Jim Cramer Says Investors Should Check Share Count Before Buying A Stock: 'You Want A Management That Agrees With You'

Jim Cramer highlighted the role of share count reduction behind more than half of the S&P 500 stocks achieving new 52-week highs in the first quarter.

What Happened: Cramer mentioned that a considerable number of companies have substantially cut their share count since 2019, an approach that has mostly flown under the radar, as reported by CNBC on Monday. This trend of share count reduction spans multiple sectors, including housing, retail, and technology.

“Check the share count before you buy a stock. You want a management that agrees with you, not one that thinks it can give away stock as compensation, often to throw you off the scent of adulterated earnings power,” he said.

Cramer cited examples of companies such as Lennar LEN and Toll Brothers TOL in the housing sector that have significantly reduced their share count. For example, Lennar’s outstanding shares have decreased to 276 million from 318 million five years ago, while Toll Brothers’ shares have dropped to 105 million from 145 million.

Similarly, retail companies like Best Buy BBY and Dick’s Sporting Goods DKS have also cut their share counts. Best Buy’s share count has reduced to 215 million from 264 million, and Dick’s Sporting Goods’ share count has shrunk to 80 million from 87.5 million.

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In the tech sector, Apple Inc. AAPL and Microsoft MSFT have been repurchasing their stocks, leading to a decrease in their share counts. Apple’s shares have declined to 15.9 billion from 18.6 billion in 2019, while Microsoft’s share count has reduced to 7.43 billion from 7.6 billion.

Why It Matters: This trend of share count reduction comes in the wake of a predicted 15% surge in the S&P 500 by the end of 2024, as noted by Goldman Sachs. The exceptional performance of mega-cap tech stocks is expected to drive this growth.

Despite a slight decline in overall market sentiment as indicated by the CNN Money Fear and Greed index, U.S. stocks recorded gains in the last quarter.

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