Jim Cramer On GXO Logistics, Inc. (GXO): ‘This Is A Very Valuable Company’
We recently published an article titled, Jim Cramer’s Latest Lightning Round: 12 Stocks to Watch. In this article, we are going to take a look at where GXO Logistics, Inc. (NYSE:GXO) stands against other stocks discussed by Jim Cramer during the latest lightning round.
On Tuesday, Jim Cramer, host of Mad Money, shared his thoughts on the market’s recent volatility and offered advice to investors regarding earnings reports. He cautioned against making trades based solely on immediate stock reactions following earnings announcements, as many of these movements might not be justified.
“The absurdity of earnings season has arrived. It didn’t take long, did it? People are already doing stupid things. And you know what? I gotta point them out to you so that you don’t make the same mistakes.”
Cramer emphasized his mission to guide individuals toward becoming more thoughtful investors, rather than impulsive traders. He noted that the Dow Jones Industrial Average dropped 325 points, while the S&P 500 declined by 0.76%, and the Nasdaq Composite fell 1.01%.
Cramer referred to this phenomenon as part of what he calls the quarterly repricing process, which is the earnings season. He explained that, typically, most stocks tend to move in tandem with the S&P 500 unless a significant event alters the market. In the absence of such an event, stock movements are often influenced by external factors that may have only a tenuous connection to a company’s actual future performance. He further clarified his perspective and stated:
“Now, I want to make one thing clear. I’m not saying that everybody’s a moron. I’m saying there are details that inform people are looking for benchmarks we’ve accepted going into earnings. Yet for the first few moments of trading, there’s just obviously oblivious action based on who knows what. It’s definitely not the key metrics. It’s definitely not the homework.”
Ultimately, Cramer described this chaotic trading behavior as a clumsy way for Wall Street to reassess stock prices in relation to their peers, driven by a flurry of parsed headlines during earnings season. He expressed relief that this sort of disorganized trading only occurs four times a year, even as he acknowledged that this is a crucial period when a stock can become detached from the S&P 500.
Concluding his thoughts, Cramer emphasized:
“Yet, if you’re not a professional, you should not be involved in this process. There are so many people playing with so much money, professionals who pay people fortunes to figure this stuff out. Let them fight to set the price. For regular investors like you, trying to trade that initial post-earnings action is just an easy way to lose money, four times a year, like clockwork.”
Our Methodology
For this article, we compiled a list of 12 stocks that were discussed by Cramer during lightning rounds of Mad Money’s episodes on October 14, 15, and 16. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Cramer On GXO Logistics, Inc. (NYSE:GXO): ‘This Is A Very Valuable Company’
GXO Logistics, Inc. (NYSE:GXO)
Number of Hedge Fund Holders: 29
When asked about GXO Logistics, Inc. (NYSE:GXO) during the lightning round, Cramer said to hold on to it.
“Just hold on. Its stock’s had a parabolic move… But I think that this is a very valuable company and even if it doesn’t get a bid, I think you’ll probably only lose about like 10-15%. So why don’t you hold on to see what you get.”
GXO Logistics (NYSE:GXO) delivers a range of logistics services on a global scale. The company’s offerings include warehousing and distribution, order fulfillment, e-commerce solutions, reverse logistics, and various other supply chain services. In the second quarter, the company achieved a revenue increase of 19% year-over-year, reaching a record $2.8 billion. The company secured new business amounting to approximately $270 million in annualized revenue during this period, while also noting that contract lengths have been extended as customers seek reliable partners for outsourcing.
Additionally, the completion of the Wincanton acquisition is expected to yield significant synergies, with the board projecting annual net run-rate benefits of £45 million (pre-tax) by the end of the third year of integration, primarily through procurement efficiencies and operational overlaps.
On October 10, Reuters reported that GXO Logistics (NYSE:GXO) is considering a potential sale following interest from various buyers. It was reported that the company is collaborating with a financial advisor to evaluate acquisition proposals, which reportedly include interest from competing logistics firms. However, as discussions remain confidential, no final decision regarding a sale has been made, and it remains uncertain whether these talks will culminate in a transaction.
Overall, GXO ranks 7th on our list of stocks discussed by Jim Cramer during the latest lightning round. While we acknowledge the potential of GXO 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 GXO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.