Stock picking is more art than science, so it's no surprise when even the most veteran Wall Street vets break their own investment rules in favor of certain companies.
Jim Cramer has some hard and fast rules for investing, and one of those rules is to know a stock's price to earnings multiple, which he calls the "cornerstone of how we value stocks."
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The lower the PE ratio, the more undervalued the stock is (if its a good company), the more attractive that stock is to investors.
But Cramer is willing to break the rules for only a few stocks. One of them is Nvidia (NVDA) -).
Nvidia is currently trading at its lowest PE multiple since December 2022, but the stock is still at about 33 times expected earnings, according to Refinitiv data. The S&P 500 PE ratio for the trailing 12 months was 25 on Tuesday, according to Gurufocus.
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But Nvidia is one of Cramer's darlings and he has been a big booster of the stock for years (minus one moment of temporary insanity), and the company's recent blowout quarter only cements his mantra to "hold, don't trade" the chipmaker.
Meanwhile, Alphabet has a more reasonable forward PE multiple (23), but the stock is up more than 40% year-to-date.
But Cramer is still all in on the stock, because its YouTube platform is unlocking a new opportunity through its partnership with the NFL.
Google is paying somewhere from $2 billion to $2.5 billion per year for the next seven years for the NFL Sunday Ticket rights, at least 33% more than the estimated $1.5 billion per year that DirecTV had been paying for the last eight years.
In turn, the company is selling the base package for NFL Sunday Ticket for the 2023-24 NFL season at $349 while an additional $40 gives access to "NFL RedZone." However, these prices require a subscription to YouTube TV, which announced a price increase from $64.99 to $72.99 just last month.
"All the megacaps except Google and Nvidia have the same charts. I think that both Google, ahead of the NFL ticket, and Nvidia, which had an amazing quarter, are both ready to run," Cramer tweeted this week.
All the megacaps except Google and Nvidia have the same charts. I think that both Google, ahead of the NFL ticket, and Nvidia, which had an amazing quarter, are both ready to run
— Jim Cramer (@jimcramer) August 28, 2023
Alphabet shares were up 2.5% to $135.09 at last check Tuesday afternoon while Nvidia shares climbed 4.4% to $489.17
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