We recently published a list of Jim Cramer’s Top 10 Most Optimistic Stock PicksIn this article, we’ll take a look at how Steel Dynamics Inc. (NASDAQ:STLD) stacks up against Jim Cramer’s other bullish stock recommendations.
On a recent episode of Mad Money, Jim Cramer expressed his excitement about the current market while highlighting an important historical perspective. He reminded viewers that 20 years ago, Google went public at $85 per share and closed its first day up 18%. While many traders were excited by that initial gain, looking back, it was a huge missed opportunity. The stock has since returned 7,736%, far outperforming the S&P 500’s return of just over 600%. This example illustrates the potential wealth that individual stocks can offer compared to broader indexes, especially if you choose wisely.
“Twenty years ago today, Google went public at a split-adjusted price of $85 per share. The stock closed up 18 percent on the first day. Many traders were excited by that initial gain and took the profit. In retrospect, this was one of the biggest mistakes of all time. Since then, the company has returned 7,736 percent, compared to the S&P 500’s return of just over 600 percent with dividends. This reminds us how much wealth individual stocks can generate compared to indexes if you choose wisely. And I’m telling you, it’s not that hard if you know how to do your research. So I think it’s time to rethink the average approach, at least for today.”
Cramer noted that despite strong recent performance — the Dow gained 237 points, the S&P 500 gained 0.97 percent and the NASDAQ gained 1.39 percent — the near-term market outlook is more complex. The market is currently on its longest winning streak since November of last year, with 93 percent of S&P 500 stocks posting gains.
However, he warned that the market could be “overbought,” as indicated by the Market Edge oscillator, a tool Cramer has relied on since 1987. When the oscillator hits plus five or more, it signals it may be time to sell. Conversely, readings of minus five or less indicate oversold conditions, suggesting it’s a good time to buy.
“While it was another good day for the markets, we must consider both the short-term and long-term outlook. The short-term backdrop is not so favorable. We are currently on a clear winning streak, with the market up for several days in a row, the longest streak since November of last year. Impressively, 93% of S&P 500 stocks are up.”
This came after a Monday when the market fell sharply due to the collapse of the yen carry trade, leading to a wave of forced selling and subsequent panic.
“As I have said many times, panic is not a strategy. Since that panic, the market has been mostly up.”
Jim Cramer has also expressed concern about the upcoming Justice Department case challenging the search engine giant’s role in the ad exchange market. This litigation could have a significant negative impact on the company, which has profited greatly from this system. A Justice Department victory could be even more damaging than the previous dispute with Apple over search engine defaults, which contributed to the company’s monopoly concerns.
According to Cramer, the resilience of the tech giants is evident, with strong recoveries occurring even after short-term dips. (see Top 33 AI companies to watch out for).
Jim Cramer emphasizes that investing in truly exceptional companies, rather than just tracking market indexes, usually yields the best returns. Cramer advises investors not to panic when markets fluctuate and to focus on strong companies for long-term success.
“As we look to the future, it’s important to remember that investing in truly great companies, rather than simply following the index, often yields the best returns. Google’s significant gains over 20 years are one example. Avoiding panic during market turbulence and holding on to strong companies is critical to long-term success.”
Our methodology
In this article, we discussed a recent episode of Jim Cramer’s Mad Money and highlighted ten stocks he is bullish on. We also included information on hedge fund sentiment for each stock and ranked them by how many hedge funds own them, starting with the least owned stock.
At Insider Monkey, we are obsessed with the stocks that hedge funds invest in. The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (Further details can be found here).
A machinist inspects a freshly cut steel beam ready for shipment to its destination.
Steel Dynamics Inc. (NASDAQ:STLD)
Number of hedge fund investors: 34
Jim Cramer spoke about Steel Dynamics Inc. (NASDAQ:STLD) in response to a viewer’s question. He explained that although Steel Dynamics Inc. (NASDAQ:STLD) is a strong company, it is facing challenges due to a rise in steel imports from China through Mexico. Cramer noted that there are not enough measures in place to counter these imports, which is negatively affecting Steel Dynamics Inc. (NASDAQ:STLD) and its competitor.
Nucor Corporation
(NYSE:NUE).
“Steel Dynamics is an excellent company, but we are currently facing a wave of steel dumping from China coming through Mexico. We are not addressing this issue effectively, which is negatively impacting Steel Dynamics and Nucor, the two best companies in the industry. It is difficult to watch, and although the stock is very cheap, I cannot recommend it at this time due to the situation below the border.”
Steel Dynamics Inc. (NASDAQ:STLD) is poised for significant growth thanks to its strong earnings and efficient operations. Steel Dynamics Inc.’s (NASDAQ:STLD) investment in a new flat-rolled steel mill in Sinton, Texas, will increase production capacity and improve profit margins. This growth is supported by ongoing U.S. infrastructure projects and high demand for steel in the automotive and construction industries. Steel Dynamics Inc. (NASDAQ:STLD) also benefits from its integrated business model, which includes steel production, metal recycling and steel processing, which enables the company to effectively manage its costs and increase its profitability.
Steel Dynamics Inc. (NASDAQ:STLD) leverages electric arc furnace (EAF) technology to support its commitment to sustainability and meet the growing demand for environmentally friendly steel. In addition, with a strong balance sheet, low debt, and robust cash flow, Steel Dynamics Inc. (NASDAQ:STLD) is well positioned to pursue further growth opportunities, including acquisitions and rewarding shareholders.
Here’s what Theresa E. Wagler, Chief Financial Officer of Steel Dynamics Inc. (NASDAQ:STLD), had to say in the company’s recent quarterly earnings call:
“Good morning everyone. Thank you for joining us and thanks to the teams for another successful performance. Our second quarter 2024 net income was $428 million, or $2.72 per diluted share, on adjusted EBITDA of $686 million. Second quarter 2024 revenue of $4.6 billion was slightly lower than first quarter results due to lower realized steel prices. Our second quarter operating income of $559 million was 26% lower than first quarter results due to the reduction in steel metal margin as prices declined more than scrap raw material costs. Our steel business generated operating income of $442 million, down 34% from the prior quarter as average realized prices declined $63 to $1,138 per tonne while total shipments remained generally stable.
Uniquely, all of our steel mills, with the exception of Roanoke, had planned maintenance outages in the second quarter, which impacted utilization and related changeover costs for the quarter. In addition, our flat steel division in Sinton, Texas, operated at nearly 60% of its capacity during the quarter compared to nearly 70% in the first quarter, due to required outages to implement necessary changes, which Barry will describe shortly. Operating income from our mills’ recycling operations was $32 million, significantly higher than the first quarter results, although realized prices were lower due to increasing volumes and the team’s continued improvement in operational efficiencies. As many of you already know, we are the largest North American metals recycler, processing and consuming ferrous scrap and non-ferrous aluminum, copper and other metals.” (Read more here…)
Total STLD takes 10th place on our list of Jim Cramer’s best stock picks. While we recognize STLD’s potential as an investment, we believe AI stocks that fly under the radar promise higher returns and do so in a shorter time frame. If you’re looking for an AI stock that’s more promising than STLD but trades at less than 5x earnings, read our report on the cheapest AI stock.
READ MORE: $30 trillion opportunity: The 15 best humanoid robot stocks to buy, according to Morgan Stanley And According to Jim Cramer, NVIDIA has “become a wasteland”.
Disclosure: None. This article was originally published on Insider Monkey.
