out that the bond market’s reaction suggests that the initial cut has already sparked fears of inflation resurgence.
He challenged the idea that the effects of a rate cut are immediate, asserting that higher loan rates, particularly for 30-year mortgages, can actually have an anti-inflationary effect, contrary to what some might believe. He highlighted that the most pressing concern in the inflation landscape remains housing.
Cramer also tackled the prevailing belief among bears that stock prices cannot rise if interest rates increase. He dismissed this idea as arbitrary, asserting that we are far from a situation where higher rates would definitively damage the bull market.
“We are nowhere near the point where the bull can be slain by higher, longer rates… Stocks have soared with bond yields at these levels before; in fact, they’ve soared with the 30-year at 5%, they’ve soared with the 30-year at 6%, so let’s stop it with the jeremiads.”
Ultimately, he argued that such fears merely drive investors away from solid companies that are performing well.
Our Methodology
For this article, we compiled a list of 13 stocks that were discussed by Jim Cramer during the lightning round of his episodes of Mad Money on October 18 and 21. 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).
GE Vernova Inc. (NYSE:GEV)
Number of Hedge Fund Holders: 92
Cramer thinks that GE Vernova Inc. (NYSE:GEV) will report solid figures in the upcoming quarter. However, he expressed worry that there is a chance that the stock might sell off on good news.
“GE Vernova’s about to report and my problem is that GE Vernova may be one of the situations where it sells off on good news, and I think you are going to get good news because I think the company’s doing incredibly well as Scott Strazik’s doing a terrific job. But remember, this is like one of those companies that is a data center magnet. They have nuclear power… Let’s say just small nuclear reactors, but that won’t be online till 2030. But be aware that they are the way that people are playing the power to the data center.”
GE Vernova (NYSE:GEV) is a prominent player in the energy sector, specializing in a wide range of products and services related to electricity generation, transfer, orchestration, conversion, and storage. The company is set to report its third-quarter earnings result on October 23.
On October 21, Deutsche Bank analyst Nicole DeBlase initiated coverage of the stock with a Buy rating and a $354 price target. The analyst mentioned in a research note that the firm recognizes GE Vernova as a focused entity in power generating capacity, emphasizing that current prospects for power investment have not been this favorable in decades. Projections indicate a remarkable annual growth rate of 63% in adjusted EBITDA through 2027 for the company.
Scott Strazik, the CEO of GE Vernova (NYSE:GEV) highlighted the evolving landscape of the nuclear power industry during his recent appearance at WSJ’s Journal House. He expressed confidence that significant additions to nuclear capacity will commence in the early 2030s, with expectations of “gigawatts upon gigawatts” being added annually. Strazik noted that while the current decade is crucial for validating nuclear technology and achieving operational milestones for initial projects, the 2030s are expected to be transformative for the sector.
Strazik also addressed the company’s offshore wind initiatives, acknowledging the challenges faced during the past summer. He emphasized the long-term significance of offshore wind in the energy transition, aligning its importance with that of small modular reactors and carbon capture technologies. Although recent developments in offshore wind have been tough, the CEO remains optimistic about its role in meeting future energy demands.
Overall, GEV ranks 1st on our list of latest stock picks by Jim Cramer. While we acknowledge the potential of GEV 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 GEV 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.