As 2024 comes to an end, the flagship S&P index is up by 25.9% year to date, driven primarily by technology stocks and investors rushing to pile into artificial intelligence. Additionally, as opposed to earlier worries of a recession, the US GDP has continued to grow as well. According to the Bureau of Economic Analysis (BEA), America's economy grew by 3.1% in Q3. According to the IMF, the US GDP is projected to grow by 2.8% in 2024 and stand out from most of the developed world and China.
Yet, while technology stocks and the industry are eye-catching, they are not the only components of the economy. In 2024, while the overall economy has grown, some sectors haven't done well. One sector that's often perceived to be the pulse of the economy is the industrial sector. It measures output from large-scale plants, and in today's era of high interest rates, industrial stocks haven't done too well.
For instance, while the broader S&P is up 25.9%, its industrial component has managed to post 16.94% in gains this year. The sluggishness in the industrial sector hasn't gone unnoticed by Jim Cramer either. On the day the Federal Reserve cut interest rates by 25 basis points but reduced 2025's projected rate cuts to two from an earlier four, Cramer commented on the state of the American economy ahead of the Fed's announcement.
He outlined the need to look at other sectors apart from technology. "Look at the material stocks, look at anything related to industrial export. Look at the housing stocks," said Cramer, adding "There are cohorts that are indeed rolling over. It isn’t like everything is just super strong and everything is quantum computing and Rocket Lab!” Cramer wondered why the Fed was cutting rates at all since the economy appeared to be quite robust. He stressed the need to sift through the data to find out the real state of the economy. According to Cramer, "So I think that the talking heads, and boy are there ever a lot of talking heads, have decided that if you look at what we’re seeing in some retailers, things are strong. By the way in retail, it’s not strong either if you count colds.”
The CNBC host wasn't convinced by the Atlanta Fed's estimate of the US GDP growing by 3.2% in Q4. He stated that he was "trying to find why. I’m trying to find where that is. You know David that travel’s very strong yeah. Leisure’s very strong. Dining out’s very strong. These are strong and by the way, they’re very obvious, they look obvious to the Atlanta Fed. I don’t know what kind of weighting they have but wow.”
Another sector that's representative of the broader economy and ties closely with industrial stocks is the automobile sector. Automotive firms often depend on the outputs of industrial firms, and if the industry is slow then industrial firms also face a demand slowdown. America's two biggest auto manufacturers, the firms behind the F-150 truck and the company developing the Cruise autonomous driving system, have both struggled in the stock market in 2024. The former's stock is down 17.5% year-to-date and the latter was up by a mere 10.5% by early August when investors were more uncertain about the economic outlook. Similarly, Elon Musk's car company had gained just 1.22% ahead of the election as its EV business continued to struggle with competition overseas and slow sales in the US.
Cramer also commented on the trouble that the automotive sector is facing during the program. He was perplexed as to why "the problems with autos are not so visible among the cognoscenti." It's important to dig deeper into the automobile industry since it "is a huge industry. Employs a lot of people. And the layoffs and the ramifications of what could happen here and other mergers,” Cramer commented.
Our Methodology
To compile our list of Jim Cramer's bold predictions about industrial stocks, we scanned the stocks he mentioned in Mad Money and Squawk on the Street as far back as in August. Then, we picked out industrial and materials stocks and ranked them by the number of hedge funds that had bought the shares in Q3 2024.
For these stocks, we also mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds invest in? 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 machinist inspecting a freshly-cut steel beam, ready to be shipped to its intended destination.
Steel Dynamics, Inc. (NASDAQ:STLD) is a large American steel producer and recycling firm. As has been the case with its peers, the firm is ending 2024 on a difficult note. Its shares are down by 10.36% year-to-date as the broader industrial economy in the US continues to struggle. Benchmark steel prices in the US had dropped by 30% to $700 a ton by December and Steel Dynamics, Inc. (NASDAQ:STLD)'s peers continued to miss analyst EPS estimates for the third quarter. Since August, the only catalyst that the shares have seen is President-elect Trump's election victory which sent the shares soaring by 13.8%. Here's what Cramer had to say about the stock in August:
"Steel Dynamics is a really really good company but we're dealing with, uh, a wave of dumping of Steel by China that's coming through Mexico and we're not enforcing it and that's bringing down Steel Dynamics and Nucor. They are the two best in the industry so it's tough to watch. I can't endorse it here because of what's happening even though it's very cheap. I don't like what's happening below the Border."
Overall STLD ranks 5th on our list of the industrial stocks Jim Cramer recently talked about. While we acknowledge the potential of STLD as an investment, our conviction lies in the belief that some 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 STLD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
