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Momentum Stocks Lose Steam – Plus Why We’re Skeptical of China’s Stimulus Bump (For Now)

On December 10, 2024By Littum

Every weekday, the CNBC Investing Club with Jim Cramer publishes the Homestretch – an actionable afternoon update, just in time for the final hour of Wall Street trading. Monday Markets: The S&P 500 opened the new week on a lower note after notching another new record high on Friday. A theme we are seeing is declines in many momentum growth stocks that continued to grow daily due to no new information and regardless of valuation. The poster child of this group may have been AppLovin, which Jim discussed Sunday in his weekly column for club members. AppLovin lost its momentum Monday after the S&P Dow Jones picked two other companies — Apollo Global Management and Workday — to join the S&P 500. AppLovin was considered a leading candidate to be added, and traders are bidding like potential candidates up. in anticipation of the index fund buying that comes with being called up to the big leagues. AppLovin’s shares fell more than 11% on Monday. Elsewhere, analytics software provider Palantir, another recent high-flying stock, is down more than 4%. It had been up in pre-market trading. Buyer beware: Shares linked to China are outperforming after Communist Party officials promised “moderately loose” monetary policy and “more proactive” fiscal policy next year. But we take the headlines with a grain of salt because we’ve seen China talk about a big stimulus game before and almost nothing has come of it. In other words, the market has been burned by the stimulus story before. Now it is possible that China is serious about improving economic growth and is waiting until President-elect Donald Trump slaps tariffs on their goods. But we’re not centering any investment thesis on the idea that China is finally staying true to its word and stimulating its economy meaningfully. To be sure, if they follow through this time, we have a few names in the portfolio that should benefit. The most notable names on the list are Danaher and GE Healthcare, both of which rely on clients in the healthcare world. Both companies have seen customers delay orders in anticipation of stimulus dollars. DuPont is another club stock on the way, although we’ve never really thought of it as a China stimulus play. We see DuPont as a special situation where the sum of its three “parts” is worth more than the whole. We believe that value will be unlocked after it splits into three listed companies, which could be completed by the end of next year. Next: After the closing bell on Monday, we’ll get the latest quarterly results from Oracle , homebuilder Toll Brothers , database software provider MongoDB and Midwestern convenience store operator Casey’s General Store . When Oracle last reported on Sept. 10, the software giant’s comments sparked AI trading. Management said Oracle had 162 data centers live and under construction, but eventually it expected to have 1,000 or 2,000 (or more). Companies reporting Tuesday before the opening bell include AutoZone, retailer Ollie’s Bargain, DSW owner Designer Brands and plumbing supplier Ferguson. (See here for a complete list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber 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 trade alert before buying or selling a share in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY ALONG WITH OUR DISCLAIMER. NO OBLIGATION OR OBLIGATION EXISTS OR IS CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR DILUTION ARE GUARANTEED.

Every weekday, the CNBC Investing Club with Jim Cramer publishes the Homestretch – an actionable afternoon update, just in time for the final hour of Wall Street trading.