CNBC’s Jim Cramer on Monday predicted shares of ford and General ElectricTwo manufacturing giants, whose inventory levels are beyond their golden days on Wall Street, will soon be able to cross an important threshold.
The two American companies, both of which have historical relevance to the country, have received new buy ratings in the past few days from analysts who are seeing an upward trend in both their difficult businesses and their stocks.
While GE tanked below $ 10 in the market during the collapse earlier this year, Ford stock has not traded above that level in over a year.
Cramer believes the automaker will be the first to break through.
“In the longer term, I think both Ford and General Electric are back in double digits,” said the “Bad money“Host said,” but if you want just one of those Robinhood favorites in your portfolio, I’d go with Ford. “
Investment firm Benchmark gave Ford a buy rating on Monday, which rose from hold and predicted momentum for the automaker for the new year. The stock rose nearly 6% on the news to a closing price of $ 7.67.
The stock of General Electric, the industrial conglomerate that was once the world’s most valuable company, received a purchase call from Goldman Sachs on Fridayciting a low point in company performance. The stock is up 2.7% since the day of the call, trading at $ 6.83 on Monday.
Both companies have seen a similar downtrend over the years that spun through multiple CEOs over the past decade. Ford is slated to receive the third since Alan Mulally’s departure in 2014.
Cramer blamed strategic mistakes by management for their falls, identifying the oil price as a factor in both cases.
Ford has made too many small cars in recent years as gasoline prices have fallen and the demand for SUVs and crossovers has increased. The company also had loopholes in its international business, Cramer noted. Ford stock is down 60% from its 2011 high from the Great Recession.
General Electric also ran into problems overseas, particularly with its acquisition of French energy infrastructure company Alstom and later oil services company Baker Hughes, Cramer said. The company has also taken out undervalued long-term care insurance contracts, which has created problems on the balance sheet, he added.
GE was last traded above $ 30 in 2016, but the stock is now nearly 80% down from its own high this year.
“Both are great American companies that became long-term losers, steadily falling out of favor and seeing their stocks plummet to single digits. Both were showing green shoots, making investors more optimistic about the future for the first time in ages.” Said Cramer.
“Lots [professional investors] won’t touch single-digit stocks, “said Cramer.” It’s too risky. “
Cramer sees green shoots for both companies, much like the analysts who appreciated their stocks. He believes GE’s aviation business will benefit from a slowly recovering air travel market and the prospect that Boeing will soon be back in the air for the troubled 737 Max aircraft that GE is a supplier. Ford could benefit from a recovering auto market, he added.
In a race for the $ 10 level, Ford may have an advantage with a lower price-earnings multiple. This is the frequency with which investors are willing to pay for a share of a company’s profits. GE is also more expensive on a cash flow basis, Cramer said.
“In short, Ford is a much clearer value game, and I also think it has the better story. Sure, GE’s core aerospace market is going to return at some point, but Ford’s core automotive market is coming back now and the F-150 is leaving to go electric in a few years, “he said. “Also, Ford has more momentum and is also much closer to the finish line.”