We recently compiled a list of the Jim Cramer’s Game Plan for This Week: 8 Stocks in Focus. In this article, we are going to take a look at where Lennar Corporation (NYSE:LEN) stands against the other stocks featured in Jim Cramer’s game plan.
Jim Cramer, host of Mad Money, provided insights on Friday about this week’s Federal Reserve meeting, key earnings reports, and the retail sales numbers due to be released. According to Cramer, the market is in a holding pattern at the moment, with investors growing increasingly uneasy. “When the market bides its time, guess what, people tend to get a little nervous,” he remarked.
“I think the Wall Street’s gotten a little too negative frankly, as we get oversold and we’re getting there. But I’ve been warning about stocks going to excessive levels for two weeks now, so I can’t be all that positive until we see a couple days where bond yields actually go lower with the stock market.”
Cramer pointed out that retail sales figures will be released on Tuesday, and although they are coming out just before the Fed’s meeting, they will likely stir significant debate. This is especially true given the unusual timing of Black Friday this year, with a compressed shopping period between Thanksgiving and Christmas. He speculated that the bond market had a rough week, and if retail sales come in cooler than expected, it could provide a much-needed counterbalance, perhaps offering a potential buying opportunity after the Fed meeting.
READ ALSO Jim Cramer Talked About These 6 Airline Stocks and Jim Cramer Discussed 18 Companies That Hit $100 Billion in Market Cap in 2024
Looking ahead to Wednesday, Cramer noted that the Federal Open Market Committee is widely expected to cut interest rates by 25 basis points. While he cautioned that nothing is certain, he emphasized that numerous Fed officials have indicated that a rate reduction is likely. He added:
“Every little signal from the Federal Reserve brings out predictions causing many people to sell good stocks when they are freaked out. You also have people who just can’t let it go, dogs with bones. As soon as we get the Fed rate cut, well, guess what? They’re immediately focused on the next cut. I think this is absurd.”
Cramer clarified that while he does see the Fed as important, he believes investors should not get bogged down by every minor shift in central bank policy. He reminded viewers that the Fed operates based on data, not ideology. He acknowledged that there could be dissent within the Federal Open Market Committee, but he cautioned against making investment decisions solely based on what the Fed might do next.
“Contrary to popular belief, there’s more to investing than monetary policy and I wish everyone knew that. They don’t.”
Moving on to Friday, Cramer highlighted that the personal consumption expenditures (PCE) inflation data would be released, offering the first look at the latest inflation numbers.
“Finally, on Friday, we get our first look at the next set of inflation data, that’s called the personal consumption expenditures number. Remember, my view is that we’ll continue to get endless chatter about what the Fed might do or not. So if this number runs hot, you’re gonna hear a lot of doomsaying, and why do I put it up there then? Well, because maybe it’s a good opportunity to buy something on weakness because other people will be freaked out by what the doomsayers say.”
In summary, Cramer believes we’re entering a seasonally strong period for stocks, though recent performance in some sectors has been underwhelming. He noted that while the Santa Claus rally typically provides a boost toward the end of the year, it’s important to wait for the Fed’s meeting to pass before making any significant moves.
Our Methodology
For this article, we compiled a list of 8 stocks that were discussed by Jim Cramer during the recent episode of Mad Money on December 13. We listed the stocks in ascending order of their hedge fund sentiment as of the third quarter, which was taken from Insider Monkey’s database of 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 construction crew installing roof tiles on a newly built row home.
Lennar Corporation (NYSE:LEN)
Number of Hedge Fund Holders: 68
Cramer pointed out that Lennar Corporation (NYSE:LEN) could face challenges and highlighted housing stocks declining after Toll Brothers reported disappointing earnings.
“We have some big earnings reports on Wednesday… After the close, we hear from two bellwethers, there’s Micron, the semiconductor company, which you know I like very much, and Lennar, the huge home builder, which I also share affection for… Lennar, okay, that’s trickier. This week saw the housing stocks just get clubbed after Toll Brothers reported a less than perfect quarter before getting downgraded by JP Morgan. One two punches Friday morning. That sent the group cascading. It’s a casualty of the frail bond market, which is not cooperating with the Fed’s rate cut agenda. Mortgage rates are stubbornly high and we just aren’t getting the turnover we would’ve expected by now.”
Lennar (NYSE:LEN) is a U.S.-based homebuilder involved in the construction and sale of single-family homes, residential land development, and multifamily rental property management. On December 13, JPMorgan analyst Michael Rehaut reduced the price target on the stock to $173 from $192 and maintained a Neutral rating on the stock.
After holding a positive outlook on the homebuilder sector for the past two years, the firm is adopting a “more cautious, less constructive approach” for 2025. JPMorgan forecasts a “significantly” less favorable demand/supply environment, predicting margin and return on equity contraction for builders in the coming year. Additionally, the analyst points out that stock valuations remain high, according to a research note. This shift in ratings reflects the firm’s 2025 outlook, as key demand drivers for housing, such as interest rates, employment growth, and affordability, are not expected to improve substantially in 2025.
On December 12, Freddie Mac published the results of its Primary Mortgage Market Survey, revealing that the average 30-year fixed-rate mortgage stood at 6.60 percent. Freddie Mac (the Federal Home Loan Mortgage Corporation) is a government-backed entity that buys, guarantees, and securitizes home loans. Sam Khater, Freddie Mac’s Chief Economist, noted that the 30-year fixed-rate mortgage decreased for the third consecutive week. He explained that the drop in mortgage rates, strong consumer income growth, and a positive stock market have led to increased homebuyer demand in recent weeks. However, he also pointed out that while the housing market outlook is improving, the progress is limited due to ongoing affordability challenges faced by homebuyers.
For the fourth quarter, the company expects new orders in the range of 19,000 to 19,300. Deliveries are projected to be between 22,500 and 23,000, with an average sales price of approximately $425,000. The gross margin percentage on home sales is anticipated to remain flat compared to the third quarter.
Overall LEN ranks 3rd on our list of the stocks featured in Jim Cramer’s game plan. While we acknowledge the potential of LEN 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 LEN 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.