We recently compiled a list of the Jim Cramer's 10 Stock Picks That Could Change Your Investing Game. In this article, we'll look at how Palantir Technologies Inc. (NYSE:PLTR) compares to other stocks that Jim Cramer thinks could change your investing strategy.
Tech stocks shine when interest rates are high, but struggle after rate cuts, Cramer says
In a recent episode of Mad Money, Jim Cramer points out that tech stocks tend to do well when the Federal Reserve has high interest rates and the economy is slowing. However, when the Fed cuts rates, as it recently did, Wall Street shifts its focus to companies that can show significant profit growth as a result of these lower rates. This may seem confusing, but money is limited in the stock market, and it is currently flowing to companies that would struggle without the rate cuts. While many stocks initially rose following the cut, they were unable to maintain those gains, leading to a market decline.
“The point is that these tech stocks are often winners when the Fed keeps rates high and the economy slows. But when the Fed steps on the gas pedal, like it did today, Wall Street gangs up and goes after the companies that can make big profits with much lower interest rates. That may sound strange to you. The real world clearly doesn't distinguish between a company that does well all the time and a company that does extremely well sometimes.
But in the crazy world of the stock market, we only have so much money to go around, and right now it’s flowing into companies that would be doomed in a world where the Fed didn’t cut rates. These companies have stocks that are in high demand right now, so the money is flowing into them. Everything else went up, but it couldn’t stay up after the rate cut. These kept going up; unfortunately, there’s not enough of it to make the averages close in the black. That’s why we’re closing in the red.”
Cramer wonders if all tech stocks are weaker now, and suggests that not every company will suffer the same fate. He believes there are still standout stocks in the tech sector that can thrive regardless of economic conditions, even if they don’t do well on days when the market is down. These companies help larger companies operate more efficiently, and there’s always demand for that kind of support, suggesting that some tech players will continue to shine.
“So, is every player doomed to the same small share? Are all tech companies' stocks weaker now? Can nothing surpass that status? Like when I went to Bye Bye Birdie or Guys and Dolls in high school, I mean, first of all, no publicly traded company would ever be ranked that low. I was totally expendable, except as Lieutenant Rooney in ARS Gold Lace, where I don't think I ever said more than a few words.
But there are going to be stocks that shine even in the tech sector as rates come down. But we’re here to find legitimate stars that can thrive regardless of the economy, and they don’t do as well on days like today. A lot of these companies are helping big companies do more with less, and there’s always demand for that. They’re not big players; you bring these guys in to fill the gap and do better with less.”
Jim Cramer: Artificial Intelligence (AI) Drives Profit Growth Despite Sales Declines
Jim Cramer also emphasizes that artificial intelligence is a crucial factor in today’s market. Companies that use AI can increase their profit margins and increase revenues even when sales are declining. This indicates that AI can increase profitability without having to boost sales.
Our methodology
This article summarizes Jim Cramer's latest developments Crazy Money episode, in which he analyzed various stocks. We selected 12 companies and ranked them based on their ownership levels among hedge funds, starting with the least owned companies and moving to the most owned companies.
At Insider Monkey, we’re obsessed with the stocks that hedge funds are piling into. The reason is simple: our research has shown that we can beat the market by mimicking the best stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has delivered a 275% return since May 2014, outperforming its benchmark by 150 percentage points (see more details here).
A software developer manipulating a vast network of code on virtual monitors.
Palantir Technologies Inc. (NYSE:PLTR)
Number of hedge fund investors: 44
Jim Cramer also described Palantir Technologies Inc. (NYSE:PLTR) as a speculative and meme stock that is gaining momentum as individual investors continue to buy. He noted that it doesn't function like a traditional stock; instead, it serves more as a gauge of enthusiasm for a company that may or may not do well. Cramer expressed a wish that Palantir Technologies Inc. (NYSE:PLTR) had more solid fundamentals.
“Well, Palantir is a meme stock; it has momentum because individual investors keep getting into it. It's not even really a stock in the traditional sense; it's just a barometer of enthusiasm for a company that may or may not do well. I wish there was more to it.”
Palantir Technologies Inc. (NYSE:PLTR) has a strong positive outlook, buoyed by impressive Q2 2024 earnings, which showed significant revenue growth, driven by increased government and commercial contracts. Palantir Technologies Inc. (NYSE:PLTR) reported expanding profit margins and improved cash flow, indicating effective operations. As demand for data-driven decision-making grows, Palantir Technologies Inc.’s (NYSE:PLTR) advanced analytics platform is well-positioned to capture this growing market, with applications in defense, healthcare, and finance.
The successful growth of its commercial customer base helps reduce its dependence on government contracts, increasing its long-term growth potential. Palantir Technologies Inc. (NYSE:PLTR) is also innovating with recent enhancements to its Foundry and Gotham platforms, which are aimed at improving user experience and functionality, and attracting new customers. Strategic partnerships with leading technology companies are strengthening its capabilities in AI and machine learning, enhancing its competitive edge. Recent announcements on new contracts and innovative product launches have positively impacted investor sentiment, reinforcing a strong outlook for Palantir Technologies Inc. (NYSE:PLTR).
General PLTR is in 8th place on our list of stocks that could change your investing game according to Jim Cramer. While we recognize PLTR's potential as an investment, our conviction is based on the belief that under-the-radar AI stocks offer more promise for delivering higher returns, and in a shorter time frame. If you're looking for an AI stock that shows more promise than PLTR but trades at less than 5x earnings, check out our report on the cheapest AI stocks.
READ ALSO: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy, According to Morgan Stanley And Jim Cramer says NVIDIA 'has become a wasteland'.
Disclosure: None. This article was originally published on Insider Monkey.
