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 3/27/24
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Spy is subject to risk similar to those of stocks. All ETS are subject to risk, including possible loss of principal, helps distributors, and distributor. My mission is simple. To make you money. I'm here to level the playing field for all investors. There's always a more market somewhere. And I promise to help you find it. Mad money starts now. Hey, I'm Kramer. Welcome to Mad Money. Welcome to Kramer America. I'll be with my friends. Hey, I'm just trying to make a little money. My job is not just to entertain you, but just teach you. Contacts, call me 1-800-743-CVC. Tweet me to Jim Kramer. All right, we've got some terrific news from CNBC's delivering alpha stock survey today. A majority of respondents believe the market's gotten overheated. And we're heading for a pullback. With the averages, once again up, down, gaining 478 points. S&P snapping out of a three-day decline. Rallying 0.86 percent. Now it's that climbing 0.56, 0.5-1 percent. You know what I have to say? How are we about that survey? So far, the S&P is up 10 percent for the first quarter. Best start of the year since 2019, which is why I accept the fact that we could be due for a pullback. And you know what? We should welcome it, not fear it. How can I cheer for something that will cost shareholders money, including my own charitable trust? Because you see, sell-offs are inevitable. They are to be expected, even as we never know exactly when they'll hit. So what? We have to welcome them. I learned this from the legendary Peter Lynch, who ran the Fidelity Magellan Fund for 13 years, where he troused the market's performance a little more on that later. I bring him up because Peter Lynch famously welcomed sell-offs. He told you to expect a 10 percent pullback every two years on average, and a 25 percent beat down every six years. He made these comments about 30 years ago. At the time, the Dow Jones Industrial Average stood at $3,797. He predicted that despite these pullbacks, the stock market would do well over the long haul as long as corporate profits held up. And historically, he noted that corporate profits tend to grow by 8 percent per year. Given that the stock market broadly follows earnings, that 8 percent rule of thumb will put the Dow at $38,238 in 30 years, meaning now. Well, you're not a Dow hit 39,760 today. I'd call that pretty much on schedule, maybe a little ahead of time. All aboard! Peter Lynch is the man who told me not to fear corrections. As he put it in, I quote, "far more money has been lost by investors in preparing for corrections or anticipating corrections than has been lost in the corrections themselves." In other words, people sell like the people in this survey, and then they don't get back in, and they end up missing a huge amount of performance. When most people see a survey that says investors are bracing for a pullback, they shudder with fear. Look, I have no problem with raising a little cashier period. That's just being responsible, but otherwise, I think you've got to write a mail. Because if you're always trying to avoid the next pullback, very often you'll end up missing out on the next rally. Let me put it this way. As a gardener, and believe me, I am salivating for my 36th garden in a row with planting season right around the corner, I know I won't be able to raise my precious tomatoes unless there's rain. Without showers, it ain't got nothing for you. You need to view these pullbacks as rainstorms. They're inevitable. They're necessary, and they can help your portfolio grow if you approach them correctly. Now, what if the 8% annual growth in corporate profits doesn't hold up this time? Going back to that delivery alpha survey, there was an increase in the amount of people saying that they think were headed for a recession in 2025. Right now, 52% said it. That's up to 23% in the previous quarterly survey, holy cow. Lynch's long-term forecast encompasses those recessions. We've had some real doozy since he made those comments 30 years ago, but man, let me think about it. We got a fair share bear markets in recent years. S&P plunged 35% in February and March of 2020. Thanks, Dakota. Then it plunged 27.5% from relative high set in the first days of 2022 through the lows of October 22, and that was... A house of pain. Maybe we aren't in due for a bone crusher because we just had two of them. Let's get grained on. 39% of the CMC delivery alpha respondents say it's time to sell out of AI related stocks because they've run too far. Terrific. Let me tell you something. On September 30, 2009, I stumbled upon this company that made the fastest chips in the world. This name was NVIDIA. It was run by this young guy named Jensen Wong. I don't know. He wore a motorcycle jacket. What's that about? But I was totally smit. Stock price was just $3.75 per share. By June of 2010, NVIDIA traded down to below $3. Of course, using the pre-split numbers, that meant that the stock was at $15 when I recommended it, and it dropped to $11 in change, where I just continued to recommend it, and continued and continued. I was pillowing. Even when websites said I was affiliated with it at the time, I defended NVIDIA constantly. At one point, with the stock at $10, pre-split in November 2010, I dared people to shorty. Go ahead, make my day short and video. I kept pounding the table on this one because of those lightning-fast chips, and what could happen with them? Eventually, the stock caught fire. Some videos high-end graphics cards started selling like hotcakes. Back then, it was all about video games. Then I began to hear about how these chips could cause a revolution in the data center, when they could lead to what we're now hearing. It's called artificial intelligence. I was kept to them. AI had been a bus for so long. On May 16th of 2019, I went to see Jensen as headquarters, and he showed me things AI that I couldn't believe. So I went nuts on NVIDIA, both on the set and particularly on Squawk on the street. Faber told me he got sick of it after a while, but I didn't care, I just kept calling. The stock was at $40. I went back to NVIDIA headquarters in 2021, with the stock at $330, up 300 points in two years, and prompted by Jensen. I asked the machine to pay an assays and seascape, knowing from my spots and dots course at Harvard, also known as Art Appreciation, that the fella was a real still life guy. I watched robot dogs try to pick up jello cubes, Jensen rewarding the ones that could do that. Jello cubes are not towards and difficult to pick up. I came back and couldn't stop talking about it. Next thing you know, less than a year later, the stock had probably $108, thanks to the hideous bear market tech, and I was the goat of the game. But you know what? NVIDIA then went to $974, and suddenly the only goat people can talk about is the greatest of all time. Obviously that's Jensen, not me. I was just along for the ride. If you took your cue from me though, you would have stuck with NVIDIA and racked up a huge game. That's the Peter Lynch method. There we are again. Oh, boy, the stock in is just getting high. Oh, it's ugly isn't it? People who get in there are sick. They're nauseous NVIDIA. I got a trick half a bottle of Pepto Bismol today, just didn't have a guy at the check it out, but stores will do it for me. But it's just to be sympathetic with the people who want NVIDIA, right? They're all tired of it and be talking about it. I told people, especially investing club members, not to buy the stock around the time of last week's GCC conference. I said, don't buy it. It's now getting clobbered. But you know what? I still say you got to own it. Don't trade it. I bet NVIDIA sells off more, thanks to this new family of those who toured AI. And then at bottoms, you got to be there. Just remember that we've seen this movie before. Do you know how stupid I looked? When I kept recommending NVIDIA from $330 to $115, that's fine with me though. The business isn't about looking smart. That's what we did when the stock got questioned 2022. That's what we're going to do again. Maybe we even buy some more for the trust. My advice to those who are tired of AI, I've heard it all. Be tired. Be fatigued. Be sellers. I don't care. I've taken my hits with NVIDIA and I keep ticking. You know why? Because I have seen the future. And the future, while it runs on NVIDIA. Here's the bottom line. I think people are right to expect to pull back here, eventually for some tech, right? But that's not a reason to hit for the hills. Instead, you want to raise a little cash, watch the market broaden as it is doing, and then buy your favorite tech stocks when they come down. If you don't own NVIDIA already, you know what? You're getting a sale. And if you do own it already, just stick with it. Because it's way too hard to swap out and swap back in, in the right level. You see, you know why? Because nobody's that good. How about we go to Sam, my homesteading journey? Sam! Hello, Jim, and the good old fashioned Booyah from Edison, New Jersey. That's kind of booyah. That's kind of booyah. Local Booyah. What's up? I have a question about the stock eye path. What I like about the stock, Jim, is that it's based in the good old USA, but it has a global improvement. I-A-I opportunities such as automation programs, logged into applications, and a cloud of automation. It's currently trading about $4 off its high. You're a thought, sir. I like dimes. I like dimes a lot. He's a smart fella. I think you're right. I think at $22 you want to own it. There were some people who owned it much much higher, and they didn't do that well. But at this level, I think you're fine. I think you got a horse sense. Could we go to John and Florida, please, John? Hey, Mr. Jim, how are you doing today, sir? Doing fine. How about you? I'm doing fantastic. I got a quick question for you. I got it at Starbucks back during the COVID pandemic. Got in for about $72. Been hovering around $91 for the last few weeks. I'm wondering if that was a good time to cash out. OK, no. I had a very long talk about Starbucks today with Jeff Marks. You got to join this investing club for heaven's sake. The discussion on Starbucks was so good. It's on a replay. I had a little read-back posted on the Twitter thing. So you can go to Twitter, right? X, you know, it's right there. And the Starbucks is, it's probably like five points off it's where it can go when they put it at this point in quarter. Then it could be a rocket ship when they explain. Not only like RH tonight, that this is the last bad quarter, but it's not a good quarter. It's not. And that's why the stock's not a 120. It's a 90. So let's deal with that. It's called House of Play. But you know what the next address over is? The House of Play. Yeah, just kidding. I think that here's the deal with this stock. I do want to make this point. I'm sorry, I know I got to get a college. I had a Starbucks today to prevent the cappuccino skin wet. And then I had an ice cold Starbucks. Can I just tell you it was good? It was real good. And that's not the reason why I'm sticking by. I'm sticking by it because they happen to have this locksen. You've got to give this locks from an hour of some of the chance. Everybody wants to dump it. Everybody. And I say, why don't dump? I think it makes sense that people are expecting to pull back here. Makes sense. But it isn't a reason to head for the hills. Instead, I think you've got to ride it out and buy your favorite tech stocks day after they come down. And enjoy the broadening out of this fantastic rally. Industrial banks. Wow. Healthcare. Remember tonight? Merck. Received FDA approval for its pulmonary arterial hypertension drug, which just shut the stock car, buddy. And it ain't done. Let me tell you. This was so much more left in this pipeline. But the CEO, then Kimberly Clark hosts this investor day highlighting the next chapter of the iconic household goods company. And I'm hearing all about the plans for the future with the CEO. And from an activist investor to the fall of East Palestine, trained derailment, they're a lot to discuss with Norfolk Southern. I'm getting an update from the company's top brass. They don't tuck anything. Stay with Kramer. [Music] Don't miss a second of Mad Money. Follow @chimcramer 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. [Music] One and eight. That's how many people have worked out of McDonald's. Who served millions the best Big Mac and best birthday party they've ever had. We haven't just seen kids graduate from a Happy Meal, but have gotten help graduating themselves. Because they know the skills learned here. Bienvenidos, welcome to English Under the Arches. Can help you grow from here. Or keep growing here. One and eight. Start at McDonald's. And where you start stays with you. The spirit of performance defines Acura. And now it's electric. Introducing the All Electric ZVX. Acura's most powerful SUV yet. While what powers their cars may change, the energy that makes Acura never will. Crafted using the same formula that brought them electrified supercars and multiple MSA championships, the ZVX has tracked tested performance that packs an energy all its own. With a premium bang and olefson sound system and up to 313 mile range on a single chart. And a type S variant with an estimated 500 horsepower. The ZVX is everything they said electric could never be. It was built with the driver in mind. Just like Acura has been doing since the beginning. We could talk all day, but the only way to experience this electric performance is to drive it yourself. Unlock the energy and order yours at Acura.com. We look at this majestic rally in Merck. Where the big pharma stopped soaring. Almost 5% today after last night's announcement that they got an FDA approval for their new pulmonary arterial hypertension drug. That is huge. And not just because this is the first decent treatment option for a potentially life-threatening disease. It's also good news for Merck because like most of big pharma, it's always needs new products. As some of their blockbuster drugs are always going to lose patent protection and they're not to do some nutrition. That's the game. Last year Merck got over 40% of its sales from Keytruder. It's fabulous. The best anti-cancer drug. But Keytruder will begin to go up patent 2028 while it's a great business now. They always have limited shelf life. That's how it works. And that's why these guys would make a bunch of small medium size acquisitions and they're crushing it. 10 billion dollar purchase of Prometheus biosensors. So I just remember that we had about that. It's a mineralogical pipeline. As for the pulmonary arterial hypertension drug that just got approved, it's the payoff from Merck's 11.5 billion dollar acquisition of Acceleron pharma back in 2021. So it's not just good news. It's great news that whose management strategy is working. But do not take it from me. Let's take it with Rob Davis. The Chairman, CEO of Merck. You've got a better way of a situation. Mr. Davis, welcome back to me everybody. Great. Well, thank you very much for having me. I'm excited to be here. It's a great day for Merck. It's frankly a great day for patients. And let's talk about the patients. There are, it's a pretty bleak future until today's. Well, you know, it is. This disease, and this is a rare disease. So it doesn't really get a lot of attention. But pulmonary arterial hypertension is really devastating. This is a disease primarily affects women in the prime of life, age 30 to 60. And unfortunately, the bad news is the mortality rate for this disease is about 43% in five years. So it's a devastating disease, not only for the patient, but you can imagine for the families and for everyone. And so the fact that potentially we now have a disease modifying agent that can really make a difference for these patients is something we're very excited about. This is a novel mechanism of action. It's not existed before. It's an active and signaling inhibitor. And really, we believe, has the potential to remodel the vasculature that allows you to avoid what happens today with PAH, which is you get a narrowing and a thickening of the arterial walls. This actually works to stop that and potentially reverse it. We'll have to see further studies, but this is exciting. But it could be, I know, I think that, no matter what I do, I come back that it could be a $7 billion drug, $10 billion on the service. But could this be an extension to other things that you might try it for? Or is that because that's pretty bold? Well, it is. So the initial indication is now is add-on therapy for people who are on either dual or triple therapy. So there's both opportunity to move into earlier lines, which we think is something we're going to study. We have studies underway to potentially prove that. But actually, more exciting is the potential to move more broadly than PAH, which is the specific thing we have here, into pulmonary hypertension and into heart failure. And so that, obviously, is a bigger opportunity. We have a pretty large Phase II study called the Caden Study, looking at that. Wow. Now, did you know about this when you guys bought accelerant? We did. We did. But you know, the thing that was really exciting about this-- and it's a testament to the Merck scientists, frankly. My team at Merck and our cardiovascular group, we were looking at other agents. We were doing our own internal work, NPAH. They came forward when they saw some of the Phase I, Phase II data, and said this could be something special. And that's what caused us to move and do the acquisition. Initially, the first study, which is the basis of this approval, called the Stellar Study, was only supposed to show improvement in symptom through a walk distance. We actually showed reduction in risk of clinical worsening, which we didn't expect to get to a later study. That has now opened up the opportunity to go more broadly. So we knew it was there. We focused on it for this initial indication, but the promise of what this can be based on the strength of the data is something we're very excited about. Now that I've heard you say that, I don't think the stock is up nearly as much. Now, that's my job. I'm a stock guy. You run the great company that is Merck. Now, last time of your own Prometheus, I think there's some real promise there. And I don't expect anything yet, because you told me not to expect. But how's it going? It's going well. So we are currently enrolling our Phase III study for ulcerative colitis. Now, we're going to start our Phase III study in Crohn's disease later this year. And we continue to see great promise with that acquisition. And frankly, see that as continuing to be a foundation for our broader portfolio of immunology assets, very similar to how an acceleron with now, what we called Sir Tatterset. Now the brand name is Wind River. Wind River is really the foundation for our broader cardio metabolic platform as well. And people need to know, you're going after big ones and tough ones. You're not going after the ones that people have solved coming up with a #MeToo. You know, just a heart failure. I mean, anything hard, novel. And if you can get, break into this colitis. I mean, this is-- I don't know if people know how big. No, it is. And the thing that always we focus on at Merck is-- and what I say to my team-- focus on what matters, which is the patient. Put the patient at the center and understand that they're waiting. And that should drive urgency. That should drive power. That should drive purpose, passion. And you talk about ulcerative colitis in Crohn's, which is from the Prometheus deal. These are terrible diseases. I have family members who struggle with this. These are terrible diseases. If you think about what we did with acceleron, we've talked about pulmonary arterial hypertension devastating. So we're very focused, but it always starts with great science aimed at the patient. And I don't want to lose sight. I do want to talk about animal health. We've made a good acquisition from a long call. But cage hooded could be the greatest drug of all time. And I feel like I've given a short shrift. Things are still amazing with that franchise. Well, you know, Katrina is one of those things that we have so many positive data readouts that it almost makes you numb. I try to remind myself every positive data readout is a patient population who now has a promise they didn't have before. And this is a phenomenal drug. It's ability to really be foundational therapy and cancer. You know, we now have, I think, we're up to 39 indications in the United States across, I believe, it's 16 different tumor types. And now what we're starting to do is move into earlier lines of therapy. Because the reality of it is, if you want to cure cancer, you have to catch it early. And if we can show that Katrina, which we are starting to do, we have multiple now approvals in the earlier lines of therapy. Most notably, we recently got approval on non-small cell lung cancer. If you can do that, we can start to potentially talk cure. And that's our focus. So it's really, Katrina still has meaningful contributions, meaningful studies underway. And we're going to see this drug make a difference for years to come. If we can take it a manageable disease, I'll take that. But you're doing so many amazing things at work. Thank you. Fantastic job. That's Rob Davis, you see a book. Guys, this stock in this company is just a fantastic breath-taking thing. Get much back there for a break. Coming up, a walk on the softer side of Wall Street. Follow the paper trail to Kimberly Clark, next. Resourceful small business owners know how to get value from the purchases they already make for their businesses each month. The Enhanced American Express Business Gold card is designed to take your business further. It's packed with benefits and features, like four times membership rewards points that automatically adapt to your top two eligible spending categories every month, on up to $150,000 in purchases per year. So you earn more where your business spends the most. Plus up to $395 in annual statement credits on eligible business purchases at select shipping, food delivery, and retail subscription merchants. And with flexible spending capacity that adapts to your business, and access to 24/7 support from a business card specialist, you can continue to run your business with confidence. The AMX Business Gold card, now smarter and more flexible. That's the powerful backing of American Express. Enrollment required, terms apply. Learn more at americanexpress.com/businessgoldcard. (upbeat music) - Look, if you're worried about some of these signs of forthiness in the markets, big runs and recent IPOs, latest cryptocurrency craze and explosive momentum, so-called AI, that maybe you do it on something slower and steadier, like the consumer package, good companies. There's always a place for one of those in your portfolio, even as it's been out of style in the Wall Street fashion show of late. Take Kimberly Clark, which makes paper towels, toilet paper, diapers, family care products, of course, Kleenex. For several years, these guys struggle with supply chain woes and rampant cost inflation, but now they've got it under control. They're ready to go on offense again. Today, Kimberly Clark held a new Vesterday event in New York, where management rolled out a new strategic plan for the next few years, including a big reorganization, and yes, indeed, some large cost cuts. Before that, though, we got a chance to sit down with Mike Schul. And Mike is the chairman and CEO of Kimberly Clark, take a look. Mike, welcome to May of Money. - General, great to be with you. - Well, I've got to tell you, I got to ask you first, what's it like to be the steward of perhaps the most iconic story brand in our country? - Yeah, well, I know it was an early pick of yours, earlier in your career. - All play, because Goldman Sachs, absolutely right. - Yes, and well, here's the thing. It's a story of a great American company. And so I take that responsibility very seriously. You know, since our founding, the founding values, we're about taking care of our consumers and our people and our investors. And the company's really done that through innovation. You know, we invented most of the categories that we operate in today, starting with co-texts and Kleenex in the Great Depression, all the way to adult care for people that are incontinent. And so it's, you know, we take our responsibility very seriously, we've always brought innovation to the core of what we do. And so we're really excited to move on to our next chapter of growth. - Well, okay, the next chapter of growth is going to be helped, I think, by this transformation that you've announced, which I think is very important because you're going to kind of localize things. All these brands need to be sold on a local level. And I think you could take share if you do that. - Yeah, the big thing for us is we saw the need to continue our transformation 'cause we really, I see an opportunity really turn it up a notch, right? And to step on the gas a bit. We've kind of navigated some big challenges in the market the last few years with the pandemic. We had disruption of the global supply chain. So we navigated, as you're well aware, an inflation super cycle. And I think the team has done a phenomenal job kind of getting the company through that healthier. At the same time, what we were focused on is proven out our thesis that we could elevate these categories. As I came in to KC, I felt like the amount of differentiation in the categories was not as high as what the consumers were looking for. And so that we had an opportunity to make the products better and set our brand as a part of it. - And when you do that, tell about the China stories. Rather amazing. - Yeah, I mean, the big thing was that we think there's a lot of growth left in our categories 'cause we can make the products better, worth paying more for and having consumers trade into a better performing product. And so the example on China is amazing. I think back in 2020, about 9% of our business was premium, super premium mix. Three years later, we're at 42%. And so we have made a big shift in terms of the value and what the consumers are looking for and they're demanding better products. At the same time, we don't have any words that are successful companies that are still the verbs or the nouns. I never call tissue tissue, I always call it Kleenex. Yeah, how are you able to preserve that? - Well, you know, it starts with the brand and it also starts with the fundamental differentiation of the product. We believe we make the best tissue products. We have unique proprietary processes. We invest a lot in materials development, product engineering and process development. And because of that, we still, in a lot of cases, manufacture our own manufacturing assets. And so our products are very differentiated and of course, marketing plays a big role and we're trying to serve consumers and the biggest unmet needs that they have. - Right, now at the same time, the productivity savings you're looking for at the meeting are very big, can it happen? - Yeah, we have some big goals. So the really turbocharged, I mean, there's really three parts of our plan, which is one we want to accelerate pioneering innovation, which I'm happy to tell you more about. The second part is we've got to find another gear on cost and we want to be superior quality, lowest possible cost. And I think we can do more of that. And then the third part is we have to rewire our organization to get faster and better. And so those are really the four. - Why don't you give me some sense of innovation? I think some people might just say, what's new under the sun here? - Yeah, so the thing is, and it's interesting 'cause I've worked on a lot of categories and people always ask, well, isn't that a commodity? And we view it differently inside the walls at Kimberly Clark 'cause we feel like, hey, there's nothing more important than mom and dad taking care of their infant and we think we can continue to do a better job of that. Question, why should there ever be diaper rash, right? And so for us, how we think about it is there's a hierarchy of needs, good, better, best. Leak-free confidence, platform one, garment-like comfort and fit. We're inspired by all the innovations that has happened in the apparel industry. And then the third plank for us is skin health and wellness, which goes back to diaper rash, and we think we can do a lot better job in each of those different areas. - Now, you are in a sense of a space in the sense that we want the best, but a new generation, two new generations are coming up and they wanna know the best and they wanna know how it's sourced. You spend a tremendous amount of time about sourcing. Some people's eyes glaze over on this. You are making substantive changes in the way the earth is going to be because of what you harvest. - Yeah, well this dates back to my predecessor, Tom Falk, and my old boss, and who you know well. - Yes, indeed. - We're a company that is proud of our track record on sustainability. And we view ourselves as 50, 100 years ago, we owned hundreds of thousands of acres of forest, right? And so we're now not in that part of the business, but we view ourselves as being one step removed from a natural resources company. So we take that responsibility seriously. We're one of the largest producers of tissue products. And we've set a new ambition. We believe we can produce our product line with being 100% free from natural forest fiber. Now today we still use a lot of natural forest fiber, but we're working on product development and engineering and we think that someday we'll get to an exceptional product experience at a price that consumers can afford that is much more sustainable for the product. - Okay, and by the way I'd say yes, you absolutely know my background. It was the first stock I recommend. So it's a Goldman Sachs and a senior recommended and then owned it for my hedge fund because Kleenex will never be replaced. We're not going to have an Asian version of Kleenex on our table. At the same time, you've got a great dividend. You'll 3.8%. But are you not surprised that somehow the price during these multiples lower? I think then it should be. Do you think these changes can make people realize that the stock is just too cheap versus its peers? - That's what we're betting on. I think it's, I think we, you know, I think we can, we deserve more and we can do more for our shareholders. And that's also why we're holding our investor day. And, you know, 'cause we believe there's a higher degree of growth. There's a higher margin of, higher degree of margin productivity that we can drive. And we can do that through a faster organization. - And I just want one last thing. When I look at the, people may not realize you have six billion dollar brands. Can there be seven, eight? Or are you just trying to make those billion dollar brands bigger? - Well, we're focusing on 12 core brands. And so, yeah, we have six today. We love a few more. And, you know, of course, if everything goes as we plan, we'll see that. - Well, I gotta tell you, I don't know how, I like it as much as when I first recommended it because it is an unassailable company and you are a good steward of it. Thank you so much. That's much use the CEO of Kimberly Clark. Look, not bad to get a good yield and some growth, bit of money's back in. (upbeat music) - Coming up, important updates from Norfolk Southern. The Railway CEO joins Kramer, Max. (upbeat music) - You know, I love the railroad stocks. I have since I started this job. I gotta ask, what do we do with this proxy fight in Norfolk Southern? The big East Coast railroads had an eventful past year or so, February of 2023. There was a horrifying derailment in East Palestine, Ohio. Last month, activist investors today and core a whole of these billion dollars worth of shares launched a proxy contest. They have highly critical management's abilities to get their operating ratio down. It's key metric and they're after seven seats on the board of directors, shake things up. But on some level, the actors have a point in Norfolk Southern stock as lag, the other railroads in the past year, but you know, out of your management side of the store. So let's take a close look with Alan Shaw, the president's CEO of Norfolk Southern, get a better sense of what's really going on here. Mr. Shaw, welcome back to that money. - General Greg, see you again. - All right, so, Norfolk Southern has a difference in philosophy with the activist. Can you let your philosophy and how you think you can do over time, particularly with some of these metrics like that operating ratio? - Jim, you know, I became CEO less than two years ago. And I laid out a transformational strategy for NS that safely and responsibly balances service, productivity and growth with safety as a core. And I came on your show like the next day. - I know. - All right. - And we talked about like the outsides and impacts this has for our shareholders and our customers. And yeah, we had a challenge last year as you noted, right? But we met that challenge head on and never lost sight of where we're taking this powerful franchise. And we improved safety last year. We improved service last year. We started to grow with our most service sensitive customers like JB Hunt and UPS. - That's intermodal, which is the thing that's really a big swing factor. You're winning over from trucks. You're winning over that corner. - Yeah, that's highway conversions to rail are a part of our strategy, right? And now we have responsibly and safely created the platform for significant margin improvement in 2024 and laid the foundation for that long-term growth that you just talked about and long-term shareholder value creation. - And now we had this again, a terrible strategy in Baltimore. Does that impact your business? And can you become someone who could help get cargo to places that right now are blocked? - Yeah, Baltimore's an important port for us. And it handles a lot of export coal for us, as you know. But you know what? Our job is to provide logistics solutions to our customers. And we've got deep relationships with our customers. We also, so we're working with them on those logistics solutions. We serve every major port up and down the East Coast and Norfolk Southern has the largest coal export terminal in the Northern Hemisphere, down in Norfolk. And so we're working with our customers right now to provide logistics solutions to help them get around this disruption. - In general, commerce right now in the country, as you see it, 'cause I think the rails move so much commerce, you're really a bellwether. - Yeah, you know, from our seat, we have a unique view of the U.S. economy. Basically we handle basically every, touch every market that's out there. The automotive franchise is still doing really well. Construction market seems like it's heating up a little bit. Truck market is still really loose and that drives some weakness in our intermodal franchise. But we're investing in the long term. We're improving our service product. We're improving productivity. That's starting to drive growth for us. And I got a lot of confidence on where we're going in the back half of this year and beyond. - Okay, so the challengers, they want more of what's called precision rail. They have a fellow Jamie Boychuk who was from CSX. They want him to be the COO, not a nominee, but they felt Jim Barber's UPS for a long time, mention UPS. William Clyburn was a former commissioner, vice chair of U.S. service transportation. Governor Kasich, Ohio, I mean, if you have the problem with East Palestine, he could be of assistance. These people seem like it's got to be somebody that you might want, no? - Well, Jim, we got a really strong board. You know, we've got 13 nominees, which include former CEOs who've got direct rail and transportation experience. We've got a former admiral and we've got rail safety advocates. And we have a really strong board. We've gone to the activists and we've offered a settlement. Their responses have been unreasonable at the determination of a board. - You've interviewed the people and you said, "Listen, maybe we can have someone if you want." And they said, "No." - Yeah, we've offered a settlement. Their response has been-- - Can you give some, you know, is that private about what the settlement is? - We've offered a couple board seats. - You have? - Yes. - Do people you interviewed? You went through the process, did you? - We went through the process. We offered seats. And of course looking for wholesale change. And our board firmly believes that is drives long-term shareholder destruction. - If you take out the East Palestine incident, which I know is very hard, because it's a terrible thing, your numbers were getting better. - Jim, since I became CEO, our velocity has improved 27%. We delivered record revenue in 2022. We were making a lot of improvements. Our safety improved last year. Mainline accident rate declined by 38%. So we were improving service. We were improving growth. We got to improve productivity. That's what we're doing right now. - Well, let's talk about the operating ratio is higher than CSX. It is higher than Union Pacific. But again, it was coming down until, I don't know. I mean, how do we get that one down to say, can you ever get it to 62 like CSX or 62 like Union Pacific? Is that in the cards for you? - Sure it is. We announced a plan of targets for a sub-60OR in the next three to four years, right? We've got the leadership and we've got the plan to deliver that. - Well, I don't know. I mean, I like, I did not know, candidly, that you had actually offered the boards. I know that there have been discussions. That's, you know, I'm thinking in the context of Disney where there were no real discussion, no real help. And that's a company that is radically underperformed and your company is not radically underperformed. Now, give me a sense of the lessons of the incident of East Palestine. And I say that because I thought that could dog you forever. But you did some things that made it so people were able to recognize how responsible you were. - Yeah, Jim, I think, you know, let's talk about how I navigated and asked through a number of challenges within the past two years, right? When I became COS in two years ago, we were in the middle of a highly politicized, highly public labor negotiation. Then we had East Palestine. I had to take decisive action to protect our shareholders and protect our franchise. And we made a number of promises. And, Jim, I've kept every single one of our promises. We enhanced safety. We're making it right in East Palestine. We enhanced service. And now we've got that platform to really drive productivity in 2024 and really drive long-term growth and shareholder value. - It's not like you've had 10 years at the helm and it's time to refresh the board. I mean, you're refreshing the board as it is, but at the same time, I mean, you kind of just got started and I remember the terrible incident. I remember the promises you made on this show. And I have followed up and you have delivered on all of those promises and more. - And I think that's really important. Yeah, it's about keeping our word, keeping promises and doing exactly what we said we're gonna do. And I am saying we're gonna deliver on productivity this year. We've got a significant opportunity for 400 to 500 basis points of margin improvement in the second half of this year and really drive industry competitive margins at Norfolk Southern. At the same time, we deliver top tier EPS and revenue growth. - Well, I held your feet to the fire in East Palestine. I don't know if I have to hold your feet to the fire again on the proxy because you just got over East Palestine. Well, it's gonna take a while to totally get up. I don't want to minimize it, but I don't know. Doing a pretty good job, yes, mate. - Thank God. - All right. That's Alan's your presence. You're the Norfolk Southern Looker. They, the other guys are not names to good people and they've got a lot of good thoughts about precision railroad. You don't know. It's a difference of philosophy, but I know this gentleman said that East Palestine was gonna make, he was gonna make it right and he did. And I think in a lot of ways, that matters big too. Man, money's back in for the break. - When we return, master the markets, one stock at a time. The lightning round is up next. (dramatic music) - It is time, it's over the wind. I'm gonna put it back to you. But it wasn't so easy to do, but it's never gonna be a waste. (buzzer buzzes) And then the lightning round is over. Are you ready, Steve? Dad, turn the light around 'cause the motor's over. Edwin in Georgia. Edwin! - Boo yah, Jim. - Boo yah, too. - Boo yah, right back. - 21 years, watch the end list until you. I got one question. How do you feel about getting into arts or aviation? A-C-H-R? - Well, you know what, Edwin, I'm a kind man. I'm a good man. That's actually from Park Lewis now. But I can't recommend that stock 'cause it just has no earnings power and we gotta stick with it. There's so many good stocks right now. We don't need that. I would prefer Nvidia down 27 today. Donald in New Jersey. Donald! - Boo yah, Dr. Kramer. This is Donald West from Jersey City, New Jersey. - Hey buddy, what's up? - Mr. Hernandez Mall. And again, I wanna know why should I buy or sell by buy Robin Hood? - May I tell you, I think that that Greyhound buses has left the station and I gotta wait. I mean, they think just doubled in no time whatsoever. Vlad, doing some good things, but it's doubled. We're not going to buy the double. We don't buy doubles here. Let's go to Dick in Virginia, Dick. - Hi Jim, thanks for taking my call. - Okay. - And great show, I have a quick question for you. I've helped coming to the engine in my IRA for about 10 years, but I wanna replace General Electric. I think it has a more upside potential. - Don't you have room for both. Jen Rums, he's doing such a fabulous job. I don't want you selling the Cummins. And meantime, I think Larry Cope's gonna, that stock is so obviously headed for 220, it's crazy. I think you can't sell the Cummins. You just gotta pull extra money in and buy the GE. I will not, as a matter of fact, forbid you from selling Cummins. But you can buy GE. There, strong statement. That won't go to Nathan in Oregon, my daughter's old home state, Nathan. - Hey Jim, I wanted to ask you about this company that is going through a fight for both seats with its former CEO. Should I hold, sell, or buy more of Crown Castle and UCI? - Actually, at this level, with a 6% yield, I would actually buy some more. I think it's a good idea. And I haven't felt that way about Crown Castle in inches. Let's go to Frank in New York, Frank! - Hey Jim, thanks for taking my call and thanks for everything you do for us. You had the lady that runs this company on not so long ago, and I liked her story. And I'm wondering why this company can't follow and else footsteps, oddity, ODD. - Yeah, I didn't like the fact that they did a secondary after I recommended the stock. And I think the stock's okay, but I didn't like that. And that, ladies and gentlemen, some conclusion of the lightning round. (buzzer) - The lightning round is sponsored by Charles Schwab. Coming up, the path to profit starts with this pivotal step. Kramer offers a suggestion fit for any portfolio. Next. (crowd cheering) - I keep thinking about that wise letter. The one Larry Fink sent to his very pleased black rock shareholders, the one we heard about when he came on the show. See, in preparation for that interview, I spoke to as many 20-somethings as I could take the financial temperature. And I didn't like what I heard about their savings or the lack thereof. Didn't like a one-door bid. Most of these kids have filed complaints about inflation, student loan debt too high, super market too expensive with the lightning out and tickets to a concert, ridiculous. They spoke gloomily about how their generation missed the bus and it's too late to recover. They believe they're destined to do worse than their parents. On top of that, these members of Generation Z, they lack confidence, confidence in the capital markets, confidence in the jobs, confidence in the country. Maybe confidence themselves. I get where they're coming from. But every generation goes through this. Let's hop on the way back to the machine to 45 years ago. I was covering homicide for now to fund the L.A. Holdings and our awful paper. My partner had been broken through twice in one week while I was working. Bad neighborhood. Police weren't going to help. I was through small time. So was the theft. They're on a miserable Monday. I drove down to San Diego to cover sniper shooting, sy-- school, horrendous. State overnight my car. Who would have thought that that would be the first of many, many months I spent living in that 1978 Fort Fairmont? When I got home, everything was going. Broom Clean, Robert taking my checkbook too. I had nothing. Nothing at all. Couldn't pay the rent, immediately evicted. I just had the clothes. Clothes, I was wearing. Yeah, everything I would own was stolen. And until it had, until it had been stolen? I've been a pretty good little saver, you know that? Making my dad proud. I tried to put away $50 a month if I could send it to Fidelity Magellan Fund. The aforementioned Peter Lynch was the manager. Pop always told me that if I saved early, kept putting money in it, it would comp out. It would make a lot of money more than he made. It seemed right to me. Now, suddenly I was in my car all alone, no phone, no money, no nothing. Fortunately, I had enough friends who were willing to take me in for a couple of nights or a couple of showers. But I was homeless, plain and simple. And you know what? I kept saving. You know why? Because Pop said I shouldn't. Like Larry Fink pointed out, our generation always knows that we would do better than our parents. We had confidence in the future. But hey, if I didn't save, how could I do that? Not only did I not stop saving, not stop sending money to Fidelity, I tried to save you a bit more. Maybe at 20, maybe an extra five-spy. Maybe a 10. I had to buy some clothes for certain, baby powder. You got to have that. But I had no rent to pay. And that allowed me to put a little extra cash away. No insurance. Hey, throw some to that. I was a proud saver, off the grid for sure. We're proud nonetheless. You see, that burglar may have thought he took everything from me, but he didn't take my savings. I wanted to make my father proud. Oh, and get this. I vowed to get rich right then and right there. In the backseat of that fort, a pile of clothes, whites on the left, darks on the right, bottle of jack, point to your collar and pistol. I'll set for anything that came my way. And you know what? I did get rich, from the Magellan Fund, and by investing and making that money work for me. I'm all about the carrot when it comes to investing. But for the moment, let me give you a little stick. You think you're a bad inflation right now? Back then, it was much worse. You weren't about your job prospects. I was worried about where I could part to sleep at night and not get a raft to arrest it. You're concerned about your country, or lack of confidence in your country. We had Jimmy Carter flailing his present with the great million lads. What the hell was that about? Billing to invest? Let me tell you something. Living in that piece and junk of a car was not exactly a confidence builder. Investing? But that did I know. Pop told me he thought me gel foam was good. So I said, okay. Now I'm telling you that any cheap S&P 500 index fund is good and I am very confident in that over the long haul for certain. So do this for me. It's the end of the month. Take 50 bucks, 350, like me. And open a brokerage account, put money in an index fund between now and April 1st. I know it sounds strange. There's no pre-evil fool's joke, but saving money turns out to be habit forming. It's just that you have to start to habit first. Do it for Larry, think. Do it for me. Above all, do it for yourself. I like to say this is always the more market summer that I pop, start to find it just for you, write your main money. I'm Jim Kramer, see you tomorrow. Let's go start it back. (upbeat music) - 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. 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