We recently compiled a list titled Jim Cramer’s Latest Watchlist: 10 Stock Picks You Need to Know. In this article, we will look at where Oracle Corporation (NASDAQ:ORCL) stands among other stock picks in Jim Cramer’s latest watchlist.
In a recent episode of Mad Money, Jim Cramer advised investors to hold onto their stocks, anticipating a rebound after the market’s downturn. This advice proved useful as the Dow rose by 484 points or 1.16% and the NASDAQ also climbed by 1.16%, indicating that selling during the market decline was not the best choice.
“Last week, I advised you to hold off on selling everything and just wait, as I believed that once the pain ended, we would see a rebound. The average investor saw gains, with the Dow up 484 points, or 1.16%, and the NASDAQ also climbing 1.16%. While it might not be a full recovery, it shows that selling into Friday’s downturn wasn’t the best strategy.”
Jim Cramer noted that the previous week was tough for economically sensitive and tech stocks, despite a mixed August employment report. This report suggested a balanced economic outlook, not too strong or weak, which initially seemed favorable for those hoping for Federal Reserve rate cuts. Despite this, Wall Street reacted negatively, shifting away from cyclical stocks to more recession-proof sectors like consumer goods and pharmaceuticals, with industries such as industrials and semiconductors being particularly affected.
Cramer observed that recession-proof stocks, such as pharmaceuticals and medical devices, have performed well recently but have seen significant gains, raising concerns about a potential correction.
“Today, recession-proof stocks like pharmaceuticals, drug wholesalers, and medical devices continued to perform well, which is dangerous as these stocks have seen parabolic gains and could be due for a correction.”
He highlighted that historically, when the Federal Reserve is about to cut rates, it signals a shift in investment strategy. With the Fed expected to ease rates soon, Cramer suggests investors consider moving away from recession-proof stocks and look into more cyclical companies that could benefit from economic stimulus. While investing in cyclical stocks during a downturn is challenging, the anticipated rate cuts could make these stocks more attractive. Cramer advises maintaining diversification but being ready to adjust investment strategies based on the economic outlook.
“Historically, when the Fed is about to start cutting rates, we know that it’s time to shift focus. With the Fed leaning towards easing and an expected rate cut next week, it’s time to consider moving away from recession-proof stocks and investing in more cyclical companies. While it’s challenging to buy cyclical stocks during a slowdown, anticipating that the Fed will boost the economy can make them strong investment opportunities. It’s important to maintain diversification but be ready to adjust as needed.”
Our Methodology
This article reviews a recent episode of Jim Cramer’s Mad Money, where he talked about several stocks. From there, we picked ten companies and discussed how hedge funds are investing in them. Finally, we rank these companies from those least owned to those most owned by hedge funds.
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).
Oracle Corporation (NASDAQ:ORCL)
Number of Hedge Fund Investors: 93 Jim Cramer highlighted a recent positive report from Oracle Corporation (NASDAQ:ORCL), noting that much of the good news is tied to the expansion of AI data centers. Cramer believes that the sell-off in chip stocks has been overdone, as the reasons for favoring this sector earlier in the year still hold true. He emphasized that the surge in AI spending is genuine, with significant investments in building the necessary infrastructure, as demonstrated by Oracle Corporation (NASDAQ:ORCL)’s latest results.
“This very evening, we got a startlingly good report from Oracle. A lot of the good news came in concert with data centers for AI. Hey, not bad! In the end, I think the chip stocks have sold off way too hard. Every reason we had to like this group earlier this year remains intact. The AI spending boom is very real, and there’s a ton of money being spent to build out the infrastructure, as we heard from Oracle this evening.
More importantly, there’s more to chips than AI. For the past couple of quarters, we’ve been exiting a period of oversupply in the semiconductor market, and we’re now finally seeing some excellent sales growth. Yes, we’re past the point of equilibrium—we’re going up!”
In Q1 2024, Oracle Corporation (NASDAQ:ORCL)’s earnings rose to $2.93 billion, or $1.03 per share, surpassing expectations. Its adjusted earnings of $1.39 per share also beat forecasts of $1.32. Revenue grew by 6.9% to $13.31 billion, driven mainly by its cloud services. The cloud segment, boosted by the acquisition of Cerner Corporation (NASDAQ:CERN), saw a 20% increase year-over-year, reaching $5.3 billion. Oracle Corporation (NASDAQ:ORCL)’s Infrastructure as a Service (IaaS) experienced a remarkable 42% growth, highlighting its successful focus on high-demand cloud and AI services.
Additionally, Oracle Corporation (NASDAQ:ORCL) has secured over $12 billion in AI contracts, positioning itself strongly in the AI field. Oracle Corporation (NASDAQ:ORCL)’s future revenue prospects are supported by a substantial $98 billion in remaining performance obligations. With its leadership in cloud technology and expanding AI contracts, Oracle Corporation (NASDAQ:ORCL) is set for continued growth, making it an attractive investment.
Carillon Eagle Growth & Income Fund stated the following regarding Oracle Corporation (NYSE:ORCL) in its Q2 2024 investor letter:
“Oracle Corporation (NYSE:ORCL) stock rose to all-time highs after the company announced better than expected cloud infrastructure revenue. Oracle signed dozens of new customers, including two leaders in generative artificial intelligence. The backlog remains, and strong growth appears poised to accelerate.”
Overall ORCL ranks 3rd on our list. While we acknowledge the potential of ORCL, 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 the ones on our list 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 was originally published on Insider Monkey.
