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Jim Cramer and Hedge Funds Agree on These 10 Stocks

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·11 min read
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In this article, we discuss the 10 stocks that Jim Cramer and hedge funds agree on. If you want to read about some more stocks that Jim Cramer and hedge funds agree on, go directly to Jim Cramer and Hedge Funds Agree on These 5 Stocks

In the past few weeks, Jim Cramer, the journalist investor and former hedge fund manager, has been busy advising his finance viewership on how to handle an economic crisis as the benchmark indexes in the US slip into recession territory. Cramer, who has gained a large fan-following on social media through his “modern” approach to investing that does not disregard the deep-value offered by high-tech names, once famously said that “there is always a bull market somewhere” — stressing how stocks performed well enough during a slowdown. 

Cramer recently outlined that amid recession fears, investors were flocking towards cash, which was not the best solution. He noted that instead of dumping stocks, changing the mix of the portfolio might be the better option, since economic activity only shrinks but does not fully stop during economic downturns. Cramer pointed towards staples as an example, noting that people would buy staples regardless of the economy. He also stressed that sticking to firms that had a historical ability to weather storms, like food, banks, and drugs was also a solid bet. 

The comments of Cramer are not without context. Since 1926, the average annualized return of the S&P 500 has been 10.49%. Compared to this, the average annual gain per year in a high-yield savings account, based on current interest rates, comes out to only 0.5%. Cramer has pointed to COVID news from China and earnings season as some of the catalysts that could fuel a rally at the market in the near-term. Some of the stocks that Jim Cramer and hedge funds agree on include Marathon Oil Corporation (NYSE:MRO), Valero Energy Corporation (NYSE:VLO), and BioNTech SE (NASDAQ:BNTX). 

Our Methodology

These were picked keeping in mind the latest calls that Cramer made on these equities on his Mad Money show aired by news platform CNBC. Only stocks that registered an increase in the number of hedge funds having stakes in them during the first quarter of 2022, compared to filings for the fourth quarter of 2021, were selected. An extensive database of around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to identify the popularity of each stock among hedge funds.

Jim Cramer and Hedge Funds Agree on These 10 Stocks
Jim Cramer and Hedge Funds Agree on These 10 Stocks

Jim Cramer and Hedge Funds Agree on These Stocks

10. Costco Wholesale Corporation (NASDAQ:COST)

Number of Hedge Fund Holders in Q1 2022: 61 

 

Number of Hedge Fund Holders in Q4 2021: 57 

Costco Wholesale Corporation (NASDAQ:COST) owns and runs membership warehouses. Cramer gave the stock a positive mention during the Discussed Stock segment of his show on May 19. Cramer believes that the stock will stage a comeback once the “smoke clears”. He said he was “unshakeable” in his belief that these stocks would be “higher, not lower” once the market calms down.

On May 20, Oppenheimer analyst Rupesh Parikh maintained an Outperform rating on Costco Wholesale Corporation (NASDAQ:COST) stock and lowered the price target to $500 from $645, noting that the shares of the firm were down because of margin concerns. 

At the end of the first quarter of 2022, 61 hedge funds in the database of Insider Monkey held stakes worth $5.41 billion in Costco Wholesale Corporation (NASDAQ:COST), up from 57 in the preceding quarter worth $5.40 billion. 

Just like Marathon Oil Corporation (NYSE:MRO), Valero Energy Corporation (NYSE:VLO), and BioNTech SE (NASDAQ:BNTX), Costco Wholesale Corporation (NASDAQ:COST) is one of the stocks that elite hedge funds are monitoring.

In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Costco Wholesale Corporation (NASDAQ:COST) was one of them. Here is what the fund said:

“Portfolio gains were led by a diverse group of contributors. Also in consumer discretionary, Costco Wholesale Corporation (NASDAQ:COST), which operates a chain of membership-only big-box retail stores, continues to impress as it takes to share and becomes more relevant for the consumer even as the world opens up.”

9. Lockheed Martin Corporation (NYSE:LMT)

Number of Hedge Fund Holders in Q1 2022: 56 

 

Number of Hedge Fund Holders in Q4 2021: 42    

Lockheed Martin Corporation (NYSE:LMT) operates as a security and aerospace firm. On May 19, the former hedge fund manager gave the stock a Buy recommendation during the Featured Stock segment of his show. Cramer stressed that “the defense industry is booming right now, and will keep booming regardless of what happens with the US economy in general”. He put Lockheed among a basket of stocks that investors could look towards in the sector. 

On April 20, Argus analyst John Eade maintained a Buy rating on Lockheed Martin Corporation (NYSE:LMT) stock and increased the price target to $500 from $415, noting that the firm had consistently driven positive surprises in earnings regardless of defense industry outlook.

Among the hedge funds being tracked by Insider Monkey, Chicago-based firm Citadel Investment Group is a leading shareholder in Lockheed Martin Corporation (NYSE:LMT), with 1.8 million shares worth more than $830 million. 

In its Q4 2021 investor letter, Vltava Fund, an asset management firm, highlighted a few stocks and Lockheed Martin Corporation (NYSE:LMT) was one of them. Here is what the fund said:

“Of course, not all of our companies are doing better than we expected. Lockheed Martin Corporation (NYSE:LMT) fell somewhat short of our expectations last year. In the cases of Lockheed disruptions in the supply and logistics chains. Lockheed Martin Corporation (NYSE:LMT) uses a great many subcontractors from various countries and could not avoid issues with continuity of supplies. As a result, production will be slightly lower than we had expected.”

8. Northrop Grumman Corporation (NYSE:NOC)

Number of Hedge Fund Holders in Q1 2022: 39 

 

Number of Hedge Fund Holders in Q4 2021: 33

Northrop Grumman Corporation (NYSE:NOC) is an aerospace and defense firm. The journalist investor gave the stock a Buy recommendation during the Featured Stock segment of his show on May 19. Cramer outlined that “the Russian invasion of Ukraine was a game-changer for the defense industry” and it would be “clueless not to notice” the boom in the sector. 

On May 12, Argus analyst John Eade kept a Buy rating on Northrop Grumman Corporation (NYSE:NOC) stock and raised the price target to $495 from $420, noting that the valuation of the stock was attractive despite gains from the Ukraine-Russia war. 

At the end of the first quarter of 2022, 39 hedge funds in the database of Insider Monkey held stakes worth $940 million in Northrop Grumman Corporation (NYSE:NOC), up from 33 in the preceding quarter worth $561 million. 

In its Q1 2022 investor letter, LRT Capital Management, an asset management firm, highlighted a few stocks and Northrop Grumman Corporation (NYSE:NOC) was one of them. Here is what the fund said:

“Based in Virginia, Northrop Grumman Corporation (NYSE:NOC) is one of the world’s largest defense contractors with annual revenue of more than $30 billion. The company operates in a cozy oligopoly, that after decades of consolidation has resulted in the US defense market being controlled by five large companies: The Boeing Company (BA), General Dynamics Corporation (GD), Lockheed Martin Corporation (LMT), Northrop Grumman Corporation (NOC), and Raytheon Technologies Corporation (RTX).

Industry barriers to entry are immense, government procurement cycles are extremely long, and the consolidated industry structure reflects this. This has allowed Northrop Grumman Corporation (NYSE:NOC) to earn stable mid-teens returns on invested capital (ROIC) and grow earnings per share at a rate of over 13% per year in the past decade, despite a topline that has grown only in-line with inflation. Even after the recent run-up in the stock price, it trades at approximate 15x next year’s earnings estimates, far below the S&P 500 index, despite being an above average company. While nominally, there are five major defense contractors, the true industry concentration is even higher because not all companies compete in all possible business segments. General Dynamics’ submarine division, Electric Boat, is the sole supplier of nuclear power submarines in the United States. Lockheed Martin is the sole supplier of the F-18, the F-35 and the F-22. Northrop was the sole bidder on the contract to develop the next generation of intercontinental ballistic missiles; Raytheon dominates missile systems; and so on.

Northrop’s revenue growth over the past decade has been mediocre but even that has led to impressive shareholder returns that have far outpaced the S&P500. What’s more, we believe that revenue growth may accelerate in the next few years. A lot of ink is spilled every year about the “massive” U.S. defense budget that critics claim is “out of control”. Given this, you might be surprised to hear that U.S. defense spending as a share of GDP is at the lowest level in recorded history, at a mere 3.8%. In other words, U.S. military spending could double and not be out of line with historical norms. While we are not calling for a new Cold War, given the global instability we are witnessing, it is not unreasonable to expect U.S. defense spending to grow faster than GDP over the next decade.”

7. Palo Alto Networks, Inc. (NYSE:PANW)

Number of Hedge Fund Holders in Q1 2022: 87 

 

Number of Hedge Fund Holders in Q4 2021: 73

Palo Alto Networks, Inc. (NYSE:PANW) provides cybersecurity solutions. On May 19, Cramer gave the stock a Buy recommendation during the Guest Interview segment of his show. During the course of his interview with Nikesh Arora, the CEO of the firm, Cramer discussed at length the warnings from the White House about Russian cybersecurity attacks in the US and the role that Palo could play to dampen the effect of these attacks. 

On May 20, KeyBanc analyst Michael Turits maintained an Overweight rating on Palo Alto Networks, Inc. (NYSE:PANW) stock and raised the price target to $630 from $610, noting that “security demand was strong despite geopolitical and inflation/recession risks”. 

Among the hedge funds being tracked by Insider Monkey, Chicago-based firm Citadel Investment Group is a leading shareholder in Palo Alto Networks, Inc. (NYSE:PANW), with 1.3 million shares worth more than $838 million. 

In its Q1 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Palo Alto Networks, Inc. (NYSE:PANW) was one of them. Here is what the fund said:

“The portfolio also saw solid performance from cybersecurity names Palo Alto Networks, Inc. (NYSE:PANW) which is gaining prominence as the risk of global cyberattacks increases as part of the Russian offensive. On an individual stock basis, leading contributors to absolute returns in the first quarter included positions in Palo Alto Networks.”

6. Raytheon Technologies Corporation (NYSE:RTX)

Number of Hedge Fund Holders in Q1 2022: 51

 

Number of Hedge Fund Holders in Q4 2021: 50 

Raytheon Technologies Corporation (NYSE:RTX) operates as an aerospace and defense firm. Cramer discussed the stock during the Featured Stock segment of his show on May 19, giving it a Buy recommendation. Cramer was of the opinion that there were at least four names in the defense sector that were “investable”, putting Raytheon on the top of this list. 

On April 27, Argus analyst John Eade maintained a Buy rating on Raytheon Technologies Corporation (NYSE:RTX) stock and raised the price target to $112 from $100, noting that the strong earnings of the firm were reflected in the 8% dividend hike. 

At the end of the first quarter of 2022, 51 hedge funds in the database of Insider Monkey held stakes worth $2.1 billion in Raytheon Technologies Corporation (NYSE:RTX), compared to 50 in the preceding quarter worth $2.3 billion.

Along with Marathon Oil Corporation (NYSE:MRO), Valero Energy Corporation (NYSE:VLO), and BioNTech SE (NASDAQ:BNTX), Raytheon Technologies Corporation (NYSE:RTX) is one of the stocks that elite investors are buying. 

In its Q1 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Raytheon Technologies Corporation (NYSE:RTX) was one of them. Here is what the fund said:

“Our material overweight to aerospace and defense (~5% in Dividend Strategy vs ~1.5% in the index) was another large contributor to performance in the quarter. Raytheon Technologies Corporation (NYSE:RTX) performed well. Our investment in the company was obviously not predicated on war breaking out in Europe. Rather, they both embody many of the core attributes we look for in all our companies. The company have favorable long-term growth outlooks that should enable them to compound earnings and dividends for years to come. Raytheon Technologies Corporation (NYSE:RTX) has been a long-term holding and benefits from solid positions in both defense and commercial aerospace. The defense business provides a stable and predictable foundation of recurring revenues while the commercial aerospace business offers leverage to recovering travel as the world bounces back from COVID-19.”

   

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Disclosure. None. Jim Cramer and Hedge Funds Agree on These 10 Stocks is originally published on Insider Monkey.