We recently compiled a list of the Jim Cramer is Talking About These 12 Stocks. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other stocks Jim Cramer is currently talking about.
On Tuesday, Jim Cramer, the host of Mad Money, analyzed the day’s market activity, shedding light on why some Big Tech stocks gained traction while others struggled. He pointed out that investors are increasingly concerned about the broader economic effects of rising bond yields. Cramer began by questioning how a day could unfold where recent market leaders lose their momentum, prompting money managers to shift back to established favorites like Big Tech.
Cramer acknowledged his growing worry about the bond market, noting that since the Federal Reserve cut rates last month, bond prices have plummeted.
“… Ever since the Fed cut rates last month, right, bond prices have plunged. Bond yields, meaning longer-term interest rates, have soared. Not supposed to happen. But when it does happen, money managers reach for the companies that simply aren’t impacted by the change in the 10-year, the 20-year, or the 30-year US Treasurys.”
Cramer likened Wall Street to Chinatown, suggesting that sometimes, it defies easy understanding. He remarked that people seem to abandon the market’s recent winners in a snap as if discarding hot fries. He then explained that the day’s disappointing earnings reports created confusion, as they didn’t align with the prevailing narrative of strong employment alongside rate cuts.
“See, this morning we got a series of earnings reports that just didn’t add up. They didn’t fit the thesis. They were disappointing. They don’t jive with a rather benign moment when we have the Fed cutting rates, yet employment remains strong. When we get these problematic quarters, several in one day, I might add, money managers default back to the tried and true growth stories that we all know and love. Yes, Titans of Tech. You know what? These managers can’t help themselves. They feel they have to rotate out of what was hot at one point and into something else that’s not that impacted by the big rate-cut cycle.”
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He addressed the “alleged earnings disappointment,” clarifying that he chose the term “alleged” because he holds these companies in high regard and does not want to undermine their reputations. Cramer stated that when the 10-year Treasury yields rise, money flows back to these tech giants. He noted that on days like Tuesday, large investors often become apprehensive about cyclical stocks, with concerns about various sectors like aerospace, home building, and even auto parts.
He reassured viewers that this phenomenon is familiar; it has been a recurring theme for over a decade. Cramer suggested that money could just as easily rotate back to previous favorites, but it might take a day or two for that to happen, which shows the volatility of the current market environment.
Concluding, Cramer noted that Big Tech experienced a significant resurgence. He remarked:
“But the bottom line, Big Tech made a big comeback today because of the bond market, not anything to do with the stocks themselves. So, keep in mind that the pause in the rally is temporary, even as you should still own some of the Magnificent Seven for diversification.”
Our Methodology
For this article, we compiled a list of 12 stocks that were discussed by Jim Cramer during his episode of Mad Money on October 22. 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 development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Cramer praised Microsoft Corporation (NASDAQ:MSFT) and pointed out the tech giant’s solid balance sheet and customer base.
“Rates don’t matter all that much to Microsoft or Meta or Google. Neither they nor their clients need to borrow large sums of money so the bond markets are irrelevant to them… Microsoft started going up right at the opening bell. Here’s a company with [an] amazing balance sheet, selling indispensable products to 100 millions of people around the world. People who pay on time regardless of how the economy’s doing.”
Microsoft Corporation (NASDAQ:MSFT) operates with a diversified business model that spans enterprise software, consumer applications, cloud services, gaming, social media, and hardware products. Its broad portfolio has contributed to significant financial success, as highlighted in the fiscal 2024 fourth quarter, which ended on June 30. During this period, the company reported revenue of $64.7 billion and operating income of $27.9 billion, reflecting a 15% increase in both metrics compared to the previous year.
The strong growth was because of several key factors, including heightened demand for Microsoft 365, the company’s suite of office collaboration and productivity tools. Additionally, the revenue generated by Azure, its cloud computing platform, experienced impressive growth, further boosting overall performance. The company also noted a 9% increase in revenue from search and news advertising, illustrating its strength in the digital advertising space.
For the full fiscal year, Microsoft Corporation (NASDAQ:MSFT) achieved a significant milestone as cash flow from operations exceeded $100 billion for the first time, reaching $119 billion. This financial strength allowed the company to return over $34 billion to shareholders throughout the fiscal year.
Overall MSFT ranks 2nd on our list of the stocks Jim Cramer is currently talking about. While we acknowledge the potential of MSFT 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 MSFT 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.