We recently compiled a list of the Jim Cramer’s 10 Stock Picks That Could Change Your Investment Game. In this article, we are going to take a look at where Palantir Technologies Inc. (NYSE:PLTR) stands against the other stocks that could change your investment game according to Jim Cramer.
Tech Stocks Shine When Rates Are High but Struggle After Rate Cuts, Says Cramer
In a recent episode of Mad Money, Jim Cramer points out that tech stocks often perform well when the Federal Reserve maintains high interest rates and the economy slows down. However, when the Fed cuts rates, as it did recently, Wall Street shifts its focus to companies that can show significant earnings growth due to these lower rates. This may seem confusing, but in the stock market, cash is limited, and it’s currently flowing into companies that would struggle without the rate cuts. While many stocks initially rose after the cut, they couldn’t maintain those gains, leading to a market decline.
“The thing is, these tech stocks tend to be winners when the Fed keeps rates high and the economy slows. But when the Fed slams on the accelerator, as it did today, Wall Street bands together and piles into the companies that can post big earnings gains with much lower interest rates. Now, that may sound strange to you. Obviously, the real world makes no distinction between a company that does well all the time and one that does extremely well some of the time.
However, in the crazy world of the stock market, we only have so much cash to go around, and right now, it’s flowing into companies that would have been doomed in a world where the Fed didn’t start cutting rates. These companies have stocks that are much prized right now, so the money funnels into them. Everything else went up but couldn’t stay up after the rate cut. These did stay up; unfortunately, there aren’t enough of them to allow the averages to close in the black. That’s why we close in the red.”
Cramer questions whether all tech stocks are now weaker 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 perform well on days when the market dips. These companies help larger businesses operate more efficiently, and there’s always a demand for that kind of support, indicating that some tech players will continue to shine.
“So, is every player doomed to the same small part? Are the stocks of all tech companies weaker now? Can nothing transcend that status? Like when I went out for Bye Bye Birdie or Guys and Dolls in high school, I mean, first, no publicly traded company would ever be that low. I was totally expendable, other than as Lieutenant Rooney in ARS Gold Lace, where I don’t think I ever spoke more than a few words.
But there will be stocks that shine even in tech with rates coming down. However, we come out here to find legitimate stars that can thrive regardless of the economy, and they don’t do that well on days like today. Many of these outfits are about helping big companies do more with less, and there’s always demand for that. They’re not big players; you bring in these guys to bridge the gap and perform better with fewer people.”
Jim Cramer: Artificial Intelligence (AI) Drives Profit Growth Despite Slowing Sales
Jim Cramer also highlights that artificial intelligence is a crucial factor in today’s market. Companies using AI can enhance their profit margins, increasing earnings even amid declining sales. This indicates that AI can drive profitability without needing to boost sales.
Our Methodology
This article summarizes Jim Cramer’s latest Mad Money episode, in which he analyzed several stocks. We selected 12 companies and ranked them by their ownership levels among hedge funds, beginning with those that are least owned and moving to those that are most owned.
At Insider Monkey we are obsessed with 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).
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Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Investors: 44
Jim Cramer described also Palantir Technologies Inc. (NYSE:PLTR) as a speculative and meme stock that gains momentum as individual investors keep buying in. He noted that it doesn’t function like a traditional stock; instead, it serves more as a measure of enthusiasm for a business that may or may not be performing well. Cramer expressed a desire for Palantir Technologies Inc. (NYSE:PLTR) to have more solid fundamentals behind it.
“Well, Palantir is a meme stock; it has momentum because individual investors keep piling into it. It’s not really even a stock in the traditional sense; it’s just a barometer of enthusiasm for some business that may or may not be doing well. I wish there were more to it.”
Palantir Technologies Inc. (NYSE:PLTR) has a strong positive outlook, supported by its 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. (NYSE:PLTR)’s advanced analytics platform is well-positioned to capture this expanding market, with applications in defense, healthcare, and finance.
The successful growth of its commercial client base helps reduce reliance on government contracts, boosting long-term growth potential. Palantir Technologies Inc. (NYSE:PLTR) is also innovating with recent improvements to its Foundry and Gotham platforms, which aim to enhance user experience and functionality, attracting new customers. Strategic partnerships with leading technology firms strengthen its capabilities in AI and machine learning, improving its competitive edge. Recent announcements about new contracts and innovative product launches have positively impacted investor sentiment, reinforcing a strong outlook for Palantir Technologies Inc. (NYSE:PLTR).
Overall PLTR ranks 8th on our list of the stocks that could change your investment game according to Jim Cramer. While we acknowledge the potential of PLTR as an investment, our conviction lies in the belief that under the radar 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 PLTR 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.
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