Jim Cramer explains why you should look toward more cult stocks in 2025

CNBC's Jim Cramer on Monday said that the fundamentals can sometimes hold investors back from buying stocks that, in hindsight, are obvious success stories.
Tesla, Netflix and Palantir were among the stocks he mentioned.

CNBC's Jim Cramer on Monday said that the fundamentals can sometimes hold investors back from buying stocks that, in hindsight, are obvious success stories, and used cult stocks as an example.

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"These are stocks where what's happening at the company and what's happening in the stock are two very different animals," he said. "But unlike meme stocks, cult stocks have such a loyal shareholder base that they can trade independently of the business for years and years."

Cramer said that the most obvious example of a cult stock is Tesla. The stock is up 86% for the year, but many investors didn't see the promise early on due to doubts around CEO Elon Musk's relationship with President-elect Donald Trump and sinking sales amid China's rising electric vehicle industry, he said.

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The public, however, doesn't listen to Wall Street research, Cramer said. He added that they knew two things Wall Street didn't — that Musk was right in saying he was the leader in EVs and that Musk and Trump's relationship would be extremely profitable if Trump won the presidential election. Those who jumped on board won big after Trump's victory and other news in the EV space, including General Motor's recent announcement that it's dropping out of the self-driving taxi business, Cramer said.

He also named two other companies as examples of cult stocks, Netflix and Palantir. Cramer said that while many doubted the streamer's ad-supported tier, a slew of hit-shows and events led loyal followers to stick around, which paid off as the company's stock is up 89% for the year. Palantir, however, had a solid business model that was often overshadowed by CEO Alex Karp's renegade attitude, he said. Many investors passed up on the stock, but Cramer said that those who liked Karp's approach bought in and won big as the stock is now up 341% for the year.

"There's a lesson here and it is a brutal one," Cramer said. "Sometimes conventional methods of valuation are completely worthless, and you need to embrace the dynamics of cult stocks. The trick is to recognize when we're in one of those moments. In 2025, let's strive to find the stocks of companies that do defy orthodoxy."