We recently compiled a list of the Jim Cramer on Tesla and Other Stocks. In this article, we are going to take a look at where Baker Hughes Company (NASDAQ:BKR) stands against the other stocks Jim Cramer is talking about.
Jim Cramer, host of Mad Money, emphasized the ongoing significance of fossil fuels in supporting technological advancements, even as investments in renewable energy continue to increase. He stated:
“This is not just a grudge match between the old and the new, a battle of electric vehicles versus internal combustion. The truth is, fossil fuels are essential for a lot more than vehicles, like it or not.”
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Cramer highlighted the growing energy demands of major tech companies, noting that the data centers they are constructing consume vast amounts of electricity. While these tech giants are making substantial investments in nuclear energy, he pointed out that this power source is unlikely to significantly impact data centers for at least another decade due to the complexities of building nuclear facilities and community resistance to having them nearby.
“If we need more energy, we’re going to get it from what comes out of the ground … fossil fuels that will power the data center, specifically natural gas… You may be reluctant to invest in it, you might think who cares, but you need to know how vital all of this fossil fuel technology is to the growth of the Magnificent Seven.”
Cramer also reflected on the shift in the U.S. energy landscape, recalling how the nation was once heavily reliant on OPEC for oil imports just two decades ago. Today, he pointed out, the U.S. produces over 13 million barrels per day, making it the largest oil producer globally and a net exporter. He mentioned the Permian Basin’s unexpected resilience, continually producing despite earlier predictions of depletion.
Cramer noted that the decline of OPEC has transformed the geopolitical landscape. He referenced the 1973 oil crisis, triggered by OPEC’s retaliation against U.S. support for Israel, which led to stagflation and economic turmoil. In contrast, he pointed out that despite Israel’s current conflict, the U.S. economy is not experiencing stagflation or recession, resulting instead in a bull market. He attributed this stability to the industry, saying:
“… This industry that spent billions upon billions of dollars to try to be as low carbon as possible is the reason why oil prices have actually come down during this period. They’ve gotten so much production that OPEC is now powerless.”
Turning his attention to the broader oil industry, Cramer explored the role of oil service companies that facilitate production, including offshore drillers. He recalled becoming optimistic about oil service stocks earlier in the year, anticipating higher energy prices but admitted that this expectation did not materialize due to economic concerns dampening oil and gas markets. Despite current investor reluctance toward oil service stocks, Cramer suggested that sentiment could shift over time, especially because of the Federal Reserve’s recent rate cutting.
“Now that the FED is our friend and more rate cuts are on the table, that’s good news for the industry. I am not worried about the election either. If Trump wins, maybe we’re back to that “drill baby drill” thing. If Harris wins, we get exactly what we’ve had the last four years. Not ideal for the industry but it’s still led to record oil and gas production here in the United States.”
Our Methodology
For this article, we compiled a list of 14 stocks that were discussed by Jim Cramer during his episodes of Mad Money on October 23 and 24. 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 drilling rig on a remote oilfield, its tower silhouetted against a setting sunset.
Baker Hughes Company (NASDAQ:BKR)
Number of Hedge Fund Holders: 41
Cramer noted that Baker Hughes Company (NASDAQ:BKR) stock has increased by almost 8% in the year, which is an improvement, but it still significantly trails behind the overall market. Here’s what he had to say:
“Well, this one’s a shocker. I’ve steered you away from this one in the past ‘cause I saw Baker Hughes as an inferior operator compared to SLB or Halliburton but maybe, maybe it’s time to rethink that stance. This stock’s been performing quite well since former parent company GE sold off its remaining stake in the business, it was back in 2022.
While SLB and Halliburton put in a relative peak last fall and have been falling steadily, since Baker Hughes has managed to keep grinding higher, you have to wonder how did they do that. Simple, unlike SLB and Halliburton, Baker Hughes is not a pure play oil service company. That’s only 60% of the business, the other 40% comes from their industrial and energy technology division which has lots of high-tech energy related products, including natural gas equipment and clean energy.
While the oil service business grew at a 3% rate in the first 9 months of the year, not great, the industrial and energy technology segment was up nearly 20%, that is great. On Tuesday night, Baker Hughes reported and though they had a very big revenue miss, their earnings still came in 6 cents better than expected. Just keep in mind that Baker Hughes is not winning because it’s a better oil service company than SLB or Halliburton, it’s winning because it’s less of an oil service company at a time when that business has just been treading water.”
Baker Hughes (NASDAQ:BKR) offers a wide range of technologies and services to the global energy and industrial sectors. The company designs and manufactures products for various oilfield operations, including exploration, production, and decommissioning, while also providing equipment and solutions for gas technology and energy applications.
In its third-quarter earnings report released on October 22, Baker Hughes (NASDAQ:BKR) highlighted an increase in revenue, largely attributed to its Industrial & Energy Technology (IET) segment. The company secured orders totaling $6.7 billion, which included $2.9 billion from the IET segment, marking the eighth consecutive quarter where orders reached or exceeded this level. Adjusted EBITDA for the quarter was reported at $1,208 million, which was a 23% increase year-over-year, while free cash flow reached $754 million.
Overall BKR ranks 10th on our list of stocks Jim Cramer is talking about. While we acknowledge the potential of BKR 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 BKR 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.