We recently compiled a list of the Jim Cramer is Talking About These 12 Stocks. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOGL) stands against the other stocks Jim Cramer is currently talking about.
On Tuesday, Jim Cramer, the host of Mad Money, analyzed the day’s market activity, shedding light on why some Big Tech stocks gained traction while others struggled. He pointed out that investors are increasingly concerned about the broader economic effects of rising bond yields. Cramer began by questioning how a day could unfold where recent market leaders lose their momentum, prompting money managers to shift back to established favorites like Big Tech.
Cramer acknowledged his growing worry about the bond market, noting that since the Federal Reserve cut rates last month, bond prices have plummeted.
“… Ever since the Fed cut rates last month, right, bond prices have plunged. Bond yields, meaning longer-term interest rates, have soared. Not supposed to happen. But when it does happen, money managers reach for the companies that simply aren’t impacted by the change in the 10-year, the 20-year, or the 30-year US Treasurys.”
Cramer likened Wall Street to Chinatown, suggesting that sometimes, it defies easy understanding. He remarked that people seem to abandon the market’s recent winners in a snap as if discarding hot fries. He then explained that the day’s disappointing earnings reports created confusion, as they didn’t align with the prevailing narrative of strong employment alongside rate cuts.
“See, this morning we got a series of earnings reports that just didn’t add up. They didn’t fit the thesis. They were disappointing. They don’t jive with a rather benign moment when we have the Fed cutting rates, yet employment remains strong. When we get these problematic quarters, several in one day, I might add, money managers default back to the tried and true growth stories that we all know and love. Yes, Titans of Tech. You know what? These managers can’t help themselves. They feel they have to rotate out of what was hot at one point and into something else that’s not that impacted by the big rate-cut cycle.”
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He addressed the “alleged earnings disappointment,” clarifying that he chose the term “alleged” because he holds these companies in high regard and does not want to undermine their reputations. Cramer stated that when the 10-year Treasury yields rise, money flows back to these tech giants. He noted that on days like Tuesday, large investors often become apprehensive about cyclical stocks, with concerns about various sectors like aerospace, home building, and even auto parts.
He reassured viewers that this phenomenon is familiar; it has been a recurring theme for over a decade. Cramer suggested that money could just as easily rotate back to previous favorites, but it might take a day or two for that to happen, which shows the volatility of the current market environment.
Concluding, Cramer noted that Big Tech experienced a significant resurgence. He remarked:
“But the bottom line, Big Tech made a big comeback today because of the bond market, not anything to do with the stocks themselves. So, keep in mind that the pause in the rally is temporary, even as you should still own some of the Magnificent Seven for diversification.”
Our Methodology
For this article, we compiled a list of 12 stocks that were discussed by Jim Cramer during his episode of Mad Money on October 22. 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 user’s hands typing a search query into a Google Search box, emphasizing the company’s search capabilities.
Number of Hedge Fund Holders: 216
Cramer discussed how big companies like Alphabet Inc. (NASDAQ:GOOGL) remained largely unaffected by the events of the bond market and highlighted its advertising capabilities. Here’s what Mad Money’s host had to say:
“They like Google for the same reason they like Amazon and Meta, targeted ads. Referenced again and again as a place to advertise pretty much anything.”
Alphabet (NASDAQ:GOOGL) serves as the holding company established following Google’s restructuring in 2015, with Google recognized primarily for its leading search engine. The company benefits from strong network effects, as the value of its Google Search platform increases for all stakeholders, users, website publishers, and advertisers, as it expands.
According to CEO Sundar Pichai, the introduction of generative AI features has led to greater engagement and satisfaction among users, particularly those aged 18 to 24. The innovation includes AI-driven tools aimed at optimizing advertising profits and automating the creation of media content and advertising campaigns.
As a major player in the digital advertising industry, Alphabet (NASDAQ:GOOGL) sees substantial gains from its successful Google Search platform, which accounted for more than half of the company’s $84.7 billion in revenue during the second quarter. Each of the primary operating segments contributed to these strong results, but the resurgence in advertising revenue had a significant impact after a challenging period in recent years. Google advertising rose by 11% year over year, which points to a recovery in its advertising business.
Overall GOOGL ranks 4th on our list of the stocks Jim Cramer is currently talking about. While we acknowledge the potential of GOOGL 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 GOOGL 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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