Here’s what we like about our two newest additions to the Bullpen watchlist
Every weekday, CNBC Investment Club with Jim Cramer publishes Homestretch, an actionable afternoon update just in time for the final hour of trading on Wall Street. The S&P 500 rose to a new record on Friday after Iran said the Strait of Hormuz was “fully open” to commercial traffic. Oil prices fell more than 10%; WTI crude fell to the low $80s, as did interest rates, and the market began pricing it at a 25 basis point discount in December. Stocks’ rebound from their March lows has been quite remarkable, with the S&P 500 on pace to gain 3% or more for a third consecutive week and the Nasdaq extending its winning streak to 13 in a row, a streak it hasn’t had since 1992. Here’s more about why we added two companies to the Bullpen watch list during our Monthly Meeting on Thursday. Arm Holdings has always been one of the most important companies in the semiconductor industry, although it operates mostly behind the scenes and made its name by licensing technology to other companies. Its royalty base comes predominantly from the smartphone end market but is expanding its product line to include CPUs and systems for markets such as cloud, automotive and the Internet of Things (IoT). But the story has changed in a very big way. At a recent event, the company introduced the AGI CPU, its first on-premises data center CPU designed specifically for agency AI workloads. This marks an ambitious shift from outright licensing of designs to building and selling its own chips. In the past, x86-based CPUs from AMD and Intel dominated the market, but Arm-based processors have gained momentum; AWS Graviton is a notable example of this. Business changes are not easy to implement, no matter how strategically they make sense. Morgan Stanley downgraded Arm from buy to equal weight earlier this month, acknowledging that entering the silicon market creates execution risk and potential channel conflict on some licenses. But the upside is clear. Arm projects it could generate $25 billion in revenue by Fiscal Year 3031, with $15 billion of that coming from in-house chips. You know we love a good breakup story. When strong management teams build high-quality businesses, both organizations benefit from sharper strategic focus and help unlock value through improved products and services and expanded margins. Both companies are becoming better equipped to pursue their own growth strategies. Last December, FedEx CEO Raj Subramaniam announced plans to spin off FedEx Freight to create two industry-leading public companies. FedEx has been outperforming UPS in part because of Subramaniam’s cost-cutting, and the breakup is the next phase of his plan to streamline the company. FedEx Freight is the largest LTL (less-than-truckload) carrier in North America with the largest network and industry-leading transit times. On the way back on June 1. FedEx Freight management recently held an investor day and outlined a mid-term outlook of 4% to 6% revenue growth with expanding margins. Next week begins the industrial-heavy portion of earnings season. More than 80 companies in the S&P 500 are scheduled to report, including Capital One, Boeing, GE Vernova, Honeywell, Dover and Procter & Gamble. Other notable reports include UnitedHealth Group, 3M, IBM, American Express, Tesla and ServiceNow. We’ll also see retail sales for March, S&P Global PMIs for April, and the University of Michigan consumer sentiment survey. (See here for a complete list of stocks in Jim Cramer’s Charitable Trust.) When you subscribe to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trading alert before buying or selling a stock in his charitable foundation’s portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing the trading alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH THE DISCLAIMERS. NO CIVIL OBLIGATIONS OR DUTIES EXIST OR SHALL BE RESULTING FROM YOUR RECEIVING ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULT OR PROFIT CAN BE GUARANTEED.
