“Maybe the whole market in China is overhyped”

We recently made a list Jim Cramer Wants You to Watch Out for These 10 Stocks. In this article, we’ll take a look at how JD.com Inc. (NASDAQ:JD) stacks up against the other stocks Jim Cramer wants you to pay attention to.

Jim Cramer noted that Tuesday’s correction was expected, as the market had been up for eight straight days, and a ninth day would have put it into rare territory, a streak not seen since 2004. The session was tough, with the Dow down 62 points and the S&P down 2%, almost a 33% loss. The question is whether the market still has the momentum to continue rising, especially since the bad news finally sent stocks lower, something that didn’t happen very often during the last eight-day rally.

“We were due for a modest pullback today – the S&P has been up for eight straight days, and nine more days would put us in thin territory. We haven’t seen a winning streak like that since 2004. Today was a tough session, with the Dow down 62 points and the S&P down 2%, down about 33%. We have to wonder if the market still has the momentum to go higher, because we got some bad news today and guess what – stocks actually fell. That hasn’t happened very often in an 8-day rally.”

Cramer noticed an unusual trend during this winning streak. If a company reported better-than-expected earnings, the stock rose. Even if the results were only slightly better than feared, the stock still rose. And if a company reported disappointing earnings, the market ignored it, assuming it was the last bad quarter because the Fed might cut rates soon, so people bought anyway.

“You see, we had a very strange pattern during the winning streak. It was a little bit of Pangloss and a little bit of Camelot. When a company reported a better-than-expected quarter, it was great. When a company reported a quarter that was just better than feared, the stock continued to rise. And when a company reported a weak quarter, we figured that was the last weak quarter because the Fed was going to cut interest rates, so it wasn’t a big deal — buy anyway. In other words, companies couldn’t go wrong, but not today. Today we had a bit of a reckoning, a dose of reality.”

Jim Cramer noted that the market had enjoyed a period where strong performance was driving stocks, and even weak performance was tempered by the belief that the Fed would step in to help. But after seven straight days of gains, he indicated that this bullish pattern may be coming to an end. The market has now reached a level where stocks will no longer be automatically viewed as a risk. Cramer explained that we are returning to a more typical environment where strong stocks rise and weaker stocks fall. At these high levels, it is no longer enough to dismiss the bearish outlook with a simple “heads I win, tails you lose” mindset.

“We’ve reached a point where the market is sufficiently elevated and we’re back to normal—where good stocks go up and bad stocks go down. At these high levels, we can’t just dismiss the bears and say, ‘Heads I win, tails you lose.’ Rationality is back, and rationality is the enemy of a market where everything is going up and down.”

Our methodology

In this article, we’ve analyzed Jim Cramer’s latest tweet and his latest insights on what to watch in the stock market on Tuesday. We’ve highlighted the ten stocks he mentioned and provided details on hedge fund sentiment for each one. The stocks are ranked based on the number of hedge funds that own them, from lowest to highest.

At Insider Monkey, we’re fascinated by the stocks that hedge funds invest in. The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

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JD.com Inc. (NASDAQ:JD)

Number of hedge fund investors: 59

Jim Cramer noted that Walmart Inc. (NYSE:WMT) recently sold its $3.7 billion investment in JD.com Inc. (NASDAQ:JD). Despite the significant sell-off, Walmart Inc. (NYSE:WMT) plans to maintain its partnership with JD.com Inc. (NASDAQ:JD). Interestingly, the move caused JD.com Inc. (NASDAQ:JD) shares to drop 8%. Cramer speculated that the drop could suggest an over-inflated market in China.

“Walmart has divested its stake in Chinese online retailer JD.com. But the American retail giant will continue its partnership. The strangest thing is that this move has sent JD.com shares down 8%. This makes me think that perhaps the entire market in China is overhyped.”

JD.com Inc. (NASDAQ:JD) is a leading player in China’s e-commerce sector, with a significant market share that puts it in a tough competition

Alibaba Group Holding Limited

(NYSE:BABA). JD.com Inc.’s (NASDAQ:JD) wide product selection and efficient delivery system strengthen market position. JD.com Inc.’s (NASDAQ:JD) recent financial results are strong, showing a 12% increase in revenue compared to last year, driven by stronger customer engagement and broader market presence.

JD.com Inc.’s (NASDAQ:JD) significant investments in technologies such as AI and automation are driving efficiency and cost reductions. As China’s e-commerce market grows due to increased internet usage and consumer spending, JD.com Inc. (NASDAQ:JD) is well-positioned to increase its market share. Additionally, its expansion into Southeast Asia and partnerships with global brands are boosting its growth potential.

In its first quarter 2024 investor letter, Ariel Global Fund stated the following regarding JD.com, Inc. (NASDAQ:JD):

“We started working with a Chinese technology-based e-commerce company, JD.com, Inc. (NASDAQ:JD). The brand has long been recognized throughout the region as a premier online shopping channel due to its unique first-party model and unmatched fulfillment service powered by JD Logistics. However, a challenging macroeconomic environment caused shares to decline as shoppers sought opportunity. In response, the company has made significant investments to elevate its third-party seller platform to increase product diversity and price competitiveness for consumers. We believe these actions will deliver improved product mix, stronger revenue growth and margin expansion going forward.”

Total JD takes 4th place on our list of stocks Jim Cramer wants you to watch out for. While we recognize JD’s potential as an investment, our belief is based on the belief that AI stocks that are flying under the radar have a better chance of delivering higher returns, and in a shorter time frame. If you’re looking for AI stocks that are more promising than JD but are trading at less than 5 times earnings, check out our report on cheapest AI action.

READ MORE: $30 Trillion Opportunity: The 15 Best Humanoid Robot Stocks to Buy, According to Morgan Stanley AND Jim Cramer says NVIDIA has ‘become a wasteland’.

Disclosure: None. This article was originally published on Insider Monkey.