47 minutes 11 seconds
🇬🇧 English
Speaker 1
00:00
Today's news can feel like uncharted waters, but more often than you'd think, we're not the first generation to confront what we're dealing with today.
Speaker 2
00:08
We're just the first generation to make a podcast about it.
Speaker 1
00:11
I'm Rachel Maddow.
Speaker 2
00:12
I'm Isaac Davy Aronson. Each week, we'll bring you a story from history.
Speaker 1
00:15
That helps with something in the headlines today.
Speaker 3
00:19
Rachel Maddow presents Deja News with Isaac Davy Aronson, an MSNBC podcast. Search for Deja News wherever you're listening and follow.
Speaker 4
00:31
My mission is simple, to make you money. I'm here to level the playing field for all investors. There's always a home market somewhere, and I promise to help you find it.
Speaker 4
00:42
Mad Money starts now. Hi, I'm Kramer. Welcome to Mad Money. Welcome to Kramerica.
Speaker 4
00:49
Other people make friends. I'm just trying to make you a little money. My job is not just to entertain you, but to educate and teach you. So call me at 1-800-743-CBC or tweet me at Jim Kramer.
Speaker 4
01:00
Diversification, 1. Concentrated risk, 0. That's how I look at the difference between Larry Fink's BlackRock business and the flagship ARCA Innovation ETF run by Cathie Wood. Now, if you aren't familiar with these 2, they represent 2 very different philosophies.
Speaker 4
01:17
And it's worth exploring what sets them apart. After a good day, where the Dow advanced 76 points, the S&P gained 0.39%, and the Nasdaq jumped
Speaker 1
01:24
0.93%,
Speaker 4
01:27
Cathie Wood tries to identify major long-term trends and offers a highly concentrated way to invest in them through her actively managed ETFs, the largest of which is the ARK Innovation Fund ETF. It used to have $28 billion in assets, but now it's back down to about $9 billion. Larry thinks BlackRock runs the largest fund group in the world with $9.4 trillion in assets.
Speaker 4
01:53
Wow. And they had $190 billion in net infos just in the first half. Cathie Wood was once hailed as the greatest investor in the world and she was absolutely the best stock picker of
Speaker 1
02:05
2020.
Speaker 4
02:08
Most individual investors have no idea who Larry Fink is. Frankly, I think he wants it that way. But what matters here is the radical difference in their styles.
Speaker 4
02:16
Wood hitches her start to a few stocks that she thinks have the greatest growth potential. 1 of her biggest calls was getting in Tesla very early. Good call. Wood's strategy generated incredible returns when Wall Street loved growth.
Speaker 4
02:30
But when growth went out of style, so did her performance. Turns out it wasn't a strategy at all, only a tactic and a very risky tactic. That next thing you know in 2021 she lost 24%. Hey S&P finished the year up 27% NASDAQ rally 21% then in 2022 as she stuck with the same kind of stocks her leading fund fell unastounding
Speaker 1
02:57
67%
Speaker 4
03:00
More than double the 32% decline in the NASDAQ and more than triple the 19% decline for the S&P 500. Why? Simple.
Speaker 4
03:09
Wood was undiversified. That gave her tremendous outperformance in 2020, but tremendous underperformance in 2021 and 2022, making things worse. She very visibly gave up on the stock of Nvidia when it was trading at $234 per share. After sticking with it for years, she finally decided The valuation was too high.
Speaker 4
03:31
She even came on our network and she trashed it. She called another check the box AI company. Well, it's now just under
Speaker 1
03:39
$465.
Speaker 4
03:41
It turned out to be anything but just another check the box AI company. It was the AI company. Cathie Wood made a reputation picking stocks like Nvidia, yet she sold the latest and greatest before the run.
Speaker 4
03:53
To me, that compounded the reputational risk of Wood's strategy with an element of cluelessness, frankly, about the fortunes of the companies she actually owned. It called into question her stock picking ability, not just her worldview. That's the danger of running an undiversified portfolio. You have to be right every time or else your investors, they get obliterated.
Speaker 4
04:13
In reality, nobody's that good to maintain this method over the long term, and they shouldn't tout themselves for doing so. Wood's inability to manage money in a strategic way, relying on a few handpicked equities that she apparently doesn't follow as closely as I thought, has led to an investor exodus as her clothings like Coinbase, Zoom Video Communications, Roku, and block failed her in the last few years even as they've been strong in 2023. I'm going to give her that. They've been very good stocks.
Speaker 4
04:38
Now it stands to reason my money managers had to recognize that money losing companies would see their stocks sell off in a situation with roaring inflation. You know, only Tesla and Zoom were profitable going into this period. Unlike Tesla, though, Zoom's trajectory rose and fell with COVID, plummeting from 588 at its highs to 72 and changed today as the epidemic peaked and subsided. How do you not recognize that Zoom's unique nature is being commoditized by the likes of Microsoft, Cisco, Google, among others.
Speaker 4
05:11
I regard that as not great work. And look, I'm not saying Wood has lost her touch. I'm saying her whole concentrated investing style is self defeating. You can't win like that.
Speaker 4
05:20
You're in and you're out. Sooner or later it will blow up in your face. Now let's talk about Larry Fink. Larry Fink's Blackrock on the other hand, is the paradigmatic opposite of what Wood offers.
Speaker 4
05:33
Diversification is at the core of the company. It's at the core of the show, so you know it's going to be sympathetical to what I'm talking about. Now, I had the opportunity to interview Larry on Friday with the rest of the Squawking the Street gang, and his understanding of the nature of investing, I find, is unparalleled. He's not a tactician.
Speaker 4
05:51
He's a strategist, a broad thinker who attempts to guide you through all sorts of situations. His conference call from last Friday was loaded with wisdom and strategisms that were, well, gems. Listen to this 1. Through our diversification and strong performance, we can help clients better match their long-dated liabilities, achieve their operational objectives, and streamline the processes, end quote.
Speaker 4
06:12
Now, while BlackRock's biggest group of investors comes under the rubric of institutional players. I actually don't think that matters. He's using judgment that shows you how money management should be done. I find it a learning, it's a great tutorial.
Speaker 4
06:26
I've been at this for 42 years, it's a great tutorial. Listen to this, quote, "'Investors are facing a complex landscape "'of competing fiscal and monetary policies "'with a number of structural forces shaping returns now and over the long term. These forces include a fragmented geopolitical landscape, causing a rewiring of supply chains, a transition to a lower carbon economy, and the aging population in the developed world, all which are likely to be inflationary over time." End quote. What goes around town now, inflation's crumbling?
Speaker 4
06:58
Fink acknowledges that while some indicators show inflation slowing, As he told us in Squawk in the Street, the trillions of dollars President Biden got for infrastructure and the environment is, well, Biden's testing. Biden's testing will be inflation no matter what, which could lead to continually higher interest rates longer than we thought. And you know what? I think he's going to be very pressured.
Speaker 4
07:18
Fink knows how to manage this risky environment. As he lays it out, his clients are, quote, focused on outcomes in the manifest in a portfolio of blending active index, private markets, and cash, end quote. You know what? That's called a strategy.
Speaker 4
07:32
A strategy to keep doing the best assets over time. Not a tactic either to hit it out of the park or strike out. Now I'm using these 2 different methods of running money to emphasize 1 thing. Human nature draws us to what's hot.
Speaker 4
07:46
It's a fact of life. Cathie Wood ran a very hot fund, maybe the hottest ever. The reason why people are bailing it out in record numbers, even as her flagship fund has increased in value this year, is that they've learned their lesson. A sophisticated attempt to manage your money requires someone like Blackrock to be your bedrock of your assets.
Speaker 4
08:04
Now, it's fine, by the way, to include a wood in the mix, so to speak, as long as you recognize that she's a true gunner, even if she doesn't identify with that term. Fink, on the other hand, offers you a menu that will lead you over time to the safest possible outcome with the least amount of risk. Now, he won't always be right. Wood won't always be wrong.
Speaker 4
08:25
But if you want to be able to have the best shot of increasing the value of your assets longer term, you need a diversified strategy that takes into account the vicissitudes of both the moment and the longer term. 1 that keeps you from being blown out as so many were from Woods Arc Innovation Fund. It's a tough lesson. I always try to teach people that they should have most of their money managed in a diversified way, like Larry describes, while also owning some stock picks that you like.
Speaker 4
08:52
For instance, the investing club is an attempt to help you find stocks that can outperform the average mutual fund. Many of you come to me because you want to manage some of your money yourself. And that is precisely what we want. But the bottom line, what we don't want is your nest egg to be concentrated in just a few stocks that might be very wrong for the moment, causing you to give up on this entire wonderful asset class.
Speaker 4
09:17
And that is my fear. That is my biggest fear. BlackRock's diversified style is the antidote to that fear. Erwin in New Jersey, Erwin!
Speaker 5
09:28
Hey Jim, how are you?
Speaker 4
09:30
I am good, Erwin. How about you?
Speaker 5
09:32
I'm doing great. A little warm down here in Monmouth County.
Speaker 4
09:35
It's hot. It's hot. It's 90 afternoon.
Speaker 4
09:38
You know, my collar is all sweaty and stuff. What's going on?
Speaker 5
09:41
You know, a few months ago, we were talking about home builders and they were on a tear. So I started to do some research. And I went to sectors, and then I clicked on industrials, and then I went to building products.
Speaker 5
09:54
And I came upon a company, which I bought about 6 months ago, 5 or 6 months ago, called Builders First Choice, B-L-D-R. And that's also on a tear, it's a double for me, which is unusual, really.
Speaker 2
10:07
And I
Speaker 5
10:07
want to know your opinion of builders first choice.
Speaker 4
10:09
You know what I've been thinking about builders first choice and floor and decor. And I'm thinking, are they the next Home Depot and the next Lowe's. And I have been working, working, working on this.
Speaker 4
10:19
And all that's happened is they keep going up. I'm waiting for a moment. All I have to say, Orrin, is congratulations. You hit it out of the park.
Speaker 4
10:25
And I sat there on the sidelines trying to figure out if it was as good as Home Depot. And you made the money. Well done. Doug in Texas, Doug.
Speaker 6
10:34
Jim, I'm an old geezer. I'm 77 and I'm still buying and selling stocks. And I still listen to your advice.
Speaker 4
10:40
All right.
Speaker 6
10:41
Years ago I bought that Walgreens thinking it was a good company. They seem to have been, got their ox in the ditch and don't know how to get it out. So are they a whole or do we treat them as a buggy whip company and just tell them to go bye bye.
Speaker 4
10:57
Boy this is 1 of the hardest things. The yield is 6 and a half. They do have Look they have levers they can pull.
Speaker 4
11:02
Absolutely. But you know what the problem with Walgreens Boots Alliance is? They are the ultimate brick and mortar in an era when Amazon's got them crushed and theft which they don't talk about enough is just crushing their performance. So my take is to 29 maybe can bounce
Speaker 1
11:20
32, 32
Speaker 4
11:21
then what I would say is sell, sell, sell. Look, if you want the best shot at long-term wealth generation, I think you have to stay diversified. So you can prepare for whatever the market throws your way.
Speaker 4
11:33
That is the essence of this show. Well, man, money tonight. I mean it when I say we have the smartest audience in television, you and last week you called in asking about MYR group. I didn't know it.
Speaker 4
11:44
Shame on me. So I'm turning my homework on the stock to see if we can spot a winner in the infrastructure group. Then, while everyone has been laser focused on the Magnificent 7, there is another co-owner of stocks that's actually quietly rallying just as well, if not better. I'll reveal what it is and how you should interpret the action.
Speaker 4
12:00
1 of my favorite parts of this show is hearing directly from you. So we're taking some questions from the CBC Investing Club members that we didn't get to the other day when we did our club meeting. We want to hear what's on your mind. So stay with Kramer.
Speaker 7
12:21
Don't miss a second of Mad Money. Follow at Jim Kramer on Twitter. Have a question?
Speaker 7
12:28
Tweet Kramer, hashtag Mad tweets. Send Jim an email to madmoney at CNBC.com or give us a call at 1-800-743-CNBC. Miss something? Head to madmoney.cnbc.com.
Speaker 8
12:47
I'm Morgan Brennan, host of CNBC's Closing Bell Overtime and Manifest Space. With rocket launches marking new milestones, the new space race is on. Make sure to listen to Manifest Space with me, Morgan Brennan, by following wherever you get your podcasts.
Speaker 4
13:10
I've said it before and I'll happily say it again. We have the smartest viewers in perhaps all cable television. They prove it time and time again, especially when they call him with an off the beaten path stock during the lightning round.
Speaker 4
13:22
You know it happened not once but twice during last Thursday's lightning round. When I was just about a pair of infrastructure related names, I really wasn't familiar with, but sure wish that I had them because they've been big winners of late. As all the federal infrastructure spending authorized in 2021, finally starts to kick in. There'll be more of these, but I gotta drill down tonight.
Speaker 4
13:40
I want to cover 1 of them in detail and will do the other 1 later in the week if we got time seeing George. In Massachusetts, called and asked about a company called MYR Group and I told him I needed to do more homework. But after kicking the tires on this 1 over the weekend, I think it upside, maybe much more upside. And we're grateful to get some time to explain why we are so excited about this 1.
Speaker 4
14:03
Pretty good website. You'll understand some of the broader themes, but we're gonna do more than that on the show. MYR Group is a $2.4 billion holding company that consists of 13 different specialized contractors focused on electrical construction. They primarily handle the construction of transmission and distribution lines for electric utilities, commercial customers, and the industrial market.
Speaker 4
14:23
The business represents about 58% of the company's revenues in 2022. The other 42% came from MYR Group's commercial and industrial business, which installs and maintains electrical wiring in commercial or industrial buildings, as well as traffic and rail systems. Oh, man, these are areas that are just begging for help, and this company does it. Now, it's not really as much a company as it is a bunch of companies, because the company's current structure, it's a roll up of these specialized electrical equipment contractors, dates back the mid-1990s when 3 of those contractors merged.
Speaker 4
14:56
Though history buffs might be interested to hear that the company's roots date back to 1891 when 1 of these specialty contractors, L.E. Myers, was founded by Lewis Edward Myers. He briefly worked for Thomas Edison as a salesman before striking out on his own. I like that bloodline.
Speaker 4
15:15
MYR group was publicly traded from 1996 to 2000. Then it got acquired, but the market took it public again in 2008. Ooh, that was a bad year. For more than a decade after that, the stock has slowly grinded higher over time, very, very slowly.
Speaker 4
15:27
Over the past 3 years, though, whoa, MYR groups caught fire. The stock is up more than
Speaker 1
15:32
341%
Speaker 4
15:35
over that period. Why? Because MYR has had fantastic earnings growth.
Speaker 4
15:40
A little bit of dip here. What an opportunity. I think we might get another opportunity. For digging the story, though, I would have assumed that the stocks recent strength was solely related to investors anticipating benefits from all the recent federal spending packages and that's certainly a factor.
Speaker 4
15:53
I mean there was 65 billion in the bipartisan infrastructure bill earmarked for building thousands of miles of new electoral transmission lines to facilitate the expansion of renewable energy. Then there was another $3 billion for transmission line construction, the Inflation Reduction Act. MYR Group stands a good chance of winning some of those contracts. They are the experts in this business.
Speaker 4
16:14
But that's not the whole story. This stock roared higher in the run-up of the passage of the infrastructure bill way back in 2021. Then it pulled back hard in late 2021 early 2022 after that, my group was kind of stuck in a pretty narrow trading range. It wasn't until earlier this year that the stock started worrying again.
Speaker 4
16:29
Why? Because even without the infrastructure package, MYR was already benefiting from powerful secular themes, like the rise of renewables, the degradation of our power grid over time. You know it's not as good as it used to be. Come on, it's gotten old.
Speaker 4
16:40
Regardless of what Washington does, companies keep building out big wind and solar farms in remote locations, which means they need wiring to take that power where it is actually needed. That's their specialty. Even if they're talking about a solar panel on the roofs of some factories, you need wiring to get the electricity from the panels to somewhere where it's used. M.Y.R.
Speaker 4
16:57
Does that too. At the same time, These guys have made a fortune from the rise of the data center. Yes, these warehouses full of servers require miles of wiring in each building. MIRs even talked about how health care facilities are a growth area, which makes sense given that modern hospitals are increasingly digitized.
Speaker 4
17:16
I love these companies that no 1 really knows of that have got all these great themes to them. Now the recent rally kicked off in late February when NYR Group reported a much better than expected quarter. Not that many analysts covered this thing up, but it was a huge sales and earning speed. 3 months later they did it again.
Speaker 4
17:30
Another very large upside surprise on both the top and bottom line, but they are not promotional. When you look at their website, you'd think that they're not even doing that well. On the company's April conference call, management explained that they've benefited enormously from the growth of renewable energy infrastructure. But 1 of the analysts asked about the anticipating impact of the coming federal spending programs, which are expected to begin in earnest later this year.
Speaker 4
17:52
NYR Group CEO Richard Schwartz had a lot to say in response. He explained that with all the infrastructure spending coming, customers are coming to them much earlier than usual, just because they know they need to plan far in advance if they want to have all the necessary labor materials lined up. That gives the company much greater visibility into its future sales and earnings and Wall Street loves visibility. You're probably wondering how can do they have enough people?
Speaker 4
18:14
They've 8000 people work for them, But you know this is going to be the hardest thing to find more labor. These guys I think can pull it off. I don't think they'll have a problem with that. In other words, the federal spending has helped them.
Speaker 4
18:25
But mainly because this encourage existing customers to book business with NYR group much earlier than they ordinarily be doing it. But the upside here is that all of this company's recent success has come without the flood of federal dollars, which again should start flowing later this year as I keep telling you these orders and we said this with Caterpillar for the club. I always talk about Caterpillar is not even seeing the orders yet. Friendly's infrastructure acts.
Speaker 4
18:47
That's all 2024 in the last quarter of this year, and that is why, despite the big gains in my group, I think the stock can continue to work. The success of data has come mostly because of themes other than the federal investments in our nation's grid. Electric grid. Those are still yet to come.
Speaker 4
19:01
Company is expected to earn again. Not a lot of analysts covered, but they say it's going to earn
Speaker 1
19:06
$5.78
Speaker 4
19:08
per share this year and then 687 next year. Wow, but given the context, those estimates actually look reasonable to me at $146 and change the stock trades at just 21 times that year's numbers, which looks good to me considering that there's great growth ahead and it doesn't factor in the next wave of government spending. So let me give you the bottom line about this gem.
Speaker 4
19:27
The only thing I don't like here is that I didn't discover this story earlier when I could have helped you more. But luckily our sharp viewers helped us out and put MYR Group on our radar. Given that the stock's rally today has been driven by catalysts separate from the coming wave of government spending, I don't think you've totally missed the movie here. I wouldn't expect NYR to rally another 300% over the next 3 years, but I do think it's got more upside as the infrastructure spending finally kicks in.
Speaker 4
19:55
I say congratulations, George, for bringing this 1 to our attention. NY is back after the break.
Speaker 9
20:03
Coming up, is it time to move past the Magnificent 7? When it comes to your next hot tech investment, Kramer's looking to the clouds. Don't miss his forecast, next.
Speaker 10
20:17
CNBC's Last Call podcast. Get the stories behind the numbers. There's investing news that impacts your money and your portfolio.
Speaker 10
20:25
And the people behind the business. And there's business news that impacts your life. From Wall Street to K Street and Main Street, the markets may close, your money never stops. Last Call is really about spotting tomorrow's opportunities tonight.
Speaker 10
20:42
Brian Sullivan hosts Last Call. Follow and listen to CNBC's Last Call on your favorite podcast platform today.
Speaker 4
20:57
Everybody wants to talk about how the magnificent 7 have been pushing this entire market higher. But you know what? There's a whole other cohort of less visible tech stocks that have been working here, working like crazy.
Speaker 4
21:08
I'm talking about the once loathed enterprise software players. Ever since the market bottomed more than 10 months ago, these enterprise software stocks have come roaring back. But you see, you don't hear about them as often, precisely because they're not consumer focused. They're enterprise focused.
Speaker 4
21:22
They're company focused. People only interact with this stuff at work if they interact with it at all. Historically, money managers have loved the enterprise software space because it's just a fantastic place to find the real growth stocks. Hey, come on.
Speaker 4
21:34
Makes sense, right? They're always looking for the next sales force, wouldn't you? Or the next service now. What a stock.
Speaker 4
21:39
And for years, let's throw in Adobe, OK? And for years, this was a terrific strategy. Then in 2021, we were flooded with cloud software IPOs right before the Federal Reserve started raising interest rates to combat inflation. The whole group went out of style and became 1 of the most despised cohorts of 2022.
Speaker 4
21:56
Even if they had some consumer protection like an Adobe or frankly if you just used them at the office like Microsoft. But just as they got too loved in 2021, they got too hated last year. Now the higher quality ones have rebounded hard from the lows. They're the comeback kids you never hear about.
Speaker 4
22:12
But because everybody's so fixated on the magnificent 7, well, nobody cares about these guys. You need to know these companies because they are loved by the growth hounds on Wall Street. And I don't want you to feel like that we all made money or avoiding the hottest area of the market just because they're so hard to understand. It's our job to break them down so you do understand.
Speaker 4
22:31
All week, I want to highlight some of the most impressive recoveries in the enterprise software space, because I think many of these moves are well-deserved. The underlying companies have gotten religion on cost cuts, on profitable growth rather than just pure revenue growth, meaning they're much more attractive financially than they were a year or 2 ago. It's made all the difference. But there's so many of these that we really need to drill down.
Speaker 4
22:50
Now, here's the way we did it. We did a little methodology. We started with the 67 stocks that are in the Wisdom Tree Cloud Computing ETF, which I consider the best proxy for the group. This ETF bottomed last November, and it's now up an astounding 49% from its lows.
Speaker 4
23:04
And within this universe of 67 stocks, the average gain off their respective lows is 74%. OK, so we missed it. No, no, we've caught some of them. Don't think that we haven't been oblivious, but We did find that some of these biggest rebounds were from smaller companies, and they were ones I either don't know well enough, or I don't have enough confidence in, or I outright distrust.
Speaker 4
23:25
So what we did was we screened out everything with a market capitalization below $5 billion. This is a rising tide. This is an all-vote situation, but we only went to good votes. That got us down to 39 stocks, and this week we're looking at the 16 best performers from the bottom.
Speaker 4
23:38
Tonight we're starting with the top 4 comeback kids. We'll take them slowly so you can write them down. The first is MongoDB. That's Dog Boy.
Speaker 4
23:47
Shopify, you probably know that 1. Monday.com, and then another called HubSpot. All of these have more than doubled from the bottom. Now the biggest comeback for this group belongs to MongoDB, which is more than triple from its lowest list of member, although the stock's still down more than 30% from its late 2021 highs.
Speaker 4
24:03
If you've never heard of MongoDB except in this network, well, that makes sense. I mean, it's a database software company. It includes a best-in-class cloud database platform, and it's called Atlas. The rise of generative AI is a boon for any company that helps you produce, make sense, or store data, which is why this stock, MongoDB, has caught fire this year.
Speaker 4
24:24
And I would say that this is the AI move that a lot of people didn't understand initially, but has still percolated all the way up here. Now that's just the icing on the cake. The real story is that MongoDB's financials have improved dramatically. They only started turning a profit last year.
Speaker 4
24:40
Now their earnings are on track to double this year. Even better, the company is expected to report its first positive free cash flow number this year. MongoDB pivoted to profitability and cash flow generation, 2 moves that are now paying off big. And that's what the bulls are focused on, because while I'm a big fan of this company, even I admit it's tough to get behind the stock's nearly 29 billion dollar valuation, basically current financials.
Speaker 4
25:03
But money managers are betting this could be the next cloud king. And if they're right, that valuation is much easier to justify. Take a look at how it did again today. It's kind of a broken record.
Speaker 4
25:12
Now next up is Shopify. You probably do know this 1. It's up more than 190% from its lowest this October, although it's still down 61% from its peak in 2021. Shopify is a little more visible than your typical enterprise software play.
Speaker 4
25:24
It's an e-commerce enabler and their platform powers many big websites. But like the other big cloud comeback names, the company's turned profitable with tremendous earnings growth expected in the next few years. Now this one's not really an enterprise software company, it's more of an e-commerce infrastructure name, but it still deserves consideration because it's so darn good, even as it caught a downgrade after the close because yes, it has rallied
Speaker 1
25:45
100%
Speaker 4
25:47
this year alone. Now third, there's 1 that I haven't talked about enough, and it's a shame. It's called Monday.com.
Speaker 4
25:54
It's a maker of workplace productivity software that came public in 2021. Now unlike its IPO classmates, though, a Monday.com's got something going for it, which is 1 reason why it's up just over 150% from last November's lows. Like Bockling, you'd be your Shopify, Monday.com's pivoted to profitability. Here's the theme for you.
Speaker 4
26:12
They're on track to have their first profitable year in 2023. Even better, their free cash flow should be up 700%, although it's off growing from a very low number. Hey, by the way, Monday.com is the only 1 of the top 4 that would pass what we call the rule of 40 test, where you add the revenue growth to free cash flow margin. And if the sum is above 40, the company passes.
Speaker 4
26:32
Somewhat abstruse, but I'm giving you everything I've got. Finally, the fourth best software company is 1 that I've not focused on enough. It's called HubSpot. It's up 127% from its close this October, but it's still down more than 35% from its peak in
Speaker 1
26:44
2021.
Speaker 4
26:45
HubSpot makes customer relationship management and marketing software. Yes, yes, it is like a junior sales force. And it's been a legitimate company for years.
Speaker 4
26:53
While these guys have been turning a profit since 2017, the earnings have accelerated and dramatically inflated. They had 38% earnings growth in 2021, 53% earnings growth in
Speaker 1
27:03
2022,
Speaker 4
27:03
and they're projecting a 74% earnings growth this year. Pre-tax flows also headed in the right direction. What's interesting about HubSpot's big recent rally is the fact that it's come as the company's revenue growth is actually decelerating.
Speaker 4
27:15
Since coming public, HubSpot's revenues have grown more than 30% every year, including a 33% increase in 2022. This year, the revenue growth is expected to fall to around 20%. Yet the stock is still soaring. Why?
Speaker 4
27:28
Because right now, Wall Street cares only about profitable growth. And HubSpot is giving Wall Street the profitable growth exactly what it needs. As the market broadens away from the Magnificent 7, these enterprise software stocks have become the hottest tech names, except most individuals might not even know them. That's why I'm spending all week on this group, because you need to know that something else still works here, even as the industrials, the retailers, and many of the smaller banks, not the larger ones, though, are stuttering.
Speaker 4
27:56
It's not just the Magnificent 7 that's making you big money. And honestly, I expect the big money managers to get even more excited about the cloud software growth as the IPO market thaws and we get some new offerings that will likely be underpriced in order to get people back into the stock market casino. Here's the bottom line. Despite the relative lack of attention, the enterprise software stocks have made huge recoveries from the lows last fall.
Speaker 4
28:16
I'm not sure their old highs from the late 2021 are real estate targets, but the best of these companies have proven to be much more profitable than we thought. While I think their stocks might be too for a breather, I bet they'll be a lot more durable than you might expect because the highest quality cloud plays are nothing like they were in 2021. They are keepers and are being kept by many of the aggressive fund managers that thirst for high growth, as long as it has some profits in the offing, as you will see when we do all these rollouts this week. I think you'll like them all.
Speaker 4
28:46
Phone, let's go. John in Florida. John. Hey, Booyah, Professor Kramer.
Speaker 4
28:52
Hey, Booyah, right back at ya.
Speaker 11
28:55
Got a question about a play I've been looking at for some time. It is RELX, and they're a parent to Lexus Nexus Corporation that's into big data and AI. They maintain databases like Clue, the comprehensive loss and underwriting exchange, which services all the insurance world for losses.
Speaker 11
29:18
What's your opinion on RELX?
Speaker 4
29:21
Okay, I remember this company when it was owned by West Publishing. I remember it used to be owned by a paper company, Westfaco, I believe. I'm not sure, but I know this.
Speaker 4
29:34
It's a British company. I've not done the work. I am not going to tell you I know it very well because I don't, but we will do the homework for you. Let's go to Anthony, North Carolina.
Speaker 4
29:44
Anthony.
Speaker 11
29:45
Yes, Jim. Booyah. Good afternoon.
Speaker 4
29:48
Good afternoon, Anthony. What's up?
Speaker 11
29:51
So, I wanted to ask you a question about SoFi. Follow CNBC pretty closely, long-time listener. SoFi seems to be in a spot where they're just about 30 cents or so away from potentially being a profitable company.
Speaker 11
30:11
And of course, we got the student loan deal. It's kind of in limbo, but, you know, they seem to have a reasonable stable portfolio. Liz Young's a contributor on the show and on CNBC. Sure.
Speaker 4
30:28
Let me put it this way. When the stock was at 4, We looked at the CEO right in the eyes. When we were in Santa Barbara for the CEO Council, the stock was at 4 and change.
Speaker 4
30:37
We asked Anthony Yoder, the CEO, is this company really in trouble? Are you going to issue equity? What is really going on? He said, there's nothing going wrong other than we're doing incredibly well and look out.
Speaker 4
30:46
And I've got to tell you something. He was dead right. The stocks at 9 and a half. All these pay pals are going up.
Speaker 4
30:51
And by the way, Robin is going up. I think there's reason to believe that so far I could at least go up another 25 30% before I would even be concerned that it was too expensive. All right. The Magnificent 7 might get all the fanfare, but there are other profitable tech names, especially enterprise software space.
Speaker 4
31:06
They deserve your attention, even if their old highs from 2021 might still be out of reach. But don't bet against these companies. There's too much growth money coming into them. Now, we've got much more mad ahead.
Speaker 4
31:16
Last week, we held our monthly meeting for subscribers the CBC Investing Club. We have so many good questions sent in by members we decided to answer some of them tonight on this show. Hey then Ford announced a price cut for its F-150 Lightning today that sent the stock lower. So why am I not panicking like the market did?
Speaker 4
31:31
I'll give you my take. And the way to call us rapid fire tonight's is to have the lightning round. So stay with Kramer.
Speaker 1
31:37
♪♪
Speaker 4
31:48
Last week, we had our invested club monthly meeting. That's what my colleague Jeff Marks and I go through our thought process for the club. We discuss our current holdings and most importantly take some member questions.
Speaker 4
31:58
It's 1 of my favorite things to do and we always have more questions than time to take them. You can undate us, but that's okay. That's why we thought we'd take some of the leftover ones we really like tonight and give you a taste of what our monthly meetings look like. If you're not a part of the club and want to be, and I sure hope you will be a part of it, you can open the camera or right here on your phone, scan this QR code behind me to become a member.
Speaker 4
32:22
I want you to be a member. It matters to me. By the way, you can always just go to cnbc.com slash investing club. Let's join up.
Speaker 4
32:29
Now, Here's what it's like. First up, we have Irvin in California who asks, Hi Jim, can you please touch on the fall of PayPal? At 1 time, you were enthusiastic about PayPal as I was. It was 1 of my larger holdings, and I added to the price as it went down.
Speaker 4
32:42
My overall investment is down 70%. Should I just bite the bullet and sell it? You know, this is a really interesting question. Why?
Speaker 4
32:48
Because just now PayPal is starting to rally. It's moving up along with other financial tech companies. It was up again today. What you need to know is that the competition got to the point where the company's gross margins got slashed and slashed and slashed again, which then called its growth into question.
Speaker 4
33:03
That said, it clearly bottomed, okay? And what you need to know is that I don't think this little bit of a rally is done. Now, why didn't I keep it? Well, the answer was we still had a chance to get out at a higher price.
Speaker 4
33:15
But I will say that the rally in FinTech looks real and I expect that you'll be able to make a little bit of money here It will even though of course you're down but make a little bit of money here from this level. So don't sell it yet Okay. Now, let's go to Mitch in Connecticut who asked given the expansion of electric vehicles and charging stations can utilities be considered as energy stocks at this time or for the foreseeable future? On that note, is AAP a good choice for my stock bullpen?
Speaker 4
33:37
AAP is not really a play on this at all, all right? As a matter of fact, the only 1 that I would actually even think about when it comes to these energy stocks, maybe next year, maybe Sempra. But frankly, it's not the way you play them. Frankly, they just don't have enough exposure.
Speaker 4
33:54
It's the same way we fell, as you know, from the club. We bought Emerson, hoping to play that role. The 1 that you might want to do that as ancillary way in EV is Eaton. Now it's at
Speaker 1
34:03
205,
Speaker 4
34:04
well, that's where it was coming out this morning. It's very high. That said, Eaton would be the company that I feel the most.
Speaker 4
34:11
I'd say most comfortable with when you're trying to pick up a stock like that, Not a utility. Next up we have Richard who's asking. Hi, thanks for the great work in the club. Blow the pen up demand and travel.
Speaker 4
34:21
Why are the airlines and cruise lines still way under the prepaid debit prices and it's now a good time to invest in them? Thank you. That's because their balance sheets. Remember, we often talk about the common stock.
Speaker 4
34:30
We don't look at the balance sheets. The balance sheets got very bad during the era that was COVID, and they're working their way out of it. I do think that Delta is very good, and we've been recommending that stock. That's the 1 I want you to be in.
Speaker 4
34:42
Next up, we have David, who asked, do You always keep 10 to 12% of the portfolio in cash, or is this percentage part of a defensive strategy? It's part of a defensive strategy. The market has moved up a great deal. We feel like as the market goes up, we want to be ready for when it comes down, because it always does rain.
Speaker 4
34:58
It has been very, very strong. We own a lot of stocks that we really like, but we have trim because we don't want to be greedy and we'll have the cash ready if the market declines. Now let's go to Scott, who asks, due to Apple's run up in the first half of the year, it's now almost 19% of my portfolio. To maintain a well-balanced portfolio, what should be the maximum percentage of any stock in my portfolio?
Speaker 4
35:19
This is a very hard discipline because on the 1 hand we say own Apple, don't trade it, right? That's been our mantra forever. On the other hand, we do have disciplines and disciplines, discipline always trumps conviction, which means that you should shave some of the Apple that you own. It's a very tough thing for me to recommend that, given my view that you own it, don't trade it.
Speaker 4
35:38
But we have disciplines. And the main discipline that I've learned for 30 years is that actually about 35, Oh my God, is that discipline trumps conviction. And right now you do not have enough discipline if your portfolio is that levered to Apple. Now let's go to Peter wants to know how do you see the oil market performing the next 6 months and in 2024?
Speaker 4
35:57
I don't really like the oil market right now. I think 1 of the reasons I don't, because as long as the war goes on, Russia has very deceitfully sent this Ukraine war that sent oil all over the world and has kept the price lower and we we didn't help. Well, we wanted oil to go down, which is why we depleted the petroleum reserve. But I have to tell you that Russia is the key and Russia will not let oil lift.
Speaker 4
36:19
It needs the money too badly. We own just a couple of oil companies. And by the way, we just trim some Halliburton for the very reason I just mentioned. Right next up we have Walt in Florida who asked J.
Speaker 4
36:31
Bill's at all time highs. Plus, fortune is ranked the company is 121. However, I've not heard you speak about J. Bill in a very long time.
Speaker 4
36:37
What is your opinion of the industry and the company specifically? I don't really like the industry because it's pretty commoditized, but J. Bill is the best in the business. And you're right, I haven't mentioned it.
Speaker 4
36:45
Why haven't I mentioned it? Because I always fear that this will be the quarter. It's been inconsistent in my lifetime, but not in the last few years. I need to reopen the books on J.
Speaker 4
36:55
Bill and see if there isn't more to it because they are the contract manufacturer for almost every major company I know. Good company. All right, well, let's go to Casey who asks, what do you think about the uranium market and also what do you think about Cameco? I think Cameco is a cold stock.
Speaker 4
37:12
I think the uranium market suffers from the fact that it's almost impossible to build a new nuclear power plant. I know that there are people who say now that Southern's done it, 1 of its and it's about to reopen. People will be very excited about uranium. I'm not going there.
Speaker 4
37:25
I'm going to pass on what I regard as a speculative excess name. Yes, okay. So I missed 20% of the last few months, but that's okay. You can't have them all.
Speaker 4
37:36
Now we have a question from Lori who asks, what would you do if you own Moderna and Roku, which are both down significantly? We've tried to be patient, but neither stock has shown any hope of recovery. If we were to sell, we would lose a significant part of our investment. What should we do?
Speaker 4
37:49
We don't care about where stock has come from. We care where it's going to. I think Groko has some upside potential, mostly because it's been so beaten down. But Moderna has just terrific science.
Speaker 4
37:58
And I would actually buy some Moderna. I know that's very out of fashion. I know Moderna's regarded as being strictly a COVID play, but let's be realistic. I mean, Stephen Buncell has been an inventor of an incredible, incredibly different kinds of technology, and I want to bank with him.
Speaker 4
38:15
I think that the RNA technology he has is very strong and I would be surprised if he doesn't come up with something even better than what he's come up with so far. I'm looking for his personalized cancer vaccines. I think they're a possibility. Next up let's go to Michael in Pennsylvania who asks What price do you consider a good entry point for Nvidia?
Speaker 4
38:32
If you don't own any Nvidia shares or Nvidia yet. Okay, so we had a huge decline from Friday, from the peak to the trough. And I would have said, okay, if you don't own Nvidia, this is your chance. Now it's still down a lot from where it was on Friday.
Speaker 2
38:45
I am
Speaker 4
38:45
not a believer that you can just go in and say, time to buy NVIDIA. However, I would tell you, oh my, whoa. Okay, how about, how about you buy some now and then you wait, let's say, down 10% and pick up a little more.
Speaker 4
39:01
Leave some room for another 10 percent below that because the stock has had a major move. Maybe the greatest move in my lifetime. That money's back. It is.
Speaker 4
39:19
Time is up in the light. That's right. We'll never see the socks. Bye bye bye.
Speaker 4
39:23
So we are in the south And then the lightning round is over. Are you ready, skis? Daddy, time for the
Speaker 2
39:32
lightning round. We're going
Speaker 12
39:32
to start with Brian. Brian. Hey, Jim, thanks
Speaker 4
39:34
for taking my call. No problem.
Speaker 12
39:36
I just want to say that my son and I record your show every night. We watch it together. We get good info from you and we have some lively discussions about our strategy.
Speaker 4
39:43
That's what this show is about. That's it. Thank you so much for those kind words.
Speaker 4
39:47
What's up
Speaker 12
39:49
Jim. This morning I bailed out of City Park which was stagnating for way too long. Should I take my cash and go into JP Morgan or something.
Speaker 4
39:57
I still like JP Morgan here. It's valued very low given the fact that it is a Colossus. That was an amazing quarter.
Speaker 4
40:04
Hats off to Jamie Diamond and company. Let's go to Richard in California. Richard!
Speaker 13
40:09
Hey Jim how are you?
Speaker 4
40:11
I'm good how are you?
Speaker 13
40:12
Biogen's Alzheimer's drug just approved which vast numbers of MRI and PET imaging is needed. Company already has record-breaking volume. On the past earnings call, the CEO stated, rolling out a game-changer AI genitive hardware platform.
Speaker 13
40:27
Company's largest cost is in workflow, bill keeping, records support, et cetera. Spread out amongst 10, 000 employees and millions of patients, making this enormous task
Speaker 4
40:36
much more
Speaker 13
40:36
efficient, quicker, and easier, which should grow the bottom line to tech-like earnings. BlackRock and Goldman Sachs recently reported 7.5 million...
Speaker 4
40:45
Which stock is this? Which stock is this?
Speaker 13
40:47
This is RadNet.
Speaker 4
40:49
Oh RadNet. No, no. We all opined positively about RadNet before it died.
Speaker 4
40:52
It's a diagnostic company. And I think it's too expensive. Versus GE Healthcare, which we own by the trust. It only sells at 21 times earnings and is much more connected with what Biogen and Eli Lilly are doing when it comes to Alzheimer's and dementia.
Speaker 4
41:06
Allen in Florida, Allen.
Speaker 14
41:08
Jimmy Chilla, big booyah to ya.
Speaker 4
41:10
Man, I'm chilling. What's going on? I need that chill.
Speaker 4
41:12
It's 90 degrees here. What's going on?
Speaker 14
41:15
Listen, there's a, everywhere I look, there's a nuclear renaissance going on worldwide. China's building 20 new reactors. Japan is turning on their reactors that were closed.
Speaker 14
41:25
They're becoming a buyer of uranium instead of a seller. Diablo Canyon in California got an extension. Palisades in Michigan may be reopening. Cathie Woods is starting to invest in the North American nuclear.
Speaker 14
41:38
The Uranium Energy Corp is
Speaker 6
41:39
a good for them.
Speaker 4
41:40
Okay, I believe that as much as you tell a positive story about nuclear power, it is still not coming back the way you would like. I actually prefer natural gas to nuclear power. Kota C.T.R.A.
Speaker 4
41:54
50 percent natural gas got a dollar cost sells it for 2. I like that business. Joshua in New Jersey Joshua.
Speaker 2
42:02
Yes. Hi Jim. I love your book. I've been reading it recently.
Speaker 4
42:07
I got a rewrite. I got a new book. I wanted it to be.
Speaker 4
42:10
Let's call it that.
Speaker 2
42:11
What's happening. I was just wondering how about Apollo Global Management. I can't figure out if it's the income from the fees or their investment.
Speaker 4
42:22
Well, see, that's the problem. The reason why I don't recommend Apollo, even though it's been a good stock, is I don't know how it makes the money. I don't know what it owns.
Speaker 4
42:30
I can't opine to use something that I don't know about myself So I think I'm gonna have to just take the pass and that ladies and gentlemen the conclusion of the lightning round
Speaker 7
42:41
Round is sponsored by TD Ameritrade
Speaker 4
42:52
You don't cut prices if you sell something that lots of people want. You raise them. But what if the story changes?
Speaker 4
42:57
What if the market's getting competitive and competitors are nipping at your heels, causing potential customers to rethink their orders. Then you can cut price to where you can still sell the merchandise without alienating prospective buyers. There's the unemotional way to view Ford F-150 Lightning's price cuts that we've heard about today, as much as 70% for certain models. Current orders will be re-invoiced.
Speaker 4
43:21
Everyone's freaking out about this, right? That was all day you heard about it, which is why the stock sold off nearly 6% today alone. I don't blame anyone for being emotional about that. We know there's a waitlist for those who want these electric pickup trucks.
Speaker 4
43:34
I spent a lot of time with Ford CEO Jim Farley not that long ago and he was realistic about how he's crippling production to meet demand. But now Tesla's out there with a truck, GM's not far behind, Rivian's selling more electric trucks than Ford is at the moment. So who knows how sticky that waitlist really is. Look, we own the stock of Ford for the Chavel Trust.
Speaker 4
43:51
I play with it open hand. Obviously, I didn't want to see this happen. I know that the big money for Ford remains in the internal combustion engines, the profit center for the enterprise. That said, I don't know how you can cut prices like Ford just did and then make it up in volume The good news is the prices of different models are well above where they were when Ford introduced these vehicles and the cost to make Each truck is now below where they started out That's a bit The bad news is that I don't know if the company can still make its earnings estimates, which you now consider to be aggressive by Wall Street, hence today's stock weakness.
Speaker 4
44:24
Oh, and it sure doesn't help that the price cuts came out on the same weekend as the launch of the Tesla Cybertruck. Even though I believe they're in 2 different markets, 1 belonging to the cold of Musk, the other the small business owner, the optics, suboptimal. What's really going on here? I think electric vehicles are losing their excitement factor.
Speaker 4
44:41
Some people are discovering that they miss their old-fashioned gas guzzlers and the ease with which they can fill it up. Others are saying that they now can comparison shop. So automakers have to price electric vehicles like regular internal combustion engines. So even if they may be a wait list, why not wait and see how much a new Silverado from GM costs or take a look at that Rivian or of course the Cybertruck.
Speaker 4
45:04
Ultimately unless your costs come down and that's what's happening with Ford there'll be no profit anyway. But if an auto company doesn't make electric vehicles that auto company will eventually be doomed. We all know that. Am I disappointed in the price cuts?
Speaker 4
45:21
Yes. Now I drove an F-150 Lightning when we were in Dearborn recently and I thought it was the coolest thing I've ever driven. I never thought it was a commodity that could be part of a price war. Even as it's still selling at a price that's higher than initially planned, who knows whether this will lead to a cost-cutting spiral.
Speaker 4
45:38
But 1 thing we do know after today is the bloom may be off the electric vehicle rose, as we always knew would have to happen eventually when there's mass adoption. It just happened a little earlier than I expected. I like to say there's always a bull market somewhere and I promise I'll defend it just for you right here on Mad Money. I'm Jim Cramer.
Speaker 4
45:58
See you tomorrow. Last call starts now.
Speaker 15
46:03
All opinions expressed by Jim Cramer on this podcast are solely Cramer's opinions and do not reflect the opinions of CNBC, NBCUniversal or their parent company or affiliates and The poll starts now. Cramer on television, radio, internet or another medium. You should not treat any opinion expressed by Jim Cramer as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion.
Speaker 15
46:27
Cramer's opinions are based upon information he considers reliable, But neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy and it should not be relied upon as such. To view the full Mad Money Disclaimer, please visit CNBC.com forward slash Mad Money Disclaimer.
Speaker 8
46:42
I'm Morgan Brennan, host of CNBC's closing bell overtime and manifest space. With rocket launches marking new milestones, thousands of satellites orbiting the earth and human spaceflight increasingly common, the new space race is on.
Speaker 5
46:57
All systems are good.
Speaker 8
46:58
I'll speak with the mega moguls and industry insiders investing in the next frontier and guide you on how to get in. Make sure to listen to Manifest Space with me, Morgan Brennan, by following wherever you get your podcasts.
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