We recently compiled a list of the Jim Cramer's Best Performers List: Top 10 Stocks.In this article, we are going to take a look at where Carvana Co. (NYSE:CVNA) stands against the other stocks on Jim Cramer's list of best performers list.
On Wednesday’s Mad Money episode, Jim Cramer took a deep dive into ten stocks, each worth over $1 billion, that have seen significant growth this year. While acknowledging that many of these stocks are speculative, he emphasized that they still hold potential as smart investments.
Cramer suggested that when looking back on this year, two trends will stand out: a steady rise in the S&P 500, and a series of moves that initially seemed almost magical, but were grounded in reality.
Cramer also reflected on the common investment approach of sticking with index funds, noting that it is a popular strategy because it requires minimal effort. But, according to him, simply parking your money in an index fund might not be the best way to maximize returns. Instead, he argued that investors should consider individual stocks with unique characteristics, many of which are speculative since they offer opportunities for much larger gains.
Cramer criticized the tendency among experts to dismiss individual stock investments beyond index funds, saying:
“Far too often we become snobs when we talk stocks. So many experts think that if you venture past the index, you could fall off some sort of intellectual cliff. It makes any gains null and void. It's as if the huge swath of points you could have gained simply don't count. But that, people, is nonsense.”
During Wednesday’s episode, Cramer highlighted several stocks that have surged by over 200% this year, choosing to focus only on those with a market cap of more than $1 billion. He did clarify, however, that he was not endorsing these stocks, especially given how much they have already appreciated. Instead, his point was that speculative stocks, despite their volatility, have a valid place in an investment portfolio.
While they come with risks, a small stake in one of these stocks could outperform a much larger investment in an index fund. For Cramer, it is not about avoiding speculative stocks altogether, but recognizing their potential when balanced alongside more stable investments like index funds.
Cramer wrapped up by stressing the importance of considering these high-flying, speculative stocks and said:
“The bottom line: Let’s remember this list of frothy stocks and think of them the next time you’re about to ignore a stock for being too speculative because these names are often the epitome of speculating wisely, which can be the key for terrific long-term performance, of course, only when melded with index funds.”
Our Methodology
For this article, we compiled a list of 10 stocks that were discussed by Jim Cramer during the episode of Mad Money on November 13 and listed the stocks in the order that Cramer mentioned them.
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 customer buying a used car with the help of a finance specialist.
Cramer discussed how Carvana Co. (NYSE:CVNA) reduced its debt and called it “getable”.
“Six: When Carvana dropped to single digits last year, I pounded the table, saying that people buy, buy, buy, buy, buy, buy. Love these low prices and generous return policy, having bought a car from them and then sent it back… Carvana was in trouble but then they got big backing from their creditors, allowing them to reduce their debt and the rest is history. The stock's now up 353% for the year and again, I think it was getable if you’re willing to take some risk.”
Carvana (NYSE:CVNA) operates a prominent e-commerce platform for buying and selling used cars in the United States. The company initially grew at a rapid pace, expanding into new markets and increasing its customer base. However, this rapid expansion came with significant financial challenges, as it burned through large amounts of cash while scaling its operations. This resulted in the company accumulating substantial debt.
In an effort to address its financial difficulties, the company entered into a debt exchange agreement with its bondholders last year. As part of this restructuring, the new notes were fully secured by the company's assets, providing a more stable financial foundation.
Despite these efforts, Carvana (NYSE:CVNA) continues to face a considerable debt load. As of the third quarter of 2024, the company reported total liabilities of $7.08 billion. However, the company’s financial position showed signs of improvement in its latest quarterly results. The company reported a net income of $148 million for the third quarter, with diluted EPS of $0.64, meeting analysts' expectations. Total revenue for the quarter reached $3.655 billion, marking an impressive 32% increase compared to the same period the previous year.
Overall CVNA ranks 6th on Jim Cramer's list of the best performing stocks. While we acknowledge the potential of CVNA 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 CVNA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
