Listen to Jim Cramer’s personal guide through the confusing jungle of Wall Street investing, navigating through opportunities and pitfalls with one goal in mind - to help you make money.
Mad Money w/ Jim Cramer
Mad Money w/ Jim Cramer 8/15/24
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And I promise to help you find it. Mad money starts now. Hey, I'm Kramer. Welcome to Mad Money. Welcome to the Kramera. I'll be with my friends. I'm just trying to make you some money. My job is not such entertaining, but to educate and teach you. So call me 1-800-743-CBC. Tweet me, it's Jim Quaver. You can't blame anyone for missing this spectacular rally that started 10 days ago. That was easy. You know nothing. It took us all by surprise. Almost everybody. But after daylight today, when they down gained 555 points, as we drop 1.61%, and the NASDAQ scores 2.34% higher. You know what? It's worth thinking back to what happened in the Monday meltdown two weeks ago, just to get a little much-needed perspective. Now, I don't want to just rehash the turn. You don't need this weatherman to know which way the wind blows. Instead, here's what I want to do. I want to talk to you about the obstacles to catching a tradable bottom, because they are incredibly powerful. At the lows, two weeks ago, everybody wanted to... S-S-S-S-S-S-S-S-S-S-S-S! Not... Bye-bye-bye-bye-bye-bye-bye! Even though in retrospect, it was a tremendous opportunity to purchase some high-quality stocks at bargain basement prices. (audience cheering) Now, those stocks from the initial recliner took people by surprise, and then it reverberated through the stock market. Well, in that Monday, two weeks ago, we saw the doubtful 2.6% S-M-E lose 3%. And the NASDAQ, Nosedive, 3.43%. It was a horrible, dispiriting session. (audience cheering) Why did that happen? Like, the expiration was very mysterious. We were told that the yen carry trade broke up, and apparently that's a massive and lasting problem, right? Sometimes, just to see how bad it is, it pays to look at the next day, so I'm reading the Wall Street Journal, 'cause it's the most authoritative real-time account of all the pure-pended pain and fear people experience. Under the headline, and I quote, "Unraveling trades fuel market route," we read, quote, "The unwinding of some of Wall Street's most popular trades intensified Monday, sending Japanese stocks to the worst cases in the 1987 market crash, and WALP and U.S. technology shares." For the vast majority of home gamers, and it could be a number of professionals, this excuse sounded ominous, popular trade. It must have been hundreds of money matters involved. A mention of the devastating '87 crash, where Japan's meltdown hurled at our own horrific collapse. When they say tech was the focus, doesn't that mean the magnificent seven are done again? Somehow, they must relate to this mysterious yen carry thing that helps send the nuclei down, and it's down in 12% that day. Many thought there'd be some inevitable contagion. What top of that? We discovered that the smartest investor in the world, Warren Buffett, was selling tens of billions of dollars worth of stocks, including a lot of Bank of America, a long time holding, and Apple, a stock he said he went to hold on to his least last month. So we had the best of the best investors lightning up while the averages collapsed. It made you feel like an idiot for buying stocks or even owning them. If Buffett's pulling out a Bank of America, didn't you have to sell the banks, even though Bank of America had the best quarter of the majors, right? If he's selling Apple, I mean, he must know something's wrong, right? I mean, he knows everything. So why don't we just shoot the stock first and ask questions later? It's only natural, right? The yen carry trade implosion, Buffett blow out. Didn't you know what that is? I want too much. But if we parse these negatives, we discover something that is so different that it's almost embarrassing. In the end, these turned out to be incredibly flimsy reasons to sell. Alibis for dumping stocks sound very convincing when the averages are getting crushed, don't they? But you need to put them to the test or else they'll lead you in the wrong direction they often do. For example, the character. All right, now that's just probably whenever you go, ooh, character. That's genuine Wall Street gibberish for borrowing money. The fund managers who were borrowing money were borrowing it in the end because Japan is some of the lowest interest rates in the world. But when the Bank of Japan suddenly raised rates a couple of times, the yen spiked in the cost of borrowing money in Japan's sword. Just think of it like this. They have an adjustable rate mortgage, and you take it down to 3%, and somebody goes higher like that. Maybe to the point where you can't afford the house anymore. In short, the institutions that were borrowing yen, and they weren't that many, it wasn't hundreds. The ones that were borrowing yen suddenly had to raise money immediately, which is why they sold practically every stock under the sun, including our great stocks. Yes, it was a popular trade, which meant the world of a lot of four sellers. That was a huge part of why the market got crushed. Too many complacent portfolio managers borrowed too much money, thought they were really smart, they turned out to be dumb, they're hiding right now, you won't know where they are, or I would put every single one on them in the wall of shame, right, behind me. Pretty simple. More importantly, it was never a long lasting problem, it was one off, even though the papers made it sound like it was gonna be with us forever. The other pillar of paying Warren Buffett selling back American Apple? All right, Buffett's the best there is, so he's the best there is. Some people looking at his moves and end up extrapolating to the point of absurdity. And that's why they dumped the banks, that's why they dumped Apple. We heard it was based on Apple's supposedly weaker Chinese sales, yet CEO Tim Cook told me, just a week before the sales were surprisingly strong, and I detailed why that was. For the rest of the week, until we got a positive jobless claims number Thursday morning, we labored under the delusion that our economy was headed for a recession, potentially a worldwide recession, all because of Japan, and the safest thing to do was to sell. It didn't matter that Japan only bounced back 10% the next day, what matter was the smart money was getting out of the whole asset class, and we felt like dope's hanging on. In reality, it was the dumb money that was getting out. In part, because Warren Buffett who won up as a businessman is nervous. Of course, we knew nothing about why he sold. Maybe he was just ringing the register, the games. Nobody cared. It just made everything more fraught, more fearful. And of course, just so we know, Japan, I mean, who knows? There was absolutely no contagion. Now, let's take a step back. There are two parts to every sell-off. The average get crushed when you have a wave of sellers, like these knuckleheads with the yen money, and then the other part of it though, is a lack of real buyers. We knew who the sellers were, these troubled money managers, and we thought we knew their motivations. But if you wanted to do something, if you wanted to buy, you ran into a real problem. It is earning season, and it's a big one. And while you might hear that it's going well, we actually lack a series of big beat and raise quarters. We got a lot of such surprises. When management left their full year forecasts unchanged, which is basically implicit, guide that. So very few stocks seem like enticing bias at that moment. Even though the selling turned out to be based on pretty much nothing, hardly anything looked like it was palatable, so to speak. Like you wanted to buy it on the dip. When I scanned the average report from the season, few companies actually beat and raised. Let me take them down for impact, write them down. First, we had two tech companies. That's right, only two. They gave you fantastic sales, earnings, and forecasts. That's the magic toy kit that makes people feel comfortable by even the tsunami of selling. And those two were, ServiceNow. And Mark Zuckerberg's meta platforms. They both blew away the numbers and gave you super forecasts. Interestingly enough, both companies are using AI powered by the latest and greatest of NVIDIA's chips. Matt, in particular, told a great story about how it can use AI to design and add programs that are fantastic with a great return on investment for advertisers. That's an unbeatable combo. One drug company, Eli Lilly, gave you the best beat and raised quarter of the entire season. And that's thanks to the GOP-1 weight loss drug. Coca-Cola overnight said numbers, concerned with B or Thoning. Aerospace shine, GE aerospace, filed by RTX, and then Hal met. We call that Hal, I met my mother, but it happens to be a company that designs screws, fasteners, they call them, for plates. Two simple industrials made the cut. Parker Hanifen, it was very nice. And Eaton trouts the numbers by doing prosaic things. The cut these industrials do. And Uber delivered incredible quarters, showing that people are still going places and doing things. That's it though. Oh, and sure we can throw in Walmart now, but it's really too late to buying opportunities probably over. The bottom line on this incredibly important story that occurred over the last two weeks, there will be other buying opportunities in the future. Other crazy sellers. But let's remember that very often these market meltdowns are driven by nothing. What happened two weeks ago was pure market mechanics. Nothing to do with the fundamentals. So keep that possible in mind. The next time the averages get clumped, it might be the opportunity you've been waiting for to do some buying. (loud clapping) Why don't we start the calls with Peter and Florida? Please Peter. - Hi, Jim, Peter in Florida. One question if I may. AT&T, let it go or should I stay? - Let it go. There's a lot of better opportunities, including by the wait team mobile, which is really a horse. Why don't we go to Greg in Tennessee while we're at it? Greg. - Good day, Mr. Kramer. It's a pleasure to talk to you. - Right back at you. - About seven months ago, I bought a stock and what I thought was solid and consistently profitable company and it's been terrible. It feels like I've got another intel on my hands and I've known about 25%. I do think it's time to sell to cut my losses or hang on to the new quarter. - Oh, no, don't sell new quarter, okay. New quarter, new quarter is in the antecical company. We would like, we sometimes want these big steel companies to be something other than what they can be. In the end, they are still tied into the earning cycle. They're still tied into any downturn. But when the Fed starts cutting rates, the first stock people are going to reach for, including me for my travel trust, will be new quarter. So please do not sell the stock. All right, look, you have to remember that very often the market meltdowns we get are caused by nothing. What happened two weeks ago was purely market mechanics. All the stories were wrong. So keep that in mind the next time we get a sell off, it's often based on nothing. I may have anybody tonight, two years since the implementation of the inflation reduction, how is Jacob's engineering fair? I'm good to talk to the CLF attorneys. Then Walmart beat on top and the bottom line and I just for your guidance, as I just mentioned, citing healthy consumers. So could it be a sign of good things to come? I'm getting into the retail details. Plus, I am under the radar housing play that you told me about and telling you, well, maybe it'll be worth by, maybe not. I'm turning into a homer. So stay with Kramer. (upbeat music) - Don't miss a second of Mad Money. Follow @JimCramer on X. Have a question? Tweet Kramer, #MadMensions. Send Jim an email to madmoney@cnbc.com or give us a call at 1-800-743-cnbc. Miss something, head to madmoney.cnbc.com. - I've got prostate cancer, but I really wanted to make it to the big game with my grandson. And here we are. (crowd cheering) Go, go, go! - With Erlita, Appolutivide, being there is possible. Erlita is a prescription medicine used to treat prostate cancer that has spread to other parts of the body and still responds to a medical or surgical treatment that lowers testosterone. Erlita may cause serious side effects, including heart disease, stroke, or severe skin reactions, which can lead to death, falls, fractures, and seizure. 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We've been so focused on the Federal Reserve that it feels like we've forgotten some big government-mandated trends, like the stunning amount of money to buy administrations in your market for infrastructure spending. Even a year ago at this time, Wall Street was eagerly searching for infrastructure winners that could feed at the Federal trough, so to speak. I don't think anything's changed here, but the stocks have lost the excitement lost here. Take Jacob Solutions. That's an engineering and construction services firm that stands to be a big winner from all the infrastructure spending, especially after they spin off their critical mission solutions in cyber and intelligence businesses to a mentum by the end of next month. So it's almost here. When Jacob's reported last week, even though the headline numbers were mixed, their backlog was wrong, focused on what's terrific. So let's take a close look with Bob Pergotta. He is the CEO of Jacob Solutions. So learn more, Mr. Pergotta, welcome back to ManBuddy. - Jim, always great to be here. - All right, it's about, we're getting close in course. It would fill our viewers in, 'cause when we saw you last time, it was, let's say it was in its infancy, but now we're really about to get the pure play that a lot of people want. - We're right there. Jim, I think last time we spoke, it was in December. - Yes. - And we had a long road ahead of us. - Right. - But thanks to a great team and working with all of our folks, we're right there. We've gotten the regulatory approvals almost, and by the second half of September, we'll be on our way. All right, so what will remain co-look like? - Remain co is gonna be a very focused business on infrastructure and advanced facilities. We also have PA Consulting, which we have a majority investment in, and does front-end consulting and advisory on infrastructure-type work. So the end-to-end lifecycle is really what we're gonna be focused in on. - Okay, so help me here. This morning, my partner David Faber turned to me, and he goes, you know, Jim, none of the money's been allocated yet for some of these programs. We've taken the chips, I know you're excited about the chip, but it hasn't even come out yet. Where are we really in all the IRA and chips money in terms of how far along the whole process is? - So maybe we'll go through each. - Yes, please. - On IIJ, which is really focused in on infrastructure. We're probably 60% appropriated, 30% spent. And so the money has been flowing to the states. Remember, there was two parts. There was a top-up on the formulaic transportation-type spending, and then there were grant money. And so the grant money has been flowing, as well as the top-ups on the formula-based work. So that's been going, and we've seen that in our pipeline. - And you have a lot of that. - We have a good amount of it in our pipeline. So double digit growth in the top line of water, as well as in advanced facilities, which is kind of the seguated chips. The chips act, remember, those companies had already started those fabs, and then made applications for the monies. - Okay, so whether they've received it or not, I think that's debatable. But those fabs and the chip manufacturing infrastructure around the country is well underway. - Now, let's talk about one of those. There's a question that was asked of you when the cops call about Intel. And Intel, this morning we learned that SoftBank didn't want to part of it with Intel, because they didn't feel they were so-called up the snuff. With the kind of idea that maybe they've taken on too much, and they may not have, necessarily, the money to do it all. Is there a way to be sure that Jacobs is never caught, not kidding paid? - No, no, especially not with Intel. Intel's been a long time client of ours for over 40 years. Resilient company, and yes, Jim, some things that are in the news right now, with regards to where they are, were bullish. It was a bold move that Pat made back in '21 about turning into a foundry. And a lot of that infrastructure is well underway. So, we're comfortable there. - And do you feel good about the book field of politics that just in case it's kind of like a belt and suspenders? - I think it'll still be there. I think what's even more exciting when you think about kind of the chip industry in the US, is what's happened with the others. If you look at Micron, or some of the other Asian manufacturers that have come here, those fabs are well underway, and producing that infrastructure that would-- - Are you doing the Taiwan sending in Arizona? - We're not. - No, that's a gigantic way to really count. I'm conscious that some of these are all, there's a lot of them in New York state. I mean, they're kind of everywhere. - They are, and so not just in logic, but in memory as well. And so this is kind of high bandwidth memory. I'll give you an example. - But it's Micron specialty. - It's Micron specialty. And if you look at an AI chip, there's probably more Micron silicon on that chip than there is in a video silicon. So it just tells you the power of Micron. - So you spent a lot of time with Sanjay Morodra, figuring out what to do next. - I've met him, I've met him, a great, great person. - Yeah, he really is, he's died of Mic. Now, speaking of died of Micron, you know what you like what David Ricks is up to, with GOP-1. And what I don't think people understand, particularly the people who believe that everybody who challenges them is gonna be a winner, do you please tell people how hard those places are to build? - They're extremely difficult. - And why? - The complexity inside the facility. You look at the outside end, Jim. This looks like a warehouse. - Right. - So we're going inside, and this is a very sophisticated arrangement of vessels, reactors, heat exchangers. And the layout is important. So that manufacturing layout is extremely important when you're going from a bench scale therapy to commercial production. - Well, then it is like in that sense a Micron high band with foundry. - Very much so, this is why Jacobs is in both. - Right, and you try to, you strive for actually the most. You're in that niche of the most complicated jobs, right? You're not just building simple warehouse. - No, I'll give you an example on Life Sciences, Jim. We only work with those tier one clients. - Right. - Who are advancing science and therapies beyond ever? - Well, I've got to tell you, I think that that's a great gating factor. One of the reasons why I wanted to have Jacobs the company is they're just not a lot of other companies. I mean, without saying the names, but how many people can really bid on these very complex jobs? - To say a handful, that'd be a lot. A couple, globally. - Really? - At that scale and that type of speed, only a few. - So how often do you follow around a company like you? So, Lily will build one here. They might want to build one in Germany, maybe build one even over in Asia. Are you a leg up on them if you've already do it here? - We go with that client all over the world. - That's fantastic. - Our Life Sciences clients procure centrally and deploy capital globally and we're a global company. We go with them. - That's fantastic. - Do you think about what would happen to change the White House? Are you more focused on Congress? Are you focused on the bills that are in that are now law that you don't even have to worry necessarily? Or is it you have to keep an eye on? - It's probably more the latter. This is law. It was bipartisan sport for these stimulus acts and all states are benefiting. This isn't red states or blue states. It's the United States that are benefiting from this. - Okay, so just to pin things down, if I buy Jacobs now, it's a little convoluted. If I wait a couple of months when I buy Jacobs, I'll get all the things we just talked about, correct? - You would, but also, Jim, if you buy now, you get that with the added benefit of Momentum, which is gonna be the merge company that's coming out. They just had their capital market stay-- - But they'll have their own sub-diver CEO. - They'll have their different CEO, different ticker, but with the board of directors and exec chair, the majority of the board of directors and exec chair and the COO that came from Jacobs. - Well, I'll tell you, it's a very exciting time. Everything that you told me a few years ago has come true. You earned patience in my part, and I have adopted that patient attitude, but it's very exciting what you're doing. - Thank you, Jim. - Very exciting. That's Bob Bugatti, he's the CEO of Jacobs. It's letter J, guys, Jacob Solutions. They might be back after the break. - Coming up, what's driven Walmart to record highs? Kramer breaks down the earnings report that's brought heat to the streets. Next. - Walmart Plus members save on meeting up with friends. Save on having them over for dinner with free delivery with no hidden fees or markups. That's groceries plus napkins plus that vegetable chopper to make things a bit easier. Plus, members save on gas to go meet them in their neck of the woods. Plus, when you're ready for the ultimate sign of friendship, start a show together with your included Paramount Plus subscription. Walmart Plus members save on this plus so much more. Start a 30 day free trial at walmartplus.com. Paramount Plus is central plan only. Separate registration required. See Walmart Plus terms and conditions. - Imagine earning a degree that prepares you with real skills for the real world. Capella University's programs teach skills relevant to your career so you can apply what you learn right away. Learn how Capella can make a difference in your life at Capella.edu. (upbeat music) - This earnings season, we've seen a lot of hand-ringing about the state of the consumer and the state of retail. Even Amazon gave us cautious vibes, but not all retailers are in the same boat. There's one who Walmart proved that when you offer shoppers great value, they'll keep showing up. That's how Walmart managed to report a glorious quarter. They delivered 4.2% same-store sales growth. Wall Street was only looking for 3.4%. With the vast bulk of that coming from transit action growth, not higher prices, which is not what you want. You don't want this number to be made by inflation. When you keep prices at a reasonable level, the traffic takes care of itself. This is what allowed Walmart to post a sizable revenue beat with expanding gross margins and a two cent earnings beat off a 65 cent basis. Both the core Walmart business and Sam's Club put up just fantastic numbers in the US. Walmart International had softer sales, but its operating income came in much higher than expected. Imagine we're also a good thing to say about Flipkart, their e-commerce subsidiary that's a major player in India. In fact, this company's even doing well in China, with strong membership trends and especially strong performance from Sam's Club over there. Everybody else is getting crushed by the China's weak economy, but not Walmart. What else? All right, now here's a starter. Walmart put up 21% e-commerce growth worldwide, driven by a store-fulfilled pickup and delivery, their nation advertising business. The margins here are insane, grew by 26% globally in their loyalty program. Walmart plus had double-digit membership growth. Best of all, so many other retailers, Walmart raised its full-year forecast across the board. They raised their revenue growth outlook from three to 4% range to the 3.75 to 4.7 bars of range. It might not sound like much to you, but when you're dealing with low to mid-single-digit growth, that is meaningful improvement. They also raised their full-year earnings per share outlook by nine cents per share at the midpoint. Remember, Walmart only beat by two cents this quarter, so the seven cents, they're coming for the rest of the year. So many companies just won't raise. These guys did. In fact, this rate's really coming from the fourth quarter because the earnings guidance for the current quarter came in and had light. That little fly in the limit wasn't enough to prevent the stock from shooting up really 7% today. This isn't a gigantic company, people. And by the way, not a tech company, although it's got a lot of tech. Why did this happen? Because as strong as the numbers were, the conference call was heavenly. It was fantastic. Just listen to what Walmart CEO Doug Luke Millen had to say on the quote. "So far, we aren't experiencing a weaker consumer overall." Boom, very encouraging. He goes on to say, "Around the world, our customers and members continue to want four things. They want value. They want a broad assortment of items and services. They want a convenient and enjoyable experience buying them, and they want to do business with a company they trust. Walmart checks all four boxes." That was easy. They basically laid out a playbook for how retail can thrive in this environment. I don't think they should help other companies. Maybe other companies can't do it, but just right there, it's like here, and you want to take us to all of this is what you do. I was pleasantly surprised when McMillen stressed out just price, but also convenience. Jim Management used the word convenience 11 different times on the conference call. Well, everybody knows Walmart is incredible prices, which should theoretically be enough to drive traffic at a time when consumers have less money to spend. Thanks to years of inflation, soft economy. These guys made it clear that convenience is part of the secret sauce that keeps people coming back. That makes sense to me. Remember, even though we've got a very value-conscious consumer, she keeps paying up for various online delivery services, even though it's much cheaper to take out. DoorDash, Uber Eats, and Instacart are all doing well because these days, people value their time even more than they value their money. McMillen went into more detail with the steam and he got a question from BMO analyst, Kelly Banya, during the Q&A session of today's earnings call. She wanted more color and how Walmart's taking tons of market share, thanks to Gainesville, get this upper income households. Historically, that really hasn't been their demographic. Now, I have to tell you, my daughter and I, we just, well, both my kids, we love shopping at Walmart. But we tend to assume most of which people wouldn't gain, just had foot in one of these stores. Even though I gotta tell you, they are just tired of it. However, McMillen insisted value matters to everyone, listen to this quote. As it relates to hiring come people, they can buy more discretionary goods and they can pay more for convenience and we're offering all the end quote. That's exactly how we feel when we go. Now, think online delivery fueled by Walmart plus memberships. Throw in the new remodels and he thinks he can keep taking share with higher income consumers. He's right. If you go there, you'll buy the stock. Now, there was a lot of interesting stuff on the call. We're talking about the biggest retailer in the world. Here's, they have some keen insights, even more you'd be expected. For example, gender of AI, it came up McMillen said Walmart's using it to improve their product catalog. As he explains in a quote, the quality of the data in our catalog affects nearly everything we do from helping customers find and buy what they're looking for to how we store inventory in the network to deliver orders end quote. According to him, copy would have needed to hire nearly 100 times as many people to handle all this data in the same amount of time without gender of AI. Well, there you are. That's the best use case I've heard yet. You see that or it would have taken much longer to get organized. That's the other way you look at it. So who says gender of AI doesn't have a use case? It's just a Walmart fortune. I keep waiting for a major grocer to mention the hit that the food business has to be taken, right from the GOP that's what it has to. The weight loss drugs that eliminate cravings, Walmart's the nation's largest producer. And they did actually mention GOP that's once in the college school. But not in the way I guess I was looking for. Instead, we learned that their health and wellness business contributed to the strong same store sales, primarily thanks to sales of GOP that's when drugs. They'll acknowledge it on the pharmacy side. But we'd still like to know more about what is doing to the grocery side of the business. Right now, they say it has not been negatively impacted. Overall, this was a very strong set of numbers. And it came just a couple of hours for the better than expected July retail sales report. That combination was a huge driver of today's remarkable rally. When Walmart crossed these numbers, I said, uh-uh, no, not today's Satan. This could be a good one. But the bottom line, don't make the mistake of assuming that Walmart's results give you some kind of generic where you don't need a consumer. You can't just extrapolate from the best operator in the industry, everyone else. This quarter's a testament to the fact that Walmart's management keeps doing an excellent job. I hope the rest of the retail can come close. But when it comes to breaking order with the sole exception of Costco, Walmart's in a league of its own. And you know what? I think it's got more room to run. Why don't we take calls? Why don't we go to Mike, Mike, Mike, in Illinois, Mike? Jim, how are ya? I'm doing well, Mike, how about you? I'm great. I have a nice position in TJX, and I'm wondering if I should add to it before its earnings come out on the 21st. Okay, so that's a dicey question 'cause we put a little gun to my head and I say take the gun away. TJX historically has not performed well around our eyes. So what I would do, it was up very nicely today. It was up 20%. I would wait 'til after to buy because it tends to collapse after they're very conservative. People keep expecting them to say great things. They don't play it that way. Buy it after not before. How about go to Michael in Tennessee, please, Michael? Hey, Jan, boo ya. This is for the National Tennessee. Oh, I love that city. Yeah, it's great. Born and raised. Hey, Jim, my question is in regards to Cabo. The company has plans to have a thousand stores open by 2032. What are your thoughts on Cabo's growth strategy compared to what-- I love Cabo's real. Cabo's real, it's the best new concept. I like it, it was down 10 points last week when we recommended. So I don't know, it's all the way back up. Why don't you give it a rest before you jump in? All right, the quarter of Walmart just delivered is a testament to the great job. From its management team, they are really good. I hope the rest of retail can follow along, but besides Costco, which we own for the travel trust, Walmart really is an illegal. So people have got a lot of man tight. I'm eyeing one under the radar housing player that I first learned from Ukraine, America. Then, what's in and what's out in this market? If you're bottle-boxing in the tech sector, I'm going to reveal what to watch. And of course, all your calls are rapid-firing tonight. So just go lightning round. So stay with Kramer. Whenever you call me and ask about a company that I don't know or haven't been following, I always promise to do some homework and then circle back later with a more informed opinion. As much as I love talking about my own favorite stocks, especially the ones we own for the travel trust for the CBC Investing Club, at the end of the day, the show is about helping you become a better investor. Which means I need to be able to address the stocks that you actually care about. Otherwise, what's the point? So let's catch up on some summer reading. Back on July 29th, Jeff in Connecticut stopped me with a company called Four Star Group. That's F-O-R for all you home gamers. I said I'd get back to my, I did not know this company. It's an outfit based in Arlington, Texas. It represents a key link in the home building food chain. See, Four Star is what's known as a residential lot development company. One that operates in 60 markets across 24 states. Their business is pretty straightforward. They acquire an entitled real estate. Then develop that land into finished residential lots by building the necessary infrastructure. They then flip those lots of the home builders for a nice profit. Home builders love this set up because it allows them to keep less land on their balance sheets. In fact, DR Horton, the nation's largest home builder, like Four Star so much that they got into a bidding war for it back in 2017. They ended up buying up 75% stake in the business. At this point, that stakes down the 62% because Four Star issued new stock. But it's still a subsidiary of DR Horton that happens to be publicly traded. More on the subsidiary status in a second. You know what, frankly, I had to take to endorse this kind of situation. I think to myself, why would I own this subsidiary when you can just own the parent, which controls his destiny? But man, the DR Horton relationship has been great for Four Star. From 2018 through 2023, the company sold 1,000% increase in a lot sold. Their revenues grown from less than 200 million in 2017 to $101.44 billion this year. Their earnings have roughly tripled over the same period. However, Four Star stopped pretty much flat-lined until the market wide bottom in the fall of 2022, at which point it finally took off. Remember, when the Fed started rapidly raising interest rates, Wall Street assumed that everything connected to housing was toast. In reality, as you know from watching the show, the housing shortage in this country is so severe that even sky-high mortgage rates didn't start with doing much damage to home sales until pretty recently. At the same time, existing homeowners don't want to sell because of the so-called golden handcuffs. They locked in ultra-low mortgage rates when the Fed was in easy money mode. And they don't want to trade those mortgages for much more expensive mortgages than they need to buy another house in this environment. All right, that's been great for homeowners because they're basically the only real source of additional supply, the only inventory around. It's given that tremendous pricing power, which they have and they have great gross margins. And that strength flows down the home-building food chain to Four Star, which saw it stock roughly quadruple from the lowest in October 2022 to its highest this past March quadruple before cooling off a bit in the last few months. Now, this thing peaked around $40 in the spring and now it's closer to just under $30. Now, you might think I'd be all over this one because I spend so much time recommending the building suppliers and tool makers and even lumber companies lately and anticipation of some Fed rate cuts, rate cuts that should provide a huge boost to the homeowners. If mortgage rates come down and buyers get more aggressive, the homeowners will need to buy more land from companies like Four Star, right? Not so fast. Remember the golden hank of something Home Depot mentioned earlier this week that I had never used the term before? We've got all these existing homeowners who won't sell until mortgage rates come down. But if you think the Fed's going to start cutting rates, that unlocks the golden hank offs. It means existing homeowners will finally start listing their houses, which is bad news for an affiliate Four Star. More importantly, it's like these guys are doing well at the moment, Four Star disappointed badly when it reported mid-July. Thanks for a nasty 15% decline. The decline in lot deliveries, much worse than expected, by the way. Sales were down 14%, earnings down 18%, both missing the estimates by a mile. Imagine it'll also cut their four-year closings forecast. So demand's clearly evaporating here. But Four Star's got 102,100 lots. That's right, 102,100. Up 40% year over year, meaning there's stuff with tons of excess real estate. Now it doesn't help that the company's a little too concentrated in some pretty wobbly housing markets. More than 58,000 of those lots are in Texas, which is peak for the most part, and Florida, which I think is definitely peak. For the last few years, there's been five, as both states have had tons of immigration post COVID, but they're not starting to struggle a bit with lots of new supply coming online in those markets. So you have to expect less new construction, and that means Four Star should sell fewer lots. Now, what I also worry about this Four Star relationship with its parent company, GR Horton, sure this partnership has worked well for them so far, but at the end of the day, GR Horton has a controlling interest in Four Star. When you're biggest customers, also you're biggest shareholder, yeah, problem. When it comes down to it, Horton will do what's best for Horton shareholders, not Four Star shareholders. And short, if you own this one, GR Horton has the wheel, you're just a passenger. Again, there are very few situations where it's worth owning someone else's publicly traded subsidiary. If you like Four Star's business, and you believe as I do, the 1,000 complex will indeed get a huge boost once the Fed starts cutting rates. Well then, let's think about this. Why wouldn't you just buy GR Horton instead? You get Four Star, you get a quality homeowner, and most importantly, your body shares in a company that's actually in control of its own destiny. Let me put it this way. Since GR Horton acquired a controlling interest in Four Star Group back in October 5th of 2017, Horton's stock is up 300 and 32%. Four Star's, how about 80%. Horton's dramatically outperformed both the S&B 500 and the S&B Homeowners ETF. It's a really good company. Four Star's dramatically underperformed both benchmarks. In fact, whether you're looking at the last three years or five years and one year doesn't matter, GR Horton's significantly outperformed Four Star in every single timeframe. Same goes for 2024. Horton's up more than 15% for the year, and Four Star's stock is down more than 10%. So here's the bottom line. When you have a choice between a parent company and its publicly traded subsidiary, you almost are always better off with the parent. I'm not that sanguine about Four Star's core business, even once the Fed starts cutting rates. But even if I love this company, I'd still tell you just bet on GR Horton instead, because Horton owns 62% of Four Star, which means they are calling all the shots. They have on his back after the break. (upbeat music) - Coming up, hit us with your best shot and electrified fast fire lightning round is next. (dramatic music) (dramatic music) - It is time to talk about the light round question, but that's what we call round five. Same minute stock. I'll tell you in a bar by buy, sales will sell, just because I don't know the core stock questions at the time. I stay at prims, we're gonna have to go and fight. Plan this out. (buzzer buzzes) And then the lightning round is over. Are you ready, ski? Yeah, it's over the light round. I'm craving to drive it. Let's start from Cody in Kansas, Cody. - Hey, Jim, it's Cody Reynolds calling in from Tonganak to Kansas, not too far away from Kansas City. And I will say I love my self-embarbit. You and Arthur is over playing, beemers all the way. - I think you're right, actually. When we're out there, it was minus nine, so I couldn't feel my mouth anyway. What's happening? - I wanted to hear your thoughts on snowflake. They just announced a partnership with TransUnion last week. - Yeah, the latest feedback I'm getting about snowflake is that they have some difficulties. They're challenged by a couple of companies. It's kind of like the one that's around for those guys right now. I think I'm gonna hold off from recommending it. Let's go to Sandy for California, Sandy. - Hi, Jim. Who ya? - Who ya? - Thank you for helping us, all of us. You're doing a great job, Jim. - Oh, thank you. Thank you very much. - Yeah, I'm curious about royalty karma, RPR. - You know what? I always thought there was gonna be more to this stock than there has been. It's really been a bit of a bust. I feel badly. I thought it was gonna constantly have a bigger, bigger, bigger yield. A bigger dividend, and it hasn't worked out. And as far as I'm concerned, it's just a so-so situation. Let's go to Arlene and Texas, Arlene. - Hi, Jim. Long time admire first time caller. - Thank you. - So, the stuff I'm curious about is cores. What are your thoughts about that? - Now, there's two cores. There's the one I like, which is tap, T-A-P, but that's a joke. And then there's core scientific. And core scientific is a very overvalued situation. Prince will be because the fact it's never made any money. But it is another play on a crypto. If you like crypto, buy crypto. Let's go to Bobby and lose he had a Bobby. - Hey, Jim. - Bobby. - With automobile prices coming down and potential interest rates cuts approaching, what's your opinion on our financial? - Buy, really simple. You laid the case out. Well, you're absolutely right. Let's go to Vince in the bottom, Vince. Hey, boo, you guys, Jimbo. My name is Vince from Vegas. They come in Vegas. Vinnie, how are you today? - I'm good, Vegas, Vinnie. How are you? - Good, I'm Jim and Jimmy. Let's talk some stock. M-T-L-H Norwegian Cruise Line. Been in it for two years. The dollar cost average is $20 a share. Every time quarter leaves come out, they smash Wall Street expectations. Most analysts say it's almost a $30 stock. Give me some good news, Jimbo. - Royal Caribbean. There's the good news, Jim and Vince from Vegas. Because I like Royal Caribbean, because every time that stock comes down, there's thousands of buyers come in, and every time the Norwegian comes down, nobody cares. It's good to Eli, Connecticut, Eli. - Hey, Jim, love your show. I'm a high schooler. - Thank you. - New investor. - I feel like that's for this. But I'm a die-hard giant, man. I've had five in a little while now. I like the 6% dividend, but it doesn't want to move higher. What are your thoughts? - Well, first of all, I think that when you gave away safe one to us, that was very kind. I never really saw that coming. I never knew we were such best friends. So it's good. Thank you very much. Second early, Pfizer is kind of like who we gave you. Who did we give you? I forget. That's right. Pfizer has a 5% yield. It's got some interesting drugs. And I'm sorry, but it's, you know, look, you bought one guy for 60 million, and he turned out to be a penny stock. Let's go to Ross in Arizona, Ross. Buh-buh-buh-buh-buh-buh-buh-buh-buh-buh-buh-buh-buh-buh. Jimmy Hill. Joe, yo, man. What's shaking? Ah, not too much. Ah, go with more than 500 robo-pack. He's already on the road, and plans to double that by the end of the year. Strong cash flows, and a 4P in the mid-signal digits. What are your thoughts on Baidu? - All right, the problem with Baidu is if it were in any of the other 172 countries in the world, I'd probably say buy it. But it happens to be right now in a communist regime that is pretending to be capitalist. They are communists. I don't want to buy anything from the communists. They have historically been people you don't want to buy for. Let's go to Raymond in Kansas, Raymond. - Hey, how are you doing, Jim? - Oh, Raymond, I'm a real dynamite. How are you? - I'm doing great. It's Raymond, like everybody loves Raymond. - Okay, sure, that's great. - I want to know about the Chinese stock, the flying cars, X-Ting. - Yeah, it's about time to buy a flying car stock from people's republic of China. I've been thinking about it and thinking about it, and I said, there's nothing like buying a flying car from President Xi, but maybe I'll take a pass. And that, ladies and gentlemen's conclusion, of the lightning round! (buzzer) - The lightning round is sponsored by Charles Schwab. (audience cheering) - It's hard to keep track of the Wall Street fashion show. Up until today, for the last few weeks, we hated the data center story. Previously, one of the hottest friends around. We heard it was Big Hat, no cattle. We all felt fooled by artificial intelligence, and the machines housed the data centers that aren't probably already used, right? A lot of dust gathered in there. Suddenly, though, out of nowhere in the data center, it's back! And video stock is running. Super Mario Richard, the story so bad, it's that last quarter's now steaming full speed ahead. When a stock that brought down an entire group rallies this hard, you have to recognize it and you must exploit it. - Well aboard! - What changed the dynamic here? Why did the data center become fashionable again? Hard to say. Hey, maybe it was Cisco talking about how strong artificial intelligence is. That was solid, quarter Cisco just gave us, with a lot of AI bells and whistles. Maybe it's the possibility that Japanese giant Softbank is going to team up with, I don't know, maybe an AMD or a Broadcom, the challenging video. Don't laugh. Today, the FT from this time said that Softbank wanted to team up with Intel and challenging video, but the deal fell apart because apparently Intel couldn't deliver, and it said, "I believe it very hard for Intel to deliver such a heinous balance sheet." And the Broadcom would be worthy standards, though. It's pretty speculative. But so was the story in some alpha called the information that crushed the AI stocks two weeks ago by claiming that Nvidia's latest high-end chip, Blackwell, was significantly delayed, and with therefore caused a setback for many of the tech titans. Looking back, that seems more like it's from the misinformation. Now, when you're from Nvidia on the 28th, the company seems quite period. You can't currently defend itself. But I'll tell you, there's been a subtle shift against the negative narrative against AI, a shift that should allow Nvidia to run right into the quarter. What hasn't fully come back yet? Okay, I got 'em. The ancillary plays, like Eaton, which makes so much of the electronics and power equipment for the data center. As does Verde. Let's not forget Cummins. We had them on recently. They make backup power systems for these warehouses full of servers. I am partially Eaton. We learn it for the child of trust, 'cause as it's fingered in so many megatrends, the data center is only one of them. But they all work. Same goes for Dell, which links the Nvidia chips to the clients themselves. It's become a very hot stock again, and it can still go higher. How do we know that business is still booming here? Well, why don't we just listen to Jonathan Greiges, the president's CEO of Blackstone, the master private equity firm that owns a gigantic data center company called QTS. John was up with us on Squawk in the street of this week. He taught a tale of incredible growth. It's not running out in any room much, so it early in. There's so much data that's needed to the point where building these data centers will be a huge, profitable business for a very, very long time. At the end of the day, artificial intelligence and its accoutrements keep plenty in and out of style and Wall Street. Each time it's pronounced dead. Each time some lag points out that the gains in the video are absurd, must be rolled back. Each time you get a giant snapback, like we're seeing right now. Maybe, just maybe, when the group sells off again, we should remember that the data center is not some fleeting, finite story. It's actually more like the greatest story ever told. I like to say, there's always a more market somewhere. I probably try to find a gift for you right here, oh man, money, I'm Jim Kramer. See you next time. All opinions expressed by Jim Kramer on this podcast are solely Kramer's opinions and do not reflect the opinions of CNBC, NBC Universal, or their parent company or affiliates and may have been previously disseminated by Kramer on television, radio, internet, or another medium. You should not treat any opinion expressed by Jim Kramer as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Kramer's opinions are based upon information he considers reliable, but neither CNBC, nor its affiliates and/or subsidiaries, or its completeness or accuracy, and it should not be relied upon as such. To view the full Mad Money disclaimer, please visit cnbc.com/madmoneydisclaimer. - I've got prostate cancer, but I really wanted to make it to the big game with my grandson, and here we are. (crowd cheering) Go, go, go! - With Erlida Appolutivide, being there is possible. 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