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We recently published a list of Was Jim Cramer Right About These 23 Stocks? In this article, we are going to take a look at where Huntington Ingalls Industries Inc. (NYSE:HII) stands against other stocks that Jim Cramer discussed 12 months ago.
In the most recent Mad Money episode, Jim Cramer shared his thoughts on the current state of the market, especially about AI stocks. He noted that despite the enthusiasm surrounding AI, investors are no longer willing to pay high prices for stocks tied to this technology. Cramer explained that on days like Tuesday, people in the market are feeling what he referred to as “painful shrinkage.”
“In this business, shrinkage means paying less for the same earnings that you were willing to pay up for only just a week or two ago.”
READ ALSO: Jim Cramer’s Thoughts on These 5 Stocks and Was Jim Cramer Right About These 23 Stocks?
He pointed out that this phenomenon is commonly known as price-to-earnings multiple compression, a widespread trend across the market. Cramer asked why this is happening, especially when it seems like nothing has changed with the companies themselves. He explained:
“Look, when everyone’s terrified that a piano’s about to fall on their heads, they don’t want to get hit by the baby grand and right now they don’t want to own the falling stocks either. So they sell but they can’t get a good price anymore because too many people want out for the same reasons. They think that stocks are overpriced versus when we consider what could lay ahead.”
Cramer further elaborated that there is a strong sense of apprehension in the market right now, with investors bracing for potential economic challenges. Despite good news that may come out about companies or the economy, people are reluctant to hold onto stocks because they are anticipating weakness down the road.
He said that even though they cannot see it clearly, the ongoing concerns about the economy and the administration’s messaging about necessary economic adjustments create a climate of fear. As Cramer put it, “If the administration keeps talking about how we’re transitioning, how the economy needs to make some painful adjustments, then any big rally that we had Friday and yesterday will become magnets for sellers.”
“Here’s the bottom line: This latest round of multiple compression came on a day of wonderment about artificial intelligence, and even with Jensen’s fabulous speech, multiple compression was just much more powerful. You know what? It’s going to stay that way until we get through this environment, either because the White House backs off, or because stocks come down to the point where we simply get used to it.”