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 GE Aerospace (NYSE:GE) 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.”
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 technician in a power station monitoring the flow of energy generated by a gas turbine.
GE Aerospace (NYSE:GE) is a favorite of Cramer’s. Talking about the company’s recent earnings report, he said:
“Number one is GE Aerospace… a favorite of mine. Today we learned that there was some weakness in some orders and some lingering supply chain issues when it came to building aircraft engines. Now it wouldn't be a big deal except the stock was already up 90% for the year as of last night's close. So people sold first and then asked questions later. They don't think, Hey, wait a second, GE has years of demand ahead and aerospace is a great secular growth market. No, that takes wisdom, genuine wisdom. And who the heck has time for wisdom when you can just ring the register? And that's how a fantastic stock like GE Aerospace closes down 9% and no more than that.”
GE Aerospace (NYSE:GE) is involved in the design and production of engines for commercial and military aircraft, along with integrated engine components, electric power systems, and mechanical systems for aircraft. In its third-quarter results, released on October 22, the company reported earnings of $1.15 per share and revenue totaling $8.9 billion. While this earnings figure surpassed expectations by a slight margin, the revenue fell short of the consensus estimate.
The report also highlighted some challenges, particularly regarding the LEAP engines, which are produced through a joint venture with Safran. The LEAP engines serve as the exclusive option for the Boeing 737 MAX and are also available for the Airbus A320 neo family. Due to supply chain issues and delays in aircraft deliveries, GE Aerospace (NYSE:GE) has revised its outlook for LEAP engine deliveries, now expecting a 10% decline in 2024 compared to the previous year.
Initially, management had expected a growth rate of 20% to 25% for LEAP deliveries. Despite these setbacks, the company achieved an increase in services revenue, rising by 10% driven by higher sales of spare parts. The commercial engine and services segment saw an overall revenue growth of 8% year-over-year, although this marked a decline from the 14% growth recorded in the prior quarter. On a positive note, total orders surged by 28% during the quarter, reaching $12.6 billion, indicating a strong demand for its products and services.
Overall GE ranks 7th on our list of the stocks Jim Cramer is currently talking about. While we acknowledge the potential of GE 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 GE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
