We recently published a list of Jim Cramer wants you to pay attention to these 10 stocks. In this article, we’ll take a look at where The Gap Inc. (NYSE:GPS) is positioned compared to the other stocks Jim Cramer says you should be wary of.
Jim Cramer noted that Tuesday’s drop was expected as the market had risen for eight days in a row and a ninth day would have put it in rare territory, a streak not seen since 2004. The session was rough, with the Dow losing 62 points and the S&P down 2%, nearly a 33% loss. This raises the question of whether the market still has the momentum to continue rising, especially since bad news eventually led to falling stock prices, something that had not happened often during the recent 8-day rally.
“Today’s modest decline was due – the S&P has been up eight days in a row and nine days in a row would have put us in rare territory. We haven’t seen a winning streak like this since 2004. Today’s session was rough, the Dow lost 62 points and the S&P fell 2%, down 33%. We have to ask ourselves if the market still has the momentum to keep going higher because today we got some bad news and guess what – stocks actually went down. That didn’t happen much during the 8-day run.”
Cramer observed an unusual trend during this winning streak. When a company reported better-than-expected results, stock prices rose. Even when the results were only slightly better than feared, stock prices rose. And when a company reported disappointing results, the market shrugged it off. It assumed it was the last bad quarter because the Fed might cut rates soon, and people kept buying anyway.
“Look, we had a very odd pattern during the winning streak. It was a little bit of Pangloss and a sip of Camelot. If a company reported a better-than-expected quarter, that was great. If a company reported a quarter that was just slightly better than feared, stocks went up anyway. And if a company reported a bad quarter, we decided it was the last bad quarter because the Fed was about to cut rates, so it was no big deal – buy anyway. In other words, companies could do no wrong, but not today. Today we had a sort of reckoning, a dose of reality.”
Jim Cramer noted that the market had been going through a period where good performance boosted stock prices and even poor performance was cushioned by the belief that the Fed would step in to help. However, after seven consecutive days of gains, he pointed out that this bullish pattern may be coming to an end. The market has now reached a level where stocks no longer automatically get the benefit of the doubt. Cramer explained that we are back in a more typical environment where strong stocks rise and weaker ones fall. At these high levels, it is no longer enough to dismiss the pessimistic forecast with a simple “heads I win, tails you lose” attitude.
“We’ve reached a point where the market is sufficiently high, and we’re back to day-to-day business – where the good stocks go up and the bad ones go down. At this high level, we can’t just dismiss the bears by saying, ‘Heads, I win, tails, you lose.’ There’s a return to rationality, and rationality is the enemy of a market where everything goes up indiscriminately.”
Our methodology
In this article, we discussed a recent post by Jim Cramer and his latest insights on what to watch in the stock market on Tuesday. We highlighted ten stocks he mentioned and provided details on hedge fund sentiment for each stock. The stocks are ranked in order from low to high by the number of hedge funds that own them.
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 young person walking confidently down the street wearing jeans and glasses.
The Gap Inc. (NYSE:GPS)
Number of hedge fund investors: 39
Jim Cramer noted that Citi initiated a positive catalyst watch for The Gap Inc. (NYSE: GPS), which includes brands such as Banana Republic, Old Navy and Athleta. The Gap Inc. (NYSE: GPS) responded well, gaining 2.5%.
“Citi opened a positive catalyst watch on Gap, which also owns Banana Republic, Old Navy and Athleta. The stock gained 2.5%. I’ll be interviewing Gap CEO Richard Dickson when the retailer reports earnings on August 29.”
The Gap Inc. (NYSE:GPS) has strategically restructured its business by closing underperforming stores and improving its online and digital platforms. This transition is aimed at increasing profitability over time. The Gap Inc. (NYSE:GPS)’s strong portfolio of brands, including Old Navy, Banana Republic and Athleta, remains a significant asset with growth potential in the domestic and international market.
Additionally, The Gap Inc. (NYSE: GPS) is well positioned to capitalize on consumers’ growing preference for casual and athletic apparel that matches its product offerings. This trend is expected to continue, especially as remote work and lifestyles continue to change. Additionally, The Gap Inc. (NYSE: GPS)’s focus on sustainability and inclusivity resonates well with modern consumers, potentially increasing brand loyalty and driving sales growth.
Total GPS takes 10th place on our list of stocks to watch according to Jim Cramer. While we recognize GPS’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 GPS 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.
