Jim Cramer On Vistra Corp. (VST): ‘This Is A Very Complicated Situation’
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 Vistra Corp. (NYSE:VST) 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 Vistra Corp. (NYSE:VST): ‘This Is A Very Complicated Situation’
Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 92
Cramer acknowledged that Vistra Corp. (NYSE:VST) stock situation is complicated but also said to own it.
“Okay, this is a very complicated situation because what I said the other day was you gotta let it come in, it went down for a couple days and then it’s right back up. Let’s just say this, own it. Put a half position on, no more, put a half position on, and then let it come down because it has had such an amazing rally. I can’t just say go buy it.”
Recently, while talking about the stock’s price movement, Cramer commented that while it might seem unusual for a traditional utility to see such growth, he emphasized that carbon-free electricity has become a highly sought-after commodity. Vistra (NYSE:VST) is an electricity retail and power generation company that provides services to residential, commercial, and industrial customers. It has a generation capacity of approximately 41,000 megawatts and serves around 5 million clients across various markets.
On October 17, JPMorgan analyst Jeremy Tonet initiated coverage of Vistra (NYSE:VST) with an Overweight rating and a $178 price target. The firm holds a positive outlook on independent power producers, referring to favorable conditions despite the stock’s performance earlier in the year. Tonet highlights several structural tailwinds influencing the industry, such as manufacturing onshoring, increasing electrification trends, and the growth of data centers. These factors contribute to what he describes as a “paradigm shift” in power demand.
JPMorgan believes that the growth in competitive market supply may not keep pace with this rising demand, which could allow companies to secure larger profit margins over time. The firm views Vistra as having a particularly appealing risk/reward profile within the sector.
Overall, VST ranks 2nd on our list of stocks discussed by Jim Cramer during the latest lightning round. While we acknowledge the potential of VST 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 VST but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.