Citigroup Inc. (NYSE:C) is one of the stocks Jim Cramer shared his thoughts on. Cramer highlighted the situation of the bank’s Russian operations while discussing its recent quarter, as he commented:
“Last but not least, there’s Citigroup, which delivered another good, solid quarter, the latest in a long line of no drama results under CEO Jane Fraser. Excluding a one-time charge related to the… sale of its Russian operations, Citi saw 8% revenue growth while earnings per share were up 35%. Citi had the best in interest income of all banks, up 14%, also ahead of expectations. But as with Bank of America, they benefit from a smaller-than-expected provision for credit losses, which signals confidence in the economy. But it’s not an operational number. Below the top lines, it’s where it hurts. It was a mixed bag. Citi’s services business and its banking business both beat, so did the markets business, but that was driven by fixed income as equity trading fell a bit short. The company’s personal banking in the United States had a shortfall… I liked that business. It needs to really climb. As did the wealth unit, though, the wealth shortfall was very small.
A laptop and a computer monitor display a detailed stock market technical analysis chart. Photo by Jakub Zerdzicki on Pexels
Citigroup Inc. (NYSE:C) provides financial products and services across banking, markets, and wealth management.
Even when his calls miss, Michael Burry’s reputation keeps Wall Street watching his every move. Astrid Stawiarz/Getty Images
Michael Burry earned a whopping $800 million by shorting the U.S. housing market ahead of the 2008 financial crisis. Whether the famed investor has made comparable money since then is far less clear. Still, his reputation endures. Investors continue to closely track his high-profile bets, hoping to ride his coattails to similar gains.
Burry ran the hedge fund Scion Asset Management and now publishes commentary through a weekly newsletter, though he discloses little about performance. He has also repeatedly deleted and reactivated his X account over the years, but remains active on the platform, where he has roughly 1.6 million followers and frequently posts cryptic market takes.
His celebrity status was cemented by the 2015 film The Big Short, which turned Burry into a household name. That visibility has granted him a level of credibility few investors retain for so long, even when their predictions miss the mark.
“People like superstars, and they love to listen to folks who they think are smart and successful,” Tom Sosnoff, founder of investment media network Tastylive, told Observer. “He is a personality and a contrarian. He is interesting and pretty famous in the world of finance. Love him or not, people listen to him.”
While Burry’s early success is well documented, his performance since then is harder to evaluate. As a hedge fund manager, he is only required to disclose limited information through quarterly filings such as 13Fs, which reveal long equity positions but not short positions, derivatives or overall performance. As a result, the full picture of his gains and losses remains largely opaque.
There have been claims that Burry has made more than $1 billion in total trading profits, but those figures have never been independently verified, and his fund has never been publicly audited.
Nvidia and Palantir in the crosshairs
Despite the uncertainty around his track record, Burry’s words still move markets. His recent bearish bets against Nvidia and Palantir have drawn particular attention, with Burry arguing that both sit at the center of an A.I.-driven market bubble.
On Nov. 3, regulatory filings revealed that Scion had placed roughly $1.1 billion in bearish options positions tied to those companies. The structure of the trade—largely long-dated put options—gives him time for the thesis to play out rather than requiring an immediate downturn.
“His timing was very good,” said Sosnoff. “He pretty much got short Nvidia near the top (around $200), and it’s now down 10 percent to 15 percent. It’s a good call.”
Palantir, which represents Burry’s largest short at roughly $912 million, has not fallen as sharply. The stock is down about 7.8 percent from its Nov. 3 level. Still, because the position is structured with options expiring in 2027, some analysts say it’s far too early to judge.
“His logic is extremely good, and he has over a year to be right,” David Trainer, CEO of A.I.-driven investment research firm New Constructs, told Observer.
Trainer, a former hedge fund manager, also backed Burry’s broader critique of A.I. hyperscalers, arguing that companies such as Oracle and Microsoft are using aggressive accounting practices, particularly around GPU depreciation, to flatter earnings.
“These companies are definitely using questionable billing and receivables to make their earnings look better,” said Trainer. “I can’t say if Burry has been right or wrong in previous trades, but I think he has made some money. “This time [with the A.I. Bubble], he seems right.”
The cult of the contrarian
Not everyone is convinced. Matthew Tuttle, CEO of Tuttle Capital Management and a frequent contrarian himself, said Burry’s post-2008 track record is far less impressive than his reputation suggests.
“When you look at the calls Burry has made since 2008, they have not been good,” he told Observer. “He has said ‘this is going to crash and that is going to crash’ many times since, and he hasn’t been right.”
Still, big bearish bets tend to attract attention precisely because they go against the grain.
“Any time someone makes a major down call, there’s a fascination with it as long [bullish] calls are always okay because the market always goes up,” said Tuttle.
That dynamic helps explain why hedge fund stars can remain influential long after their best trades are behind them.
“If I’m the main character in a movie and in a book like Burry and have been right in a big way, that buys me a lot of getting things wrong,” added Tuttle.
The same dynamic applies to other market personalities such as Robert Kiyosaki, Peter Schiff and CNBC’s Jim Cramer, whose reputations often outlast their accuracy.
“Robert Kiyosaki is constantly calling a bear market, and he is wrong, and Peter Schiff has been calling gold up for a long time,” said Tuttle. In Schiff’s case, it eventually worked—but more because of timing and luck than brilliance.
“When you say gold is going to go up every year, and one year it does well, does that make you a genius? I would argue it doesn’t,” he added.
Fame as financial fuel
Wall Street is full of one-hit wonders whose early success grants them enduring influence.
“Most of the time, they don’t risk their money,” said Sosnoff. “If they have one big win one year, they’re set. Their reputation is made.”
John Paulson, who famously made $15 billion betting against subprime mortgages, fits that mold, as do figures like Ralph Acampora, who called the 1990s bull market, and Paul Tudor Jones, who predicted the 1987 crash.
Other famous short sellers have stumbled. Jim Chanos, known for shorting Enron, closed his Kynikos fund in late 2023 after his Tesla bet went wrong. Bill Ackman lost roughly $1 billion betting against Herbalife in 2018, despite previously scoring a massive win betting against mortgage insurers during the financial crisis.
Ultimately, fame often matters more than accuracy.
“We live in a world where celebrities (movie, social media) have megaphones, and Michael is a celebrity because of the movie,” NYU Stern professor Aswath Damodaran told Observer. “Put simply, I will wager that most people who follow his advice (good or bad) are doing so because they liked the movie, think he is Christian Bale or like Batman, rather than because they read his treatises on Nvidia or Palantir. “
That doesn’t mean Burry lacks insight. “Michael actually is a good macro thinker and often willing to break away from the herd,” Damodaran added. “But so are many other smart investors who never get noticed.”
We recently published 11 Stocks on Jim Cramer’s Radar. NVIDIA Corporation (NASDAQ:NVDA) is one of the stocks Jim Cramer recently discussed.
NVIDIA Corporation (NASDAQ:NVDA)’s AI GPUs rule the AI industry. In this appearance, Cramer discussed the orders for these chips. The orders are crucial for NVIDIA Corporation (NASDAQ:NVDA)’s valuation, and the CNBC TV host believes that there is more than enough demand for the chips:
NVIDIA (NVDA) Has The AI Orders, Says Jim Cramer
“I do think that they have the orders, so does Jensen, Jensen Huang has the orders. You need the orders in order to be able to get to where we’re gonna go here. It’s just that we need the orders to be paid for. . .I know that Jensen Huang has a list of clients who’re willing to pay for anything, anything that was meant for China. And I think, I think you own NVIDIA, don’t trade it.”
While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.
“Now, onto something more interesting. McDonald’s reports on Wednesday, and I think they are the single best judge, maybe in the world, of the true state of the consumer who is strapped, who is worried, alongside by the way, restaurant brand Burger King… We keep hearing about this cash-strapped consumer not willing to eat out and wants to stay at home, wants to preserve capital, but only McDonald’s and Burger King can really tell us if that’s true or if the people decided that tastes have changed.”
Ken Wolter / Shutterstock.com
McDonald’s Corporation (NYSE:MCD) owns, operates, and franchises restaurants that serve food and beverages, including burgers, chicken, fries, and drinks. During the September 19 episode, a caller had a query about the company’s dividend and Cramer replied:
“Well, look, they pay a dividend, it’s $1.77. They make, they have huge cash flow. They have no problem paying it. It’s a fantastic dividend. It’s been an amazing company. It does sell at market multiple 25 times earnings. I have to tell you, if you own McDonald’s here, you bought McDonald’s here at 302, I think a year from now, you’re going to make a lot of money, and Chris Kempczinski is such a good manager. I think McDonald’s is a buy, and by the way, I have to admit, as a treat, I still go, had it last week. Can’t beat it.”
While we acknowledge the potential of MCD as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
We recently published 10 Stocks on Jim Cramer’s Radar. Meta Platforms, Inc. (NASDAQ:META) is one of the stocks Jim Cramer recently discussed.
After social media giant Meta Platforms, Inc. (NASDAQ:META)’s shares fell following its latest earnings report, Cramer took the contrarian view and defended the firm’s CEO, Mark Zuckerberg. The CNBC TV host did not hold back when discussing the firm:
Photo by austin-distel on Unsplash
“[After David Faber commented that Cramer was frustrated with the conference call despite Meta’s sizable user base] I thought that the revenues were terrific. The reaction to the conference call is that, finally we’re at the point where people are spending too much. And he is spending too much. People did not like Mark Zuckerberg’s assurance that you have to spend.
Jim Cramer hired a bodyguard after threats from retail investors during the 2021 meme stock rally.
Cramer says he believed the stock never should have passed $400.
GameStop shares have been volatile since the meme craze. The stock is down 15% in 2025.
Jim Cramer‘s take on the meme stock mania of 2021 drew the ire of a powerful group that was swaying markets during the pandemic: retail traders.
The “Mad Money” host recounted that he had to hire a bodyguard after he angered some retail investors in 2021 at the peak of the pandemic’s bout of meme stock mania that boosted GameStop and other stocks to dizzying heights.
Cramer, who was in the hospital recovering from a back surgery at the time, said he thought he was hallucinating when he saw shares of GameStop rip higher, he said during an episode of Bloomberg’s Odd Lots podcast on Monday.
After shares of the gaming retailer quadrupled, Cramer said he ripped out his catheter and phoned Carl Quintana and David Faber, two of his fellow hosts at CNBC.
“[I] said, ‘This is ridiculous. Everybody has to sell.’ After that, it was 24/7 bodyguard,” Cramer said.
In January 2021, Cramer called into CNBC from the hospital and urged GameStop investors to sell.
“Take the home run. Don’t go for the grand slam. Take the home run. You’ve already won. You’ve won the game. You’re done,” Cramer said on the network’s “Squawk on the Street” program.
Cramer told retail investors to sell GameStop when he called into CNBC from the hospital.Noam Galai/Getty Images
Cramer, a former hedge fund manager known for his bold stock calls on the air, said he believed GameStop stock shouldn’t have been valued above $400, which it briefly soared beyond as shares ascended to their peak during the pandemic.
The stock ended up plummeting to around $10 a share in mid-February as hype for the struggling retailer finally died out.
GameStop stock has been on a rollercoaster ever since its short-squeeze in 2021, but it retains a dedicated following among some retail investors, who periodically reignite fresh meme-like rallies.
GameStop shares traded around $27 on Monday. The stock is down about 15% year-to-date.
Citigroup Inc. (NYSE:C) is one of the stocks Jim Cramer weighed in on. During the episode, a caller asked about the stock, and Cramer replied:
“Oh, I like Citi. Now, Citi’s up a huge amount, but I think Citi is still an inexpensive stock. It’s got still a lower multiple than others. I think it can go higher. Yields 2.4% and what can I say? Jane Fraser’s doing an admirable job there.”
Kiev.Victor / Shutterstock.com
Citigroup Inc. (NYSE:C) delivers financial services, including consumer banking, wealth management, investment banking, trading, treasury, and securities solutions. Hotchkis & Wiley stated the following regarding Citigroup Inc. (NYSE:C) in its second quarter 2025 investor letter:
“Citigroup Inc. (NYSE:C) is one of the largest US banks by total assets. Investment in its IT, compliance and risk capabilities have pressured margins and returns over recent years, obscuring the banks strong core franchise. With these investments now largely complete we expect Citi’s expense to decline and its margins and returns to be more consistent with peers. Citigroup performed well in the quarter on improved profitability and positive operating leverage. We think that C is very undervalued on our normal expectations and would still be attractive even if they do not fully achieve their goals.”
While we acknowledge the potential of C as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
Williams-Sonoma, Inc. (NYSE:WSM) is a home furnishing and associated products retailer. Its shares are flat year-to-date, primarily due to a 5.2% dip in August. Williams-Sonoma, Inc. (NYSE:WSM)’s shares fell after the firm’s second-quarter earnings report and an announcement by President Trump that he would start a major tariff investigation into furniture items entering the US. Here is what Cramer said about Williams-Sonoma, Inc. (NYSE:WSM):
“If you want to know who was best yesterday, and I know she’s not gonna get any credit for it, but, Laura Alber had the most largest increase in tariffs, of any one company, and she still did the number. That is impressive. Williams-Sonoma.
Williams-Sonoma, Inc. (WSM) Has A Great CEO, Says Jim Cramer
Previously, Cramer discussed Williams-Sonoma, Inc. (NYSE:WSM) in the context of tariffs and the American furniture industry:
“Let’s talk about Wayfair, Williams-Sonoma, and RH, the old Restoration Hardware… I know both Williams-Sonoma and RH are a different story. They make some fine furniture here, and they’d like to make more furniture, but it’s difficult to find skilled workers to make high-quality merchandise. I’m not slagging our workers. The people who used to make furniture simply moved on to other things, or they retired. … Tariff wouldn’t go far enough to make them come back. At the end of the day, I’m skeptical that we can bring back the American furniture industry as we remember it, and even if we could… would it be worth the cost? I don’t know… Unless the federal government wants to get into the business of making furniture, forcing the hand of RH and Williams-Sonoma, it won’t make a difference to the industry as a whole. There will most likely not be a revival of those great furniture cities.”
While we acknowledge the potential of WSM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.
The Goldman Sachs Group, Inc. (NYSE:GS)’s shares have been performing well lately as mergers and acquisitions pick up. They have gained 25.5% year-to-date and are up by 56% since the post-Liberation Day dip in April. Cramer’s previous comments about The Goldman Sachs Group, Inc. (NYSE:GS) have discussed the bank’s valuation and commented that a price-to-earnings ratio of 16 was too low. The shares are currently trading at a P/E ratio of 15.9, while the CNBC host believes they should trade at least 18. This time, Cramer discussed The Goldman Sachs Group, Inc. (NYSE:GS) in the context of broader market activity and President Trump’s belief that its top management should switch careers:
“The reason I brought it up instead of Rocket Mortgage is because Goldman encapsulates everything, IPOs, right, M&A, trading volume. This is the barometer for this stock market and it took off in a way that I haven’t seen in ages.
The Goldman Sachs Group, Inc. (GS) “Is The Barometer” For The Stock Market, Says Jim Cramer
Source: pixabay
Here is what Cramer believes about The Goldman Sachs Group, Inc. (NYSE:GS)’s valuation:
“Goldman, Goldman and Morgan. I think that Goldman stock has been elevated because of things I guess. Now see, Goldman’s only at [inaudible] it’s got a parabolic move. But it sells at 16 times earnings. That is a candidate to be revalued up to 18, 19 times earnings.”
While we acknowledge the potential of GS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.
We’re selling 100 shares of Wells Fargo at roughly $65 each. Following Friday’s trade, Jim Cramer’s Charitable Trust will own 2,340 shares of WFC, decreasing its 4.41% weighting to from 4.6%. We’re ringing the register on some Wells Fargo shares after a huge run since third-quarter earnings on Oct. 11. The results were better than expected , with signs of troughing net interest income (NII) and clean beats on non-interest income, or fee-based revenue, and non-interest expense, or operating expenses. This forced the Street to put a higher multiple, or do a so-called re-rate, on the bank’s projected earnings per share (EPS) because of its revenue diversification, operating leverage, and the strong return it earned on its assets. WFC YTD mountain Wells Fargo YTD Wells shares have been on a tear since the report, rallying from $57.75 to $65.50 — good for a gain of nearly 14%. Over the same period, the S & P 500 has only tacked on about 1%. This outperformance has caused our Wells Fargo position to swell into one of the portfolio’s largest, especially after our three separate buys totaling 440 shares in the low $50s when the market broke down in early August. Due to this swift move higher to levels last seen in 2018 before the Fed put a cap on the bank’s assets, we think it is prudent to take some profits. We’re also downgrading the stock to our 2 rating , preferring to buy again on a pullback. From this sale, we’ll realize a fantastic gain of 92% on stock purchased in January 2021. We should note that this sale and downgrade do not reflect any change in our long-standing positive view on Wells Fargo since Charlie Sharf took over as CEO in 2019. If anything, we felt even better about the trajectory the bank is on after Scharf’s appearance on “Mad Money” last week. We are most encouraged by the bank’s progress on risk controls and regulatory oversight. (Jim Cramer’s Charitable Trust is long WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Bond traders are at it again, pushing Treasury yields higher and signaling the Federal Reserve was too heavy-handed when it cut interest rates by a half-percentage point last month. The recently rising yields have put pressure on the stock market — and specifically, names in our portfolio tied to housing. The 10-year Treasury yield — which influences all kinds of consumer loans, including mortgage rates — rose again Wednesday, reaching a session-high 4.26%. That’s a level not seen since late July when the yield had started to turn lower in anticipation of the Fed rate cut, which came on Sept. 18. Since then, though, the 10-year yield has been working its way higher. On the shorter end of the yield curve, the 2-year chart follows a similar pattern. US10Y US2Y 3M mountain Three month performance The hope when the Fed started cutting rates was that shorter-duration Treasurys would move lower at a greater pace than longer-dated ones, providing relief to borrowers and investors. That’s not what has been happening lately. The 2-year and 10-year yields have recently been moving higher together. Rates are like gravity for stocks — the higher the rates, the greater the competition for investment dollars. Elevated, risk-free government bond yields become an enticing way to get returns when compared to the volatility of stocks. A higher 10-year Treasury yield also halts relief on mortgage rates. The average 30-year fixed-rate mortgage, while more than 1 percentage point lower than a year ago, has moved higher three weeks in a row. In Freddie Mac’s latest weekly survey , the 30-year fixed rate was 6.44%. The Fed cutting rates represents an easing of monetary policy, which allows the economy to grow quicker and easier and makes debt more affordable. The downside of those dynamics is that a hotter economy also raises the prospects of sparking inflation again, just as it has started to moderate. Bond traders are worried about rekindling inflation because economic numbers have been coming in stronger since central bankers met in September. The market odds on a quarter-point Fed cut next month remain basically a lock, according to the CME FedWatch tool . But after that, the chances of a December cut are dwindling. A troublesome rebound in inflation, however, is not what we’re calling for, and it’s not what we’re basing the Club’s investment decisions on. Another dynamic pushing bond yields higher is concern over what happens to the national debt and trade deficit under a new presidential administration. Whether the move up in yields is a bet on next month’s election or reflects a that view that regardless of who wins, fiscal policy will remain loose, is anyone’s guess. Both presidential candidates do seem to agree on one thing: The cost of living is too high. A large, unavoidable line item on consumers’ balance sheets is housing costs, which have been one of the stickiest areas of inflation. For home prices to come down, we need more housing supply and lower mortgage rates to incentivize builders and to motivate sellers and buyers. Lots of would-be sellers are sitting on historically low mortgage rates and are reluctant to move, which drives home prices higher. Would-be buyers are reluctant to pay those higher home prices on top of elevated mortgage rates. Increased housing formation based on the Fed lowering rates is key to our investment cases for three stocks in the Club portfolio: Stanley Black & Decker , Home Depot and Best Buy . The bond yields rising and mortgage rates creeping up have pushed back the benefits of the Fed’s easing, as we explained in Tuesday’s small addition of more Home Depot shares. Ultimately, however, fighting the Fed has proved a fool’s errand in the long run — so, we do expect rates to eventually come down. In addition, the management teams at Stanley Black & Decker, Home Depot and Best Buy are executing effectively on the things within their control. Sure, they will benefit from lower rates — but rates alone are not why we own positions. We’re in them because the fundamentals are improving, which will only come further into focus when rates come down. Bottom line The rise in bond yields is not sustainable, in our view, because shorter-duration Treasury yields are bound to come down if the Fed applies enough pressure. The longer end of the curve should then come down and provide the needed relief on mortgage rates. When that happens, you will want to already have the rate-sensitive stocks on the books. We may have been early. But we’re ready. To give up on these names now, right when the Fed has broadcasted that the rate-cutting cycle is in effect, would be a mistake. By the time it becomes clear that the 10-year yield has peaked, you will likely have missed a significant part of the move. (Jim Cramer’s Charitable Trust is long SWK, HD, BBY. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Cars drive past the Federal Reserve building on September 17, 2024 in Washington, DC.
Anna Moneymaker | Getty Images News | Getty Images
Bond traders are at it again, pushing Treasury yields higher and signaling the Federal Reserve was too heavy-handed when it cut interest rates by a half-percentage point last month. The recently rising yields have put pressure on the stock market — and specifically, names in our portfolio tied to housing.
After a siding with the bulls in the run-up to Netflix‘s latest earnings report, CNBC’s Jim Cramer explained why the quarter made him more optimistic about the company’s future, saying he was impressed by management’s outlook and commentary about content.
“If you were worried about Netflix not having enough levers to pull in order to generate growth going forward, or at least enough growth to justify the stock’s price-to-earnings multiple, I think those concerns have been put to bed by last night’s earnings report,” he said. “Near-term, the Netflix bears will hibernate, but just remember all these positives when they inevitably come out of their den and try to maul this best-of-breed company with a stock that I think can rock on higher for a long time.”
Netflix beat Wall Street’s expectations for earnings, revenue and paid membership growth when it posted its report Thursday evening. The streaming giant’s shares popped 11% Friday morning and maintained those gains through close.
Cramer was encouraged by management’s guidance for the current quarter and 2025, as the company expects to keep up double-digit revenue growth some investors feared would be hard to maintain. He also appreciated co-CEO Ted Sarandos’ explanation about Netflix’s vast library and engagement, including his assertion that members on average watch two hours of content per day. Cramer pointed out that Sarandos also said that the streamer is focused on adding “more value to this package,” instead of bundling content with other streaming services, as some competitors are doing.
This breadth of content makes Cramer optimistic about Netflix’s ability to scale its ad-tier, pointing to popular offerings like “Emily in Paris,” “Selling Sunset” and “Squid Game,” as well as two National Football League games set to stream on Christmas. He also liked Sarandos’ positive read on how AI will impact business.
“I’m not saying that Netflix has become an AI play, not at all, I’m just saying that between the expanding library, clear customer interest in the ad tier model, and their ability to harness the power of artificial intelligence, we have a lot of positives here, and it’s gong to translate into a lot of money,” Cramer said.
Two stocks are getting the call-up from our Bullpen stocks-to-watch list. We’re initiating positions for Jim Cramer’s Charitable Trust in BlackRock and CrowdStrike . We’re buying 17 shares of BLK at $1012.44 each. We’re buying 60 shares of CRWD at $305. Following Wednesday’s trades, BlackRock will have a roughly 0.5% weighting in the Trust, the portfolio used for the Investing Club. CrowdStrike will have a roughly 0.5% weighting. BlackRock is the world’s largest asset management manager and leading provider of investment, advisor, and risk management solutions. It offers a broad set of investment products in equity, fixed income, multi-asset, alternatives, and cash across different client types like Institutional, Retail, and ETFs, around the world. About 43% of its base fees come from actively managed products, 42% from ETFs, 8% from Index, and 7% from cash. Blackrock reported a strong set of third-quarter results last Friday. Total revenues increased 15% year over year to $5.2 billion thanks to the positive impact of markets on average assets under management, 5% organic base fee growth, and higher performance fees. And that 5% organic base fee growth was the company’s highest level in the last three years. BLK YTD mountain BlackRock YTD BlackRock lived up to its reputation as a premier asset gatherer, generating $221 billion of net inflows in the quarter – a company record. The company is having a huge year. Through the first three quarters of 2024, net inflows already surpassed the full-year net inflows of both 2022 and 2023. Assets under management stood at about $11.5 trillion at the end of its third quarter, up $2.4 trillion year over year. Profitability was another highlight. The company continues to deliver sustained asset and technology services growth at scale while remaining disciplined on expenses. Adjusted operating margins expanded 350 basis points year over year to 45.8%, leading to adjusted earnings per share of $11.46, well above estimates of $10.40. The company bought $375 million worth of shares in the quarter, slightly reducing its weighted average diluted shares. The company also pays a dividend yield of about 2% and has increased its payout for 15 straight years. One of the company’s biggest strategic pushes right now is in alternative strategies like private markets and infrastructure. Earlier this month, BlackRock completed its acquisition of Global Infrastructure Partners, a leading independent infrastructure fund manager. The company believes this combination “will provide clients access to investment and operating expertise across the infrastructure landscape.” Blackrock believes infrastructure is a $1 trillion market today and will continue to be one of the fastest-growing segments of private markets in the years ahead. The deal brought in an additional $116 billion of client AUM and $70 billion of fee-paying AUM. It also added long-dated, non-redeemable assets to Blackrock’s business, which the company likes because it diversifies its revenue and earnings mix. Management believes these private market assets will positively impact the company’s overall effective fee rate by 0.5 to 1 full basis point. The stock has had a big move this year, gaining roughly 24% but we think the gains can continue. It’s a pretty steady business with market-leading organic growth, margin expansion, plus a dividend and buyback. Also, BlackRock should see an acceleration of inflows into Fixed Income as central banks cut rates, pushing some of the record amount of assets in Money Markets to flow into bond funds and ETFs. CEO Larry Fink addressed the large cash holdings of investors on the earnings call, explaining that “investors will have to re-risk to meet their long-term return needs.” Fink sees opportunities for investors across several structural trends like “rapid advancements in technology and AI, and rewiring of globalization, and the unprecedented need for new infrastructure.” Fink is a thought leader in the banking industry. We’re starting the position off on the smaller side given its recent run to new highs, and we’ll take advantage of pullbacks to add to our position. Our price target is $1,150, which is roughly 24 times the consensus 2025 EPS forecast of $48.47 per FactSet. CRWD YTD mountain CrowdStrike YTD Next up is CrowdStrike, the cybersecurity company led by its co-founder and CEO George Kurtz, who Jim has had on “Mad Money” many times. CrowdStrike specializes in endpoint protection through its AI-native platform called Falcon. The Falcon platform operates entirely in the cloud, allowing for rapid updates, scalability, and ease of deployment. There’s a good whitepaper on CrowdStrike’s website published by IDC that explains the value of the CrowdStrike Falcon XDR platform. It stops breaches. But it also saves time by speeding up threat protection and response while also helping security teams do more with less. It saves money by reducing the cost of cybersecurity – companies can get rid of less effective platforms and consolidate point solutions. The IDC report found that customers realized a $6 return for every $1 invested with a 5-month payback period after they used the Falcon XDR platform. CrowdStrike was virtually unstoppable this year until July 19 when a faulty software update to its Falcon Sensor security software system caused a global problem with computers running Microsoft Windows. It was a major blow for a cybersecurity company, especially one with a pristine reputation. There was a lot of speculation that the outages would hurt their business from customers revolting, resulting in a loss in market share. However, when CrowdStrike reported at the end of August, the results were excellent with revenue up 32% year over year and adjusted earnings per share of $1.04 versus the 97-cent consensus. Even better, the company showed a gross retention rate of 98%, a sign that virtually no business was lost from the event. More recently, the company held its annual Fal.Con conference in September and it seemed to get a great reception, with attendance up 30% versus last year. Microsoft CEO Satya Nadella spoke at the event which suggested the two companies have buried the hatchet. They’ve had this rivalry for years, but ironically the incident brought the two companies closer together. Shares of CrowdStrike may be up almost 40% since bottoming in early August, but it is still down more than 10% from the July 19 incident and about 23% from its closing high of $392.15 on July 1. This could be an opportunity since virtually no business was lost. Our initial price target is $350, which is roughly where the stock traded right before the July 19th outage. We think the stock should return to these levels since virtually no business was lost. You might be wondering if adding CrowdStrike to the portfolio means that we are heading to the exit on Palo Alto Networks . Does having two cybersecurity companies violate our rules about diversification? We typically don’t like to double up in one area, but we think there is room in the portfolio for both of these best-of-breed names because of position sizing. Palo Alto Networks isn’t that big of a position in the portfolio anymore because of all the huge gains we’ve locked in. Cybersecurity is a great area to be invested in. We’re in an elevated threat environment given all the hostilities happening around the world. Artificial intelligence and Gen AI have made bad actors more sophisticated, so corporations need to invest with the leaders in the industry to stay protected. We’re almost a year into the new SEC rules surrounding the disclosure of cybersecurity incidents, and greater awareness of threats has been a tailwind. (Jim Cramer’s Charitable Trust is long BLK, CRWD, MSFT, PANW. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Morgan Stanley shares soared to all-time highs Wednesday after third-quarter beats on the bank’s top and bottom lines, with strength seen across the board. Revenue for the three months ended Sept. 30 increased nearly 16% year over year to $15.38 billion, outpacing expectations of $14.4 billion, according to estimates compiled by LSEG. Earnings per share (EPS) jumped over 36% versus the year-ago period to $1.88, exceeding the $1.58 expected, according to LSEG. MS YTD mountain Morgan Stanley YTD Club stock Morgan Stanley was up 7.5%. At one stage it was even higher, punching through our $120 price target. We are setting a new PT of $130 and keeping our wait-for-a-pullback 2 rating in deference to the stock’s hot streak — up over 13% from its July high before the August market swoon and up 33% from its Aug. 5 low. Bottom line This was as clean a quarter as anyone could have asked for. Morgan Stanley outpaced expectations in just about every aspect of each operating division and put up very strong quarterly results in terms of firmwide key performance indicators. Last quarter, when the results weren’t quite what we were looking for, we told members that patience was warranted, and we would likely see dynamics improve in wealth management — a key focus area for investors who want to see the bank’s durable fee-based revenue streams continue to grow. That’s exactly what we saw with Wednesday morning’s release. Investment banking also shined as it did for its rivals, including fellow Club name Wells Fargo , which saw its overall earnings report and commentary on Friday blow the doors off. Wells Fargo stock on Wednesday was trying to extend its winning streak to nine straight sessions. We continue to believe that the improvements we’re seeing at Morgan Stanley in terms of efficiency and disciplined execution will magnify the tailwinds of a resilient U.S. economy and stimulus activity internationally. Commentary Return on tangible common equity (ROTCE) is an important metric in valuing financial institutions, such as determining what multiple to put on tangible book value, which came in at $43.76 per share. Morgan Stanley’s third-quarter ROTCE of 17.5% blew away expectations of 14.8%, according to estimates compiled by Bloomberg. On a year-to-date basis, the bank has realized an 18.2% ROTCE. The common equity tier 1 (CET1) ratio, meanwhile, indicates a financial institution’s ability to return cash to shareholders via buybacks and dividend payments. For that reason, we’re very happy to see that stand at 15.1%. That’s a hair lower than the 15.3% the Street was expecting but not too concerning. Total client assets across wealth management and investment management have now exceeded $7.5 trillion, a nearly $1.4 trillion increase over what we saw a year ago as management continues to execute on its mission of reaching $10 trillion over the long term. The overall efficiency ratio , which is calculated by dividing total non-interest expenses by net revenue — so lower is better — came in well below expectations and declined 300 basis points versus the year-ago period – though importantly did not come at the cost of continued investments in the business. On the call, CFO Sharon Yeshaya noted that in addition to revenue growth, the efficiency ratio improvement was the result of “disciplined prioritization of our controllable spend.” Morgan Stanley repurchased $750 million worth of shares in the third quarter — 8 million shares total — at an average purchase price of $99.94 each, which in light of Wednesday stock price looks like a pretty good move for shareholders. Given its 15.1% CET1 ratio, Morgan Stanley has plenty of excess capital at its disposal to both continue investing in growth and return excess capital to shareholders. Morgan Stanley Why we own it : We own Morgan Stanley for the rebound taking place in IPO and M & A activity along with growth in wealth management, which provides more durable fee-based revenues. We also view the bank’s excess capital as supportive of further shareholder returns via buybacks and dividends while also providing for additional investments in growth. Competitors : Goldman Sachs Weight in Club portfolio : 3.5% Most recent buy : Oct. 18, 2023 Initiated : July 12, 2021 Segments Institutional Securities in the third quarter benefited from strong international performance, with management calling out an acceleration in activity exiting the quarter, indicating the fourth quarter was also off to a strong start. In line with our thesis, CEO Ted Pick noted on the call that “a broadening equity market and evolving interest rate policy are favorable backdrops for our markets businesses.” Morgan Stanley’s large footprint allowed the firm to benefit from “shifting expectations around the size and timing of the Fed’s first rate cut” during the quarter, the change in monetary policy at the Bank of Japan and Chinese stimulus. Investment banking saw a pick-up in equity underwriting due to higher IPO activity and fixed income underwriting increased significantly from a year ago. Wealth management reported record revenue and a record pre-tax profit. Net new assets in the quarter were about $64 billion, well above the $53.5 billion expected and brings year-to-date net new assets to $195 billion, a 5% annualized increase versus where we started the year. Yeshaya said that “year-to-date flows are on pace to exceed last year, supported by an ongoing contribution of assets from advisor-led brokerage accounts to fee-based accounts.” The CFO expects net interest income “to be modestly down from the third quarter results largely on the back of lower rate expectations consistent with the forward curve.” That’s not too much of a concern given the Street has been looking for about $1.73 billion of net interest income in the current quarter. The pre-tax profit margin of 28.3%, a key watch item for investors given the increased focus on fee-based performance, outpaced the 26.8% consensus estimate and represents a very strong sequential increase versus the 26.8% we saw in the prior quarter. Investment management got a boost from higher asset management and related fees, which came on the back of an increase in assets under management. On the call, Yeshaya highlighted the benefits of the prior acquisition of Eaton Vance. (Jim Cramer’s Charitable Trust is long MS, WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Bing Guan | Bloomberg | Getty Images
Morgan Stanley shares soared to all-time highs Wednesday after third-quarter beats on the bank’s top and bottom lines, with strength seen across the board.
It’s been a stellar month for the U.S. stock market, driven largely by easing monetary policy. Since the Club’s last Monthly Meeting, investors have celebrated the Federal Reserve’s pivot to its rate-cutting era. The U.S. central bank announced its first interest rate reduction in more than four years on Sept. 18, sending stock benchmarks to all-time highs. Most recently, the S & P 500 and Dow Jones Industrial Average both closed at record levels Monday. The S & P and Dow are up 4.5% and 4%, respectively, since the Sept. 12 monthly gathering. We’ve taken advantage of the market highs. The rate cutting news sent Meta Platforms , Alphabet and Danaher higher, encouraging us to offload shares of each on Sept. 26 in an overbought market. The Club also exited Procter & Gamble on Oct. 8. The reasoning: There’s less need to hold onto traditional defensive names like consumer staples while the Fed is embarking on an easing cycle. We did hold onto our rate-sensitive names like Wells Fargo and Morgan Stanley , which were among the best performers since the last Monthly Meeting. (We sold a little of the latter, more details below). The improving macro backdrop on the back of loosening policy bodes well for Meta Platforms too. Meanwhile, continued investments around generative artificial intelligence boosted shares of Salesforce and Eaton , which rounded out the top five. Here’s a breakdown of what drove gains in each of these five Club stocks since the market close of the September meeting through Tuesday’s close ahead of Wednesday’s October Monthly meeting at noon ET . 1. Wells Fargo: 22% This stock got a boost after the Fed enacted its first rate cut in mid-September, which lifted the entire financials sector. That’s because lower borrowing costs can benefit Wells Fargo by stabilizing its interest-based revenue streams. The firm’s net interest income (NII) took hits during the higher-for-long rate environment as customers sought to park cash in higher-yielding alternatives. It weighed on the bank’s loan growth as well. Wells Fargo’s solid quarterly earnings release on Oct. 11, and subsequent positive Wall Street commentary in the sessions that followed, sent the stock to multi-year highs. We hiked our price target to $66 apiece from $61 on earnings, and reiterated our buy-equivalent 1 rating on the stock. 2. Morgan Stanley: 16.2% Following the Fed’s decision, shares advanced as investors became more optimistic about a soft landing for the U.S. economy. Morgan Stanley benefits from lower rates — and, in turn, a better economy — because it can usher in more Wall Street dealmaking such as initial public offerings and mergers and acquisitions. That’s great news for the turnaround story in Morgan Stanley’s crucial investment banking division. To be sure, we made a small sale of the financial stock on Sept. 19 after its post-Fed pop. That’s because the Club has been debating exiting Morgan Stanley altogether for a potentially better investment banking rebound play like Goldman Sachs. However, we hope to get more clarity on Morgan Stanley’s standing in the portfolio when the firm reports quarterly results Wednesday. 3. Salesforce: 13.8% What caused the double-digit percentage jump in this tech stock? Two words: artificial intelligence. Salesforce hosted its Dreamforce Conference last month, where CEO Marc Benioff touted Agentforce, the company’s AI-enhanced chatbot tools. Shares had their biggest single-day jump in nearly four months, at 5.4%, on Sept. 19 after management detailed more about the flagship offering. A flurry of positive Wall Street chatter followed suit, extending the run even further. Piper Sandler upgraded the stock to a buy rating from neutral on Sept. 24. A week later, Northland Capital Markets also raised its rating on the software maker to a buy-equivalent rating from hold. 4. Meta Platforms: 11.5% The social media giant trended higher after investors saw the unveiling of the Quest 3S , the latest VR headset from the company at the social media giants annual developer conference on Sept. 25. The stock continued to climb on positive signs for the company’s advertising business, which prompted UBS to hike the stock’s price target to $690 apiece from $635. Guggenheim raised the company’s price target to $665 from $600. Analysts at the firm argued that Meta was the top destination for incremental ad dollars, citing recent channel checks. 5. Eaton: 11.3% This industrial name doesn’t have one single catalyst for its outperformance. But increasing data center investments on the back of increased AI adoption, accompanied by upbeat Wall Street research, likely contributed to the stock’s climb. On Sept. 16, Citigroup initiated coverage of Eaton as a buy, sending shares higher. Analysts argued that Eaton will continue to benefit from the buildout of data center facilities, which will in turn increase demand for the company’s power management solutions. Morgan Stanley reiterated its buy-equivalent rating on Oct. 10, arguing that Eaton has a positive setup into earnings season. That same session, analysts at JPMorgan maintained their buy rating on Eaton and increased its price target to $349 apiece from $325. The stock traded near all-time highs on Tuesday. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Traders work on the floor of the New York Stock Exchange.
Angela Weiss | AFP | Getty Images
It’s been a stellar month for the U.S. stock market, driven largely by easing monetary policy.
Wells Fargo CEO Charlie Scharf gave CNBC’s Jim Cramer a positive read on the consumer landscape.
“The consumer’s been extremely resilient,” he said. “We don’t sit here and say risks don’t exist — But what we see looks pretty, pretty strong.”
According to Scharf, consumer spend is going up “at a very measured pace” in both debit and credit cards. Deposit balances, he added, remain strong and credit quality is “still performing extremely well.” He praised the Federal Reserve, saying the central bank managed the economy well under difficult circumstances.
Wells Fargo’s most recent quarter topped Wall Street’s expectations, and shares surged more than 4% last Friday just after the report. The company managed a substantial earnings beat, even as its net interest income — a measure of banks’ lending revenue — declined. By Tuesday’s close, Wells Fargo was up 1.40%.
While Scharf said Wells Fargo does care about its quarterly results, he suggested the market can obsess over reports more than management does. He pointed out that the stock fell after last quarter but jumped after the most recent one — even though trends are “not dramatically different,” and strategies, as well as progress on building business hasn’t changed significantly.
Scharf also remained neutral when asked about what results of the upcoming presidential election could mean for business.
“We’re going to work with both sides,” he said. “I’m encouraged by what both candidates are saying about the way they want to interact with business.”
Jim Cramer’s Guide to Investing
Sign up now for the CNBC Investing Club to follow Jim Cramer’s every move in the market.
Disclaimer The CNBC Investing Club Charitable Trust holds shares of Wells Fargo.
Wells Fargo stock hit new multi-year highs on Monday after Wall Street analysts praised the bank’s third-quarter earnings report. The news Shares of Club name Wells Fargo jumped more than 3% on Monday — a close above $63 would be the highest finish since January 2018. That’s on top of Friday’s more than 5.6% post-earnings rally, which extended its recent run to six straight sessions. Investors are mulling a slew of positive analysts’ calls after Wells Fargo’s better-than-expected quarterly earnings . While missing on revenue, the bank impressed with a surge in fee-based income streams that offset weakness in other parts of the business. WFC 5Y mountain Wells Fargo 5 years In response, Barclays raised Wells Fargo’s price target to $75 apiece from $66 on Sunday, implying roughly 23% upside from Friday’s prior close. The analysts cited both “increased confidence of a soft landing” and “improvements in operational risk and compliance, which should ultimately lead to [the] removal of its asset cap,” which was imposed by the Federal Reserve in 2018 following misdeeds before Charlie Scharf took over as CEO. Barclays maintained its buy-equivalent rating on the financial name. Piper Sandler hiked its Wells Fargo price target slightly to $62 from $60. “We are keeping our neutral rating, but note that the story becomes more interesting as net interest income begins to find its bottom, the fee base gains momentum, and regulatory issues seem to move forward,” analysts wrote in a Friday note. Big picture Big bank earnings are off to a great start. Not only did Wells Fargo post solid results, but so did JPMorgan Chase . On Friday, the Jamie Dimon-led bank topped analysts’ expectations on earnings and revenue on continued strength in non-interest income streams. Wall Street behemoths including Bank of America, Citigroup and Goldman Sachs are set to post results before Tuesday’s bell. The Club’s other financial name, Morgan Stanley, releases earnings on Wednesday morning. Getting a look at Goldman Sachs’ quarter and then Morgan Stanley should be interesting. Although Jim has previously said the Club would rather be in Goldman than Morgan Stanley, we’re taking a wait-and-see approach to the stock. That’s because Morgan Stanley can turn things around if Wall Street dealmaking picks up and eventually boosts the firm’s investment banking business. Bottom line We’re not surprised that Wells Fargo’s getting the recognition it deserves. After the earnings release. the Club on Friday raised our price target on the bank to $66 per share from $62. We also reiterated our buy-equivalent 1 rating on the stock. “What an amazing quarter,” Jim Cramer said Monday. “Friday was Charlie Scharf’s day.” Similar to the Wall Street analysts, we’re upbeat on the progress Wells Fargo is making toward convincing the Fed to lift the $1.95 trillion asset cap. The removal of this growth lid is crucial to Wells Fargo’s turnaround story and a big reason why the Club invested in the stock in the first place. In fact, in Jim’s Sunday column , he argued that Wells Fargo’s earnings report may be the best of the batch so far. He said he was “astounded that Wells Fargo had been able to start changing its business model to the point where it was more of an investment bank” than previously thought. That’s why we do have one qualm with Piper Sandler’s commentary, in particular. We don’t agree with the research firm’s choice to leave the stock at a hold-equivalent rating. (Jim Cramer’s Charitable Trust is long WFC, MS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Wells Fargo bank signage is seen on Broadway on April 12, 2024 in New York City.
Michael M. Santiago | Getty Images
Wells Fargo stock hit new multi-year highs on Monday after Wall Street analysts praised the bank’s third-quarter earnings report.
The good times are still rolling on Wall Street. An intensifying earnings season will put that momentum to the test. The S & P 500 ended Friday at a record high, buoyed by strong quarterly results from Club holding Wells Fargo and other major financial firms, which reinforced the idea of a healthy U.S. economy. The index posted its fifth positive week in a row, advancing 1.1%. Meanwhile, the Dow Jones Industrial Average rose 1.2% in the week and also closed Friday at an all-time high. The tech-heavy Nasdaq Composite gained 1.1% and now sits just 1.6% below its July peak. The third-quarter earnings calendar starts to get crowded in the coming days, featuring more major U.S. banks, health-care heavyweights and a few industrial and tech players. All eyes will be on the numbers and what executives have to say on their outlooks — just as it should be, according to Jim Cramer. When consumer price index for September came in a bit hotter than expected Thursday morning , Jim cautioned investors against sweating every line in every economic report. Keep your “eye on the prize,” he said. Right now, he said, that prize is “companies which are about to have earnings.” The high-level takeaway from the economic data in recent days is what matters most: Inflation is broadly trending down. The CPI in September showed an annual inflation rate of 2.4%, slightly above consensus but below the 2.5% figure seen in August. In Friday’s look at wholesale inflation, the producer price index was unchanged month over month . Economists had expected a 0.1% monthly gain. As the market marched back to records, we mostly sat tight. Exiting Procter & Gamble on Tuesday was our lone trade of the week. Simply put: a defensive stock like the maker of Crest toothpaste and Dawn soap didn’t seem right for the portfolio as the Federal Reserve embarks on an easing cycle and the economy remains on solid ground. Wells Fargo and JPMorgan reinforced that notion Friday with their earnings reports. Shares of both banks surged — Wells up 5.6%, JPMorgan up 4.4% — and helped the financial sector climb the S & P 500 leaderboard for the week. Tech led the way, up 2.5%, followed by industrials and financials, which added 2.1% and 1.8%, respectively. Utilities and communication services were the main laggards, losing 2.6% and 1.4%, respectively. In the week ahead, a number of influential companies are set to report including UnitedHealth and Goldman Sachs on Tuesday. ASML on Wednesday and Taiwan Semiconductor Manufacturing Co . on Thursday will provide a glimpse at the state of the AI trade before the megacap tech companies report later in the month and beyond. We’ll hear from Club holdings Morgan Stanley and Abbott Laboratories on Wednesday morning. Morgan Stanley: The ongoing recovery in investment banking will be front and center. That was a key theme in the second quarter , and the hope is that the July-to-September period showed a continuation of the trend for Morgan Stanley. An encouraging sign arrived Friday, with JPMorgan reporting a better-than-expected number for its investment banking segment. Shares of Morgan Stanley had suffered through a period of underperformance, leading Jim to openly question whether owning rival Goldman Sachs was a better idea. Morgan Stanley has been strong lately, though. The stock is up more than 14% over the past month and closed Friday at a record $110.91 a share. Morgan Stanley’s results Wednesday should hopefully add more clarity on our next move. Indications that its growing wealth management segment has found its footing would be welcome news. Abbott Labs: The medical products maker’s legal fight over its premature infant formula looks more manageable after a trio of U.S. health agencies recently pushed back against claims that formulas like Abbott’s cause an intestinal illness commonly abbreviated as NEC. To be sure, a second trial on the matter is ongoing in St. Louis, so Abbott Labs is not out of the woods just yet. Nevertheless, agencies including the Food and Drug Administration lending their support to the formulas is a big deal. “You clean up the lawsuits, [the stock] goes to $125,” Jim predicted Friday. The reason it would be so positive? Abbott’s strong fundamentals have been obscured by the legal issues. On that front, we’ll be looking for updates on the U.S. launch of Abbott’s over-the-counter continuous glucose monitoring systems and the state of its medical devices business overall. Weak points in the second quarter were nutrition and established pharmaceuticals, but even with them, Abbott has reported back-to-back beat-and-raise quarters. A third would be nice. Week ahead Monday, Oct.14 Before the bell: Charles Schwab (SCHW) Tuesday, Oct. 15 Before the bell: Walgreens Boots Alliance (WBA), UnitedHealth (UNH), Citigroup (C), Bank of America (BAC), Johnson & Johnson (JNJ) and Goldman Sachs (GS) After the bell: United Airlines (UAL), Interactive Brokers (IBKR) and JB Hunt (JBHT) Wednesday, Oct.16 Before the bell: Morgan Stanley (MS), Abbott Labs (ABT), ASML (ASML), US Bancorp (USB), Citizens (CFG) and Prologis (PLD) After the bell: Alcoa (AA), PPG Industries (PPG), CSX (CSX), Kinder Morgan (KMI), Discover (DFS) and Crown Castle (CCI) Thursday, Oct. 17 8:30 a.m. ET: Initial Jobless Claims 8:30 a.m. ET: Retail Sales 8:30 a.m. ET: Industrial Production & Capacity Utilization Before the bell: Taiwan Semi (TSM), Travelers (TRV), Elevance (ELV), Huntington Bancshares (HBAN), Blackstone (BX), Truist (TFC) and KeyCorp (KEY) After the bell: Netflix (NFLX), Intuitive Surgical (ISRG) and Crown Holdings (CCK) Friday, Oct. 18 8:30 a.m. ET: Housing Starts & Building Permits Before the bell: American Express (AXP), SLB (SLB) and Procter & Gamble (PG) (Jim Cramer’s Charitable Trust is long WFC, MS and ABT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
A view of the New York Stock Exchange building in the Financial District in New York City on Aug. 5, 2024.
Charly Triballeau | Afp | Getty Images
The good times are still rolling on Wall Street. An intensifying earnings season will put that momentum to the test.
Wells Fargo extended its recent winning streak to six straight sessions Friday despite missed expectations on third-quarter revenue. Investors focused instead on the bank running leaner and generating better-than-expected profitability. Total revenue for the three months ended Sept. 30 fell 2.4% versus last year, to $20.37 billion, missing analysts’ expectations of $20.42 billion, according to LSEG. Wells Fargo reported results before Friday’s opening bell. Earnings of $1.52 per share, however, was above Wall Street’s consensus estimate of $1.28 per share, LSEG data showed. Adjusted EPS excluded a 10-cent-per-share hit due to “losses on debt securities related to a repositioning of the investment securities portfolio.” That said, even before the adjustment, the reported EPS of $1.42, still looks good versus expectations. As for guidance , it was a bit mixed. However, the more important factor is that management believes net interest income (NII) pressure resulting from interest rate dynamics is bottoming out and expects it to rebound in 2025. WFC YTD mountain Wells Fargo YTD Shares of Wells Fargo surged 6% on the release to more than $61. That’s just shy of their 52-week high of $62.55 back in May, which was also the highest level since January 2018. Bottom line We’re raising our price target on the stock to $66 per share from $62 and reiterating our buy-equivalent 1 rating . The reasons are three-fold: We like the efficiency gains at the bank; the progress being made to get the Federal Reserve-imposed asset cap lifted; and the optimistic outlook for the economy and inflation. Commentary Wells Fargo’s quarterly revenue disappointed as net interest income came up short due to a miss in the bank’s net interest margin (NIM) as both loan and deposits were a bit lower than expected. That’s the bad. The good, however, more than offsets those misses. Non-interest income, or fee-based income, which has been a major focus for the Street, advanced nearly 12% year over year and exceeded expectations. Fee-based income growth is a major factor in our investment thesis as it is more predictable and allows the bank to be less at the mercy of interest rate dynamics that it can’t control. Wells Fargo Why we own it : We bought Wells Fargo as a turnaround story under CEO Charlie Scharf. He’s been making progress cleaning up the bank’s act and fixing its previously bloated cost structure after a series of misdeeds before his tenure. Scharf has also been working to get the Fed’s $1.95 trillion asset cap lifted and to boost Wells Fargo’s fee-generating revenue streams. Competitors : Bank of America and Citigroup Weight in Club portfolio : 4.76% Most recent buy : Aug. 7, 2024 Initiated : Jan. 8, 2021 CEO Charles Scharf kicked off his prepared remarks on the conference call by saying, “Our earnings profile is very different than it was five years ago, as we’ve been making strategic investments in many of our businesses and deemphasizing or selling others. Our revenue sources are more diverse, and our fee-based revenue has grown 16% during the first nine months of the year, largely offsetting the net interest income headwinds we have faced over the last year.” Wells Fargo’s overall efficiency ratio was also below expectations. That’s a positive as this is calculated by dividing total non-interest expenses by net revenue — so, the lower the ratio, the more efficiently the bank is operating. At the same time, the firm’s common equity tier 1 (CET) ratio — which compares a bank’s capital against its risk-weighted assets — was above expectations, indicating that Wells Fargo still has plenty of excess capital to reinvest in the business while still returning cash to shareholders. During Q3, management returned $3.5 billion to shareholders via buybacks and another $1.4 billion via dividends. Tangible book value per share (TBVPS) came in well ahead of expectations, increasing nearly 12% year over year, as did return on tangible common equity (ROTCE), a key metric that investors rely on to determine the appropriate valuation multiple to put on a financial institution. Higher level, indicating resilience in the broader U.S. economy Scharf said on the call, “Customers in our consumer businesses continue to hold up relatively well, benefiting from the strong labor market and wage growth. … We continue to look for changes in consumer health, but we have not seen meaningful changes in trends when looking at delinquency statistics across our consumer credit portfolios. Both credit card and debit card spend were up in the third quarter from a year ago. And although the pace of growth has slowed, it is still healthy. … The benefits of inflation slowing and interest rates starting to ease should be helpful to all customers but especially those on the lower end of the income scale.” Scharf added, “Looking ahead, overall, the U.S. economy remains strong with inflation slowing and a resilient labor market, boosting income and supporting consumer spending. Company balance sheets are strong, contributing to both consumption and investment in the economy but slowing demand for commercial lending. We continue to be prepared for a variety of economic environments, and we’ll balance our desire to increase returns and grow while protecting the downside.” Bank earnings are especially important for investors to focus on because of all the money and business that flows through these big institutions. Management teams like Wells Fargo’s are uniquely positioned to opine not only on the path ahead for their businesses but the economy more broadly. We come away from the call feeling good not only about Wells Fargo’s setup for next year. As Scharf continues to clean-up Wells Fargo after misdeeds that predated his tenure, we could see the bank’s $1.95 trillion asset cap lifted in 2025. That would allow the bank to grow its balance sheet and return more capital to shareholders. In advance of the asset-cap decision, Scharf has been ramping up Wells Fargo’s corporate and investment banking (CIB) division. He made a series of senior-level hires in recent years. A resurgence in Wall Street dealmaking — both mergers and acquisitions and initial public offerings — will benefit Wells Fargo. Our other financial name Morgan Stanley, which reports earnings next Wednesday, stands to gain even more from dealmaking because a greater percentage of its revenue is tied to investment banking. Guidance Wells Fargo’s management team updated its outlook for the remainder of the year, now expecting NII to be down about 9% versus the $52.4 billion result we saw in 2023. That puts us at the higher end of the down 8% to 9% range previously provided. A decline of 9% would mean roughly $47.66 billion in NII, below the $48.99 billion expected, according to FactSet. The update isn’t all that surprising given what we’ve seen with rates this year. More important is the team’s commentary that they still expect to see NII to trough this year before rebounding in 2025. NII in the current (fourth) quarter is expected to be in line with the third quarter result, which is what one would expect to see right before a rebound. (Jim Cramer’s Charitable Trust is long WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Jim Cramer has been considering a potential investment in BlackRock, the world’s largest asset manager, and we’re now adding it to our Bullpen stocks-to-watch list. The news BlackRock shares surged to a record high Friday after the firm posted third-quarter earnings that crushed analysts’ expectations, yet again. Management also announced that assets under management reached another record high, an incredible $11.5 trillion, on surging inflows as the stock market rallied. “We’ve added $2 trillion organically over the last five years. $2 trillion is the equivalent of being in the ranks of the sixth largest asset managers,” CEO Larry Fink told CNBC on Friday after the release. Fink also praised BlackRock’s recent $12.5 billion acquisition of Global Infrastructure Partners, which added more than $100 billion in assets. Big picture The financial industry kicked off quarterly earnings Friday. In addition to BlackRock, Club name Wells Fargo was among the companies that delivered strong results. Morgan Stanley , also in the portfolio, reports next Wednesday. It’s been a murky operating environment for the Wall Street behemoths, which were forced to navigate higher-for-longer interest rates until the Federal Reserve finally cut rates last month. The Fed’s next move has been a point of debate. Right after last month’s jumbo 50-basis-point cut, the market had expected another 75 basis points worth of cuts before year-end. Now that odds favor just 50. Bottom line BlackRock’s stellar quarterly results highlight another reason for the Club to consider an initiation of the stock. That’s why we put the stock in the Bullpen. Management’s track record draws us in further as Fink expands the firm’s footprint in private markets, and delivers quarter after quarter of steller inflows. BlackRock shares have been on a tear recently – up more than 12% in the past month versus the S & P 500’s roughly 4% gain. Jim Cramer said Friday he knows the stock has run a lot, “but that doesn’t mean it can’t run more.” Why have we waited to pull the trigger on the stock? Jim said Thursday he wished he had but he’s been dealing with Wells Fargo and Morgan Stanley, and we don’t make these moves in haste. (Jim Cramer’s Charitable Trust is long MS, WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
BlackRock CEO Larry Fink speaks during the New York Times DealBook Summit Nov. 30, 2022 in New York City.
Michael M. Santiago | Getty Images News | Getty Images
Jim Cramer has been considering a potential investment in BlackRock, the world’s largest asset manager, and we’re now adding it to our Bullpen stocks-to-watch list.
