Cramer’s 10 Hottest Momentum Stocks
Over the past 30 years, Jim Cramer noticed the same thing tends to happen at around this time of year — many hedge fund managers continually buy momentum stocks from the start of the fourth quarter through the year's end.
"The growth-oriented fund managers will keep buying their best-performing momentum stocks practically non-stop for the next three months, " Cramer said. "And these guys will pay pretty much any price because they can justify stratospheric valuations based on the earnings in the out-years, meaning how much money these fast growers can make down the road in 2015 or 2016."
In Cramer's experience, anticipating which stocks may be "anointed by Wall Street as winners in the fourth quarter" is typically a winning trade. When he ran a hedge fund, he often bought the stocks he thought might be bought en masse during the last quarter of the year. He put together a list of stocks he thinks are likely to be the biggest winners this fourth quarter.
Amazon.com, the world's largest online retailer, was the first stock to make Cramer's list.
"Amazon is a beloved company that has cultivated fabulous relationships with its customers and most important, it's still taking market share all over the world, " Cramer said. "Amazon's like a bulldozer, putting bricks and mortar retailers out of business on every continent on earth save Antarctica."
Amazon has expanded beyond retail, though, Cramer said. The Internet company is engaged in the fast growing cloud computing space. Cramer said its website has become "a true online marketplace, " where people can both buy and sell goods. Amazon currently controls nearly 20 percent of all e-commerce in the U.S. and roughly 13.5 percent of international e-commerce, but Cramer thinks it can still take share. After all, Amazon accounts for less than 1 percent of total retail sales in both the U.S. and internationally, as well as both online and off-line. Going forward, Cramer thinks Amazon's share of total retail sales will only continue to rise as more people realize how convenient online shopping is and that its prices are relatively competitive.
Amazon also sells its own hardware, Cramer said, noting its Kindle e-reader has allowed Amazon to dominate the online publishing business. Not only is the Kindle cheaper than Apple's iPad tablet, the Kindle reading application is a popular download for both the iPad and Google's Android devices.
Although Amazon currently trades at 110 times next year's earnings, Cramer said growth-oriented managers can justify paying for the stock through the end of the year because it's expected to earn $7.39 a share in 2015. In turn, Cramer said the stock is really trading at around 35 times 2015 earnings, which he considers inexpensive given its 36.8 percent long-term growth rate.
Internet search giant Google also made Cramer's list of "anointed stocks."