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 4/19/24
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All ETS are subject to risk including possible loss of principal, alps 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. Other people might want to make some friends. I'm just trying to make you money. My job, not just entertaining. But put the Dow and the S&P in the NASDAQ into some sort of context. Call me 1-800-743-CBC. Tweet me, Jim Kramer. When the market says tough, it's this one. With the Dow advancing 211 points, well, the S&P plunge point, 8%, and the NASDAQ plummeted 2.05%. We played it one of the worst weeks for the S&P since March of 2023. And the worst week for the NASDAQ since November of 2022. The House of Pain. Well, right now, there is this real bifurcation going on. We got to explain this. Anything non-tech is doing fabulous. Anything tech? So, you can't just wait in and start buying tech. I know you need to know your stuff even by non-tech here. Namely, who's doing really well and who's doing badly? The reason, it can't just be a relief file. Where we say, "Okay, Israel didn't hit the kind of major target in Iran that would revoke instant retaliation, so let's go buy stocks." It can't be that oil pulled back from its highs, or that Netflix added subscribers, or even that in markets, press and pocket, we're actually reporting good numbers when people look at their bed. And a tough market with the S&P is uncertain. The NASDAQ is disastrous. You need a very specific reason to buy a stock or a sector. And right now, those kinds of reasons are few and far between, except for some old-fashioned big cap stocks that have nothing to do with tech. Tech itself is just abysmal. So going to the week where we're starting to get some tech earnings, you need to avoid becoming a tech butcher block. I've been saying that you have to let this group come down, question club members on the eve of next week's CMBC Investing Club meeting, that just, the tech isn't worth this address. The House of Pay. It will be someday. Right now, just let it rain. Even though next week is a huge one for earnings. I need to start the game plan. Right here? Yes, that's right. The end of the week, because this is when we get the personal consumption expenditures index of PCE. Now, this happens to be the Fed's favorite cage of inflation. If the number is too hot to any gains we got earlier this week, we'll probably prove to be a federal. If the numbers are cool, then most stocks are fair game. I don't know what it'll be, but I do know this. It'll have a significant impact. So even as the market is getting oversold, you should not understand, it's only the tech market that's getting oversold. The rest of the market is not oversold. So be conscious that the end of next week is when the rubber really hits the road and you're not protected by the oversold oscillator I always talk about, because frankly, other than tech, things are doing okay if they're big. Well, my name is a good example. We have Verizon, which has been a horse ever since that last quarter. CEO Hans Vassberg, he seems to have gotten control of his piece. And you can do worse than under 6.6% yield or some actual growth through his business. After a close year from two steel companies, New Court and Cleveland Cleanups, the former has been of phenomenal stocks despite the Fed's rate of rate hikes, which is really unusual. The latter is an acquisitive shop that could end up buying US steel if the government successfully blocks the nip on steel deal. Hey, that could be good, both could be very strong. Tuesday, here's another one I kind of like, GM. Do you know that GM is now the second cheapest non-financial stock in this and the entire S&P 500? Thank you, Adam Jones, for pointing that out. I focus on how well Mary Barr is doing. She's the CEO, and how big the buyback is. It's monstrous. Stay long. We also get results from GE Aerospace and talk about upside. I think it's substantial. CEO Larry Copas orchestrated a beautiful breakup here. Now he has to show us why GE Aerospace is worth holding on to it, and I bet he does it. Next, RTX has made a phenomenal comeback from the abyss of engine trouble, and abyss of fell into because it issued a release about what was basically a recall, and the markets spelled catastrophe. It should have spelled opportunity as the stocks now come all the way back and then some. I think RTX could stall out here unless there's something announced as big, but you know what? It's a good stock. Now we spoke to the CEO of Kimberly Clark done that little ago, and he's doing a reorganization to cut costs. He announced he talked about it on the show. Now a stock's been trending higher ever since the appearance, making me think that this could be beginning of a major run for KMB. I like it both before and after the earnings. I think the turn is real. The best play of Tuesday morning though will come from Spotify, which has become the beaten raised machine. Spotify is all about a subscription revenue. Something I love because subscription revenue is so sticky. Buy it. Tuesday night's about Tesla. Now we've heard nothing but negatives this quarter. Everything seems weak with the possibility of an actual loss to a dramatic decline in cash flow. David recalls. But maybe Elon Musk can pull a rabbit out of the proverbial hat, and I hope it isn't just self-driving. Now there's a lot of line here for Musk and for the shareholders, and I don't know a way out of Tesla's jam. But Elon Musk is smarter than I am. When does he starts with controversy too? Okay, and it's not me. It's what's above me. Boeing. When it talks about how a few planes can they produce, I don't know, that's negative. Hey, perhaps they have to buy spirit air systems to get control of the fuselage. Well, give us a plan of succession. It cannot be business as usual. That won't cut it. Now we do have our investing club meeting at noon on Wednesday, and I do have to urge you to join the club. You hear the testimonials. Mostly the monthly meeting is worth the price of admission. The most important thing I do, working on it this weekend. Now, extra close, we hear from tech. Okay, we hear from meta platforms, and since this will be a bang-up quarter. Of course, when you get that consensus, this is usually a death sentence for the bulls in tech these days. Mark Zuckerberg does not have the bull rabbit out of the eye. He just has to talk about earnings and forecasts, and they better be good. He's got a lot of levers to push, and if you don't own it yet, you know, like we do own it for the child to toss much lower basis. Please wait, because it could be like Netflix, where the quarter was basically great, but the stock was paid anyway. Who knows? Tech may be so oversold by the time we get to here, and it may even bounce. Hey, I'll give you another example. Service now, that could bounce, and I have faith that Bill McDermott will deliver. I should call him the delivery man. He's so good. Most people brag about non-consequential AI, not Bill. He just puts up great numbers because his clients trust him to install gender AI platforms and then show them how they can work to benefit their company's bottom line immediately. To polar reports, too, I'm confident that they'll see the good numbers. The company has integrated robots. That's not all the tech they have there, right? Well, they do have good points. So they've got the best menu with real value, and they own the stores. It's not a franchise model, and boy, the stores are going up an average unit volume, and they are making a lot of money. Thursday. Thursday we find out of Caterpillar can continue its run from the low 200s when it put all those doubting Thomas analysts. It's a shame. Now, this is a bit of a tricky one because the first move is often the wrong move when it comes to cat. Wait for the conference call before you decide to pull the trigger, and be mindful that this stock might need a breather after it's scorching run. Mark's been a horse under Rob Davis, and when he speaks, I bet he tells some surprising stories about new drug applications for all the acquisitions he's made in cardiovascular immunological disease, as well as his anti-cancer portfolio. After a close, it's Big, Big, Big. Microsoft and Alphabet, the former has high expectations signed for 34 times earnings. The latter goes for 22 times earnings. Why the difference? Because Microsoft's business to business behemoth with amazing integration of artificial intelligence, including an AI button that's going to become your PC real soon. But Alphabet has got an advertising-based business model, and that's less consistent. We've been scaling out of Alphabet for the travel trust, precisely because its stock performs so badly when it reports. Maybe with its new AI product can change, but consider yourself born. You've got to be cognizant that it is tech and tech is bad. Finally, Fridays have PCE Day, but it's also the day where we see the oil companies be, and that's Exxon and Chevron. Did they take advantage of the higher price of the oil, from what Rusty Brazil calls the war premium? I don't know if they did, but let me tell you this. They sure should. Bottom line, it's a tough week to hold together in an atmosphere where sellers seem to blow your head off every time you lift it, especially when it comes to tech. It'll be time to stay cool until we see that cool inflation number Friday. Without that, you can't afford a trustless market. It will only let you down by the boring old blue chips, not tech, not yet. Chris in New Mexico, Chris. Go Chris. Hey, Kramer, what's happening to her? Well, I don't know, weekend, happy, what's going on? Just working a lot. All right, what's stock? Costco, should I keep it? Oh, yeah, Costco actually have a buyer. I buy Costco right here. It's the kind of blue chip stock that you want to own. Johnny Virginia. Johnny? Yes, this is Johnny. All right, Johnny, Jim, what's going on? Not much, Jim. Jim. All right. First, happy birthday to my beloved Kirsten. Second, I want to get your thoughts on Pfizer. Is this a good stock to include in a basket of stock? No, no, no, Pfizer. I mean, look, it might bounce, you get the yield, that's fine. If you want it, boring old drug stock, just go buy Merckers. It ain't boring and still old. That would be the one I would do. Because, frankly, I think that Pfizer just doesn't have enough in the pipe. Let's hope that season deals toward paying off. This market is going to stay tough until it lets me in a cool inflation meeting next Friday. Remember, the market is back. You can't afford tap, not yet. It's too difficult for trust. Manly tight. The used car sector has been a tough one to figure out, right? So I went on a location and wanted to carve on. It's a car vending machines order today to see how the companies continue to disrupt the space. Then, a year ago, there were some pretty serious reservations about Charles Schwab. Where do they stand now? I'm tracking the companies from performance to sharing where I come down. And we covered AR, one of our small cat names. Should that be a good one? We brought it to the CEO. So stay with Cramer. Don't miss a second of Mad Money. Follow @chimcramer on X. Have a question? Tweet Cramer. #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. 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Terms and conditions apply. Need to hire? You need Indeed. ♪ Let's talk about one of the greatest and fastest turnaround stories I've ever seen, Carvana, e-commerce platform for used cars with gigantic used car vending machines where you pick them up in person. Back in December of 2022, a lot of people worried that Carvana was headed for bankruptcy, but the company managed to raise money and then mount an incredible comeback. Stock's now more than 1900%. Earlier today, we had a chance to check in with Ernie Garcia, the co-founder, president and CEO of Carvana, to talk about how this whole thing works. How do you pull it off? Take a look. First, Ernie, it's pure joy to see in person. Thank you. And why don't you tell us where we are, because it's a lot different from a typical car deal. Yeah, well, we're in the Carvana vending machine. So we're where our business model works. Customers go online. They can select from thousands of cars. They pick the one they want. And then if they choose to come and pick it up instead of having it delivered to their house, they come to this place. We invented out of this vending machine. They drop a coin in this slot here. It's an experience they tell their friends about, and we think it's pretty great. Now, it's disruptive. Give me three reasons why I would want to go and use a vending machine to buy a car. Sure. Well, I think I'll start with the one that doesn't show up in models, but I think matters, and it's fun. I think, you know, when people are buying a $25,000 car, that's something that doesn't happen too often. We want to make it fun. We want to make it memorable. We want to make an experience that they're excited about. I think getting a car is always exciting. Sometimes buying one can be a little bit tough. So we want to make, you know, the whole experience great, and that's what we do here. Well, I've got to tell you, it is the most disruptive model. I, of course, have bought one from Carbonnet. Hadn't taken it back. They always say that when as soon as you leave the lot, it's worth a lot less. But I got my money back. How are you able to afford doing that? Yeah. Well, so I think our whole business model is set up to give customers selection a low price, a great experience. And we do that with something that's totally different. We use infrastructure in a totally different way. We have our own supply chain. And then what we want to do is we recognize the customer's buying something that expensive online. They want to make sure they're confident when they buy the car. And so by providing that return policy, people can go into that confidence. Not that many customers use it, but for those that do, it's really valuable. And it gives everyone the confidence they need to buy a car online and save a little money. Now, when your stock was going down, people told me that your goal of being the largest and most profitable dealer was a sham. And laughable. You've proved the wrong so far when it comes to getting out of the abyss. Can you become the largest and most profitable dealer? We can. And that's a plan. I think our whole business model is built to give customers a different experience, to have a different kind of business model that benefits from scale. I think we've always been a company that really hustled. We always ran really fast. You know, we were lucky enough to become the third fastest company to ever hit the Fortune 500. That came from a bunch of people hustling hard. And then I think in '22, when the wind started blowing against us, it was tough. We went through some tough times, but we've responded extremely well. And I think we're in the best spot we've ever been. So that's the goal and we're going to do it. I'm thrilled that I kind of got behind you. But it just happens to us because we used you. Have to do not. But now, I'm not going to pick on these guys. I'm not going to pick on this fellow from RBC or from Jeffries, but listen to this. Bear case, increasingly unprovable, upgrading to sector reform. Jeffries, from distressed assets to internet, darling, upgrading to whole. What did these people who are paying a lot of money not see about you and your company? Well, you know, I think, in fairness to all of them, I think they do good work and I think they've been following us for a long time. And I think, as always, the case sometimes are positive, sometimes they're negative. And our job is to make most of the time positive. But I think what can be missed sometimes in financial models is business fundamentals and the people that make the business work. And I think our business fundamentals that we deliver experience that customers love. And I think we have a team that want our backs against the wall, we hustle. And I think those things generally lead to better outcomes and you can sometimes see by extending a line. So I think that's what we're doing. All right, better outcome for a company like yours is that you've got to come in under people's costs and yet still make a lot more money. Everyone told me you couldn't do that. But this supply chain that you have, let's talk about that. Sure, so I think without giving too much background, I think the way that automotive retail has evolved over time is there's tens of thousands of dealers out there that do things in similar ways. And I think a lot of customers love buying a car that way. But we wanted to build something. Really? I think it's intimidating. I think different people have different views. It sounds like, yeah, so it sounds like we're probably a great option for you. But I think we tried to build a business model that used infrastructure very differently. We've got thousands of acres, we've got 500,000 parking spots around the country. We've got a logistics network that delivers cars to people's doors. We've got a website where customers can go through the entire process. They can get approved for and select financing. They can go through all of it. And I think that business model required scale, but the variable costs are lowered so it allows us to pass savings on to customers. Okay, now what are people buying? And I keep hearing EVs are out. They're like hybrids that that's the story. Tell me what people are coming to see and buy. So I think different people like different things. I think our job is to give customers all the options they want. I think those options include ice cars, they include hybrids, they include electric cars. I think electric cars went through their kind of heavy hype cycle. And now it's kind of the opposite of that for now, but we view it at least as the kind of the horse out of the barn on that one. Electric cars are coming and they're coming pretty fast. They're now 8% of new car sales that's going to flow into use eventually. So we focus on trying to give customers all the options. You don't think it's peaked? We do not. We think electric cars are coming. Interesting. Now, I need to know who is it, the person who buys. And I want to do that because the old days we watch the car commercials during the football games and we say, wow, that's cool. Maybe we come in, maybe we don't. I think these newer people are required by going on the web. Googling, trying to find a car and are really comfortable with this whole thing. What is the demographic initially of what you're doing and what's the demographic now? Sure. So the demographic, I think, skews in all the ways that you'd expect. It skews a little younger, it skews a little bit more in the direction of electric car. It skews a little bit more affluent, it skews a little bit more female. But generally speaking, it looks like the average American customer. And so we're reaching them in the ways that most people would. We do TV advertising, we do a lot with Google, we do other digital channels. And then I think importantly, we try to deliver great experiences at places like this that people pull out their phones and record and tell their friends about. All right. I want to talk about that. I first heard about you because I go on I-95 and filled off you. And there it is. The beautiful tower. And I said to myself, that is all artifice. That is just some sort of come on. But it isn't. So I think another thing that doesn't fit in a business model is cool. I think it's cool to be here, right? It's cool to come here. Your kids pull out their phone. They're excited. They share with their friends. And we can deliver a lot more cars out of this small location in a much more interesting way than most dealerships can out of a much larger location. So it can be efficient, fun, and a little cool. Do you monitor Instagram and see what people do? Of course. Yeah. It's just a hot thing to do. Yeah. It's fun. All right. I want to talk about you. When things got ugly. I think there are a lot of people who would have said it's over. It was a great run. We should have had worked out. We had worked out. The balance sheet wasn't good. The disruptive model wasn't. What was it like? Take me back to when the stock was in the single digit. Which, by the way, was it? Nineteen hundred percent? Nineteen hundred percent for the market. Take me back to what it was like for you. Great. So that's not a fun transition. I think every company goes through periods that are tough. Most of the time, that's out of the public eye. We went public as a four-year-old company in 2017. So we went through a struggle in the public eye that I think was more difficult. But I think what I was really impressed by is the entire team that had put so much work and effort into building carbon over so many years. I think in that moment stood up and recognized, "Okay, fine. The narrative went against us, but the fundamentals are still the same. And we're going to keep charging." And I think we did a pretty great job over the last couple of years. I think, to be honest, I think we found a different gear. And I think we're a better business because we went through it. It's not something I would wish on anyone to go through that difficult time. But I think a lot of times it takes pressure to make us better. And I think that's what we did. I think you took grit. I know you're a believer. I know you're a family person. Well, I don't family. I think that matters very much too. People don't talk about that. I know. I don't talk about it. Now, one of the problems, we got this problem with inflation, right? And I view you as an inflation fighter. But we've got car insurance that's been really sticky. Of course, we've got affordability because of interest rates. Could you give me a fewer of the Federal Reserve? What do I think of Carvant? Well, I think what we're trying to do is build a business model that's different that cuts costs out of the system and gives room for a great financial return as well. Generally speaking, that means our customers can save about $1,000 versus buying from some of our other competitors. So I think that comes from the cost of distributing the car. It doesn't change the underlying price of the metal. But it does put $1,000 back in our customers' pockets. So hopefully we're doing our little part. And what do you think about the overall notion of a business person? If they took rates up, what would it do to your business? You know, I think the economy is a dynamic place. I think that the auto industry has been around for a long time. And I think it's adjusted to a lot of different environments. I think there's no question that when supply chains broke in 2021 and when interest rates started going up in '22, cars got a lot less affordable. Payments went up 50%. We would love for rates to come down. We would love for cars to depreciate because it makes it more affordable for our customers. But our job as a business is to live in the world that we're in. And so I think we've been doing the best job we can to adapt. All right. Well, I want to thank you for all you did for shareholders. Thank you. 1,800%. That's what makes you make stock investing good now. Well, thank you. Thank you for believing in us. Absolutely. That's because I was a customer. And that makes it a lot easier to believe. Earn to you. See it. Co-founder, president, and CEO of Carbon. Thank you, sir. Thank you. Coming up, this company has helped millions start their own portfolio. Should their stock be in yours? Kramer talks Schwab. Next. 1 and 8. That's how many people have worked better, 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 I've gotten help graduating themselves because they know the skills learned here. The amineedos, welcome to English Under the Arches. Can help you grow from here or keep growing here. Hi, welcome to McDonald's. 1 and 8. Start at McDonald's. And when you start, stay is with you. Sometimes the market will get a stock so catastrophically wrong. That you're almost wondering if you're losing your mind. Because the explanations for the action don't make a look of sense. But if you've done your homework, that can lead to some incredible buying opportunities. 5, 5, 5. Take Charles Schwab, the retail brokerage firm that I started recommending aggressively about a year ago because the stock got caught in the crossfire of the many banking questions last spring. Schwab shares went from the mid-80s to early last year to the mid-high-40s at their lows last spring. It was almost cutting back for heaven's sake. Basically trading like a troubled regional bank that seemed vulnerable to a bank run, not a premier brokerage house with an amazing franchise. It was repeated that this was insane. Schwab's a brokerage firm. That's how it makes its money for heaven's sake. It's got an internal bank to help with their clients' accounts. And their internal bank shared some similarities with many of the worst regionals. Its bump workflow had a lot of unrealized losses from longer-term bonds that had plummeted in price after the Fed started tightening. Hey, that was never a good reason to sell the stock though. Because underwater bonds can't hurt you as long as you're planning to hold them to maturity. That's the only problem for banks that run low on cash and are forced to sell their bonds early, maybe taking a big loss. The internal bank was frankly a sideshow. In the end, I said Schwab's brokerage business would thrive in a world with a strong stock market, and that's totally what we got. I started recommending this stock when I hit 55 in late March of last year, then doubled down when I hit 51 and just a little more than a year ago. Those were good calls as Schwab's now trading at $73 in change. Yep, the stock is thriving, especially if it's strong rally in February and March. Now, on Monday morning, Schwab reported an excellent quarter overlooked, sending stock up merely another 5% this week. Even as he asked me if I wanted to drop 3% of the same period. So tonight, here's what I want to do. I want to spend a few minutes updating you on the company that's powered through a wall worry and made it to the other side. They know nothing! Now, the headline numbers from Schwab's first quarter results on Monday, they didn't boil your socks off. Even as the firm still delivered a slight top and bottom line beat. Schwab reported net revenues of $4.74 billion. $4.74 billion is not bad, but that was down 7% year of a year, but up 6% versus the previous quarter, the link quarter, and modestly higher than the analysts expected. They also beat the earnings estimate by opinion, even as the adjusted earnings per share were down 20% year of a year. I know, I know that looks bad, but the earnings were also up 9% for the previous quarter. So you've got to look at both year over year and linked quarter. Even though the headline numbers weren't that impressive, when you look down to the hood, there was a lot of light. First, when I recommended this stock a year ago, I told you that even if deposits fled from Schwab's internal bank, they'd likely still see major inflows of cash to other parts of the business. Sure enough, that's exactly what happened. In particular, I thought Schwab's money market funds could benefit, and they have. Average client assets and Schwab's money market funds have increased by 58% from the first quarter of the last year. While Schwab's revenue from money market funds has grown by 45.5%. If you include Schwab's other equity and bond funds, ETFs, collective trust funds, and mutual funds, their average client assets jumped by 17.6% year over year. Meanwhile, the revenue from all these other offices up more than 29% total client assets were up 20%. In fact, Schwab's actually seen coordinate new asset growth in 11 of the past 12 months, meaning they're bringing in plenty of new business. That wasn't supposed to happen. Remember? Best part? The trends accelerate. In the quarter, they just reported that Schwab had $95.6 billion in coordinate new assets alone, almost half of which arrived in March. Meanwhile, the company opened more than a million new brokerage accounts in the quarter. That's incredible, no one expected that. A couple more things really did jump out of me when I sold the earnings. Last year, Schwab announced some layoffs that were widely seen as cause of weakness and concern. I told you that wasn't true. I told you not to worry about it, because Schwab merged with TD Ameritrade a few years ago, and they were still in the process of rationalizing the workforce. It takes a long time. If any, I said the last were actually in good news, at least for shareholders, obviously not too good for the people who lost their jobs. And you know what? Thanks to those layoffs, Schwab's core profitability metrics are starting to trend higher. Their pre-tax profit margin equated by nearly 500 basis points just versus the previous quarter. I thought that was outstanding. Finally, let's recall the top concerns that investors had about Schwab around this time last year. First deposit at Schwab Bank, those were coming down as expected from 325.7 million at the end of March of 2023 to 269.5 million at the end of March 2024. So a 17.3 decline, overall, not great. But that's not a bank run. Now, some of the more reasonable bears last year didn't necessarily think that Schwab would have some sort of calamitous outcome, like a run on the bank, but they did worry about this process called cash sorting, meaning the process of people moving their deposits around the endless search for more yield. The skeptics figured that would hurt the business. And again, to some extent, they weren't right. Schwab's net interest revenue was down 19.4% year over year in the latest quarter. Some of that's cash sorting. Some of it comes down to the Fed rate hikes and the action in the bond market, which sets longer-term rates. Remember, for financials, net interest anything means they're talking about the difference between what they pay you, the client, to hold on to their money, and what they charge, clients for loans. When you're a brokerage firm, we're usually talking about margin lending. At this point, the cash sorting process seems to have played itself out. In fact, while their net interest revenue was down substantially over year, it was actually up 4.8% from the previous quarter. Schwab's net interest margin also expanded by 13 basis points from the previous quarter. In part, that's because they've been able to roll out some of the most expensive sources of funding. They're getting less cash from retail certificates at deposit and making more money from margin lending on the brokerage side. That's what we want. Here's the bottom line. Just that year ago, people were tearing out their hair about Charles Schwab. They somehow thought it would fall victim to a bank run, even though it's a brokerage firm that just happens to have a pretty small internal bank. Even if there was no run, we were told endlessly the reverberations from the mini bank crisis were crushed Schwab's earnings and its stocks. I told you that was nonsense, and I hope you listen. Because the stocks now rallied from the low 50s to the low 70s, and Schwab's still putting up some very encouraging numbers. I'd like to say they're back, but the truth is, they never went away. It was just that the sellers didn't know what the heck they were doing. Let's take calls. Let's go to JR in Washington, JR. Hi, Jan. Booyah. Booyah, my friend. What's going on with you? I'm a single chef looking at my first-time collar. My question is, I'd like to know the stocks so far. Sure. Okay, now this is a $7 stock, so it's an incredibly of interest to people. We've gone over the quarter many times. They need to be able to show consistent profitability, and most importantly, they've got to stop having to put stock out, even though it cares to have to be added. The float has just got so overwhelming to people, and I think people didn't see it coming. Anthony, you know, explained all that very well, and I think you can go to the archives and see what he said, because it was the CEO telling the truth. I think Charles Schwab is doing well, but the truth is, they were always doing well. Just the sellers didn't know what the heck they were doing. Hey, much more made money at it. We know that travel is back and bigger than ever, so should investors be looking for an ancillary way to play the space that's not the obvious one? I'm checking in with a little aviation services company I recommend to me, which is called AAR, to get a read on where the space can be headed. Then, sometimes the pre-market action is just playing wrong, which was the case with a marketing express today, and also, by the way, proctor and gambling. I'm sharing what I saw in the quarters that gave me the conviction to believe in the stocks and tell you to buy them. Of course, all your calls are wrapping apart in tonight's edition, for writing them out. So stay with Kramer. Under this month, we're in a whole series of small cap stocks that could be worth owning, and a world where the megacaps are really taking a breather, if you want to say that, or just going straight down. I gave you usually the names across all those sectors. It's stocks like AAR Corp. An independent provider of aftermarket parts and services for both commercial aviation and government customers. I figure this whole industry gets more attractive every time there's a bad headline about production quality issues of Boeing, and these seem to be sadly endless. AAR stock is already up to over 6%, as I recommended a little over two weeks ago, in a really lousy tape. Can you keep running? Let's take a closer look with John Holmes, the chairman, president, and CEO of AAR Corp to learn more about what this company's up to. Sir, I am so glad to see you, because boy, we got one hot stock in a very tough market. So Mr. Holmes, tell me what's going on. Awesome. Well, thank you, Jim. It's so good to be here, and I've been a fan of yours in this show. Really my whole career. So this is exciting to be here to talk about what we've got going on at AAR, and we've got a lot going on at AAR. As you mentioned, we're an independent provider of aviation services, and there's really no other company in aviation like cars that's independent, meaning we're not part of an OEM, like an Airbus or a Boeing, or part of an airline like Lufthansa. And there's no one else that does all of the things that we do and integrates them in the way that we do. So just a couple of things about us, so we're about $2.5 billion company. We were founded back in 1955, so we're coming up on our 70-year anniversary here in Chicago. We have about 6,000 people on our team, and we operate in about 30 different countries. And we do three things, and one of the things I'm most proud about is the work that we've done, and I know you've known the company for a while, the work that we've done in recent years to really focus the portfolio down to the three core things that we're the best at. And the first is selling parts. We sell both new parts as a factory new distributor for a number of manufacturers, and then we also sell used parts. We're one of the largest in the world for selling used parts, and that means that we're buying dozens of individuals and buying dozens of aircraft and engines each year. We're tearing them down. We're repairing them, and then we're reselling them into the market. And that's become a real important business given the OEM supply chain challenges that you've mentioned. The second thing. Let me just stop you there. On the OEM supply chains, in other words, if there are, let's say there's a problem building planes, that means the existing planes have to run much longer and have to run many more times, which to me means AAR's got great business. That's exactly right. That's exactly right. And we're benefiting from that now, and we expect to benefit from it in the future as well. Anything that prolongs the life of the existing fleet, which is core to us in terms of our existing capability, is good news. And that's the production challenges out of Boeing that you mentioned, but also the engine reliability challenges, the F, et cetera, that extend the life of the existing fleet and tip those aircraft into their next maintenance visit. And that's what drives a lot of our business. Now, I also want people to know that your FAA approved. In other words, we read all these things. The FAA is not that happy, obviously, with some companies, but you do your work. And I have to believe that you're the good housekeeping seal of approval that the FAA would actually love you to be in there, working on the doors and working on parts, because they know that you're not beholden to specific companies. Absolutely. I think that's a great way to look at it. And that's a great segue into the second thing that we do. We are one of the largest in the world for outsourced maintenance, maintenance of whole aircraft, which is called heavy maintenance, and maintenance for individual aircraft parts, which is called component maintenance. And in the heavy maintenance segment, we're the largest in North America, we have a number of facilities in the U.S. and Canada, and we work on over a thousand aircraft a year in our facilities. And these are for the world's largest airlines. United is a huge customer. Alaska Airlines is a big customer. Air Canada, Southwest, Delta. They're all big customers of AAR. And as they've turned to outside providers of maintenance over the years, that's been a big source of growth for us. Well, also, you did something that was brilliant. I think the company that sold it may have need some capital. This Triumph Group's product support business seems like it's right in your wheelhouse. More business, you can integrate it synergistically fabulous. Absolutely right. This is a business we'd had our ion for some time. And I'd actually, I've been CEO for about six years. This was the fourth written offer that I sent the CEO of Triumph Dan Crowley to buy this business. Because to the points you just made, I felt that we all felt it would make tremendous sense for AAR. We're leaders in the world in terms of part sales and parts distribution. We're leaders in heavy maintenance, but we were not leaders in this area of component maintenance, and Triumph was. So now adding that to our portfolio creates a tremendous amount of synergy, both on the cost side because there is some overlap in their operations and our operations. So we will have the opportunity to rationalize our footprint and take out some costs. But also on the vertical integration side. That trading business I mentioned, that USM business where we're buying and selling the aircraft and tearing it down and repairing them. Well, a lot of that work, millions of repair work now can be in-sourced inside AAR now that we're owners of Triumph. And we believe that we can really sell the Triumph services. They've got a great set of capability. We've got an incredible sales force around the world, and we believe that we can really grow that business. And it's a creative to our margins. That's been a big focus of ours. One last thing. A lot of people talk about workers shortage. They say nothing we can do blah, blah, blah. That is not your approach to the situation. Yeah. In terms of workforce, you're absolutely right. You know, it's interesting. It's been a focus of the world post-COVID, but it actually became a focus of AAR all the way back in 2018. We started to feel the effects of the shortage of mechanics. The pilot shortage in the market rightly so gets a lot of attention, but there's been a shortage of mechanics in the industry for some time. And I remember my early earnings calls back then. You know, we had some softness in our maintenance business back then, and it was because we couldn't get people. And, you know, we were being asked questions, you know, wow, you can't get people, that sounds unique. But it turned out to be really good for us because it really got us focused on this issue. We started partnerships with schools. We've got a number of scholarship programs around the country. We doubled down on our efforts to recruit veterans into our industry. 20% of our employees roughly are veterans, and we're really proud of that. It's been a great source of talent. So really focusing on this workforce development issue early on back in 2018 has worked out really well for us now. And today we've got the people that we need to meet the incredible demand for our services that we see. And we also will be expanding facilities, and we've got a line on talent to support that expansion. Well, John, look, I got a hand at you. You're doing everything right. I did have a big position with AAR when I was a hedge fund manager. That was now more than 20 years ago. But I want to thank you, and I also want to thank you for your kind words about the show. I hope it's influenced you positively, and that we've done a good job for you, and for AAR. Thank you so much, John, for coming home. May have money. Yeah, absolutely have. Thanks so much, John. Terrific. May have money is back at the Breakthrough of John Holmes, chair, president, CEO of AAR. The tip is easy to remember. Air! May have money is back at Hoover. Coming up, hit us with your best shot and electrified, fast-fire, lightning round is next. It is time to start the light round. Take it back. My last week's take. We'll try to find you guys. We're going to start the light round. And then the lightening round is over. Are you ready, Steve? Thank you for the light round. I want to start with Bill in Massachusetts, Bill. Boo, boo, boo, yeah, Jimbo. Except you. Except you. How can I help? You know, Jim, I wanted to start out with first thanking you and your staff for the incredible annual meeting. It was a great time. I've never been to Wall Street. It was thrilling to go there and meet you and get a picture with you. Thank you so much. Well, thank you for coming, and thank you for your trust in us, and the team is fantastic. How can I help you today, Bill? Well, I'm looking at a company that I'm going to watch for 18 months. They have a total of 11, with 36.6 billion. The net income is 5.6 billion. It is Honeywell. Okay, Honeywell reports next weekend. In this particular table, people don't like technology, and they do like to be at some of the industrials. I think Honeywell can deliver. This is time for Vamal Kapoor to show his stuff, because it has been maybe one of the worst of the industrials, and it's a good company. I'm surprised. It's time for him to make a move. He's got a brand and a wife, please, brand. Hey, a little hot, Jim. I have a quick question about a technology I haven't heard you cover much on. And I'd like to know what you think of IONQ or any other company that we ought to be taking. Right now, technology is in free fall, and that includes the companies that are actually doing incredibly well. So, a company is losing money like this. I have to say, all right, now we're going to go to John and Florida, John. Max Kramer, thanks for taking my call. Oh, sure, John. What's going on? I just had to get your take on Snowflake, Inc. Okay, so, remember, Snowflake did lose the guy that we love, Frank Sloop. And it's been replaced by Rama Swami. I think Rama Swami's good, but Sloopan was great. So, I don't have the conviction yet to be able to say this horrible tech stock market that it's time to buy snow. I just can't do it. It's just too horrible a tech market. Let's go to Pete in Delaware, Pete. Jim, hey, how are you? Thank you so much for my call. Oh, of course. How are you? It's good. You have an awesome weekend as well. I don't want to get your opinion on one of the holdings here. Guidewire software. Very good. Owns a property and cash he builds in business when it comes to software. However, it sells at like 90 times earnings, and companies that are selling at anything more than 20 times earnings are getting hurt. This may be one where you actually, look, I don't want anyone to be a hedge fund. But you probably can sidestep the decline and get back in at a lower price. Let's go to Doug in Alabama, Doug. Hey, Jim, I want to ask you my Uber. I like Uber here. I think now Uber's well below. It's high. I think you buy some now, and you buy some a little bit lower, and that'll do it. And that, ladies and gentlemen, I'm the lightning round. The lightning round is sponsored by Charles Schwab. Coming up, do you have what it takes to thrive in the markets? Kramer shares an investing club lesson you won't want to miss. Maxed. People can't resist taking their cue from the action, the way a stock trades. Even though the action is often quite wrong. Right or wrong though, journalists can't resist taking their cue from selling this to you on the screen. It's a classic mistake, and I see it all the time in this business. Who needs a very morning? Consider the case of Marcus Bess. When Amazon reported a solar number, I always like to read the report and the deck, the big explainer, before a stock trades, and the quiet away from everybody. I match the numbers against what I expected, and then I get the lay of the lamp. I see things I like, and in the case of Marcus Bess, I got all excited because the company's become a consistent winner. But then I see the stock trade down a couple of bucks in the early morning. Suddenly I hear that Amazon had a weaker quarter because of the softest and small business. What the heck? I said to myself, are these sellers blind? Don't they see all the other fabulous stuff? The low charge loss, the amazing growth, the younger people who've taken the card and loved it? So I go on the air and explain why this wasn't a bad quarter, but a great one. And I give the reasons why, the reasons I saw before I looked at the tape. Next thing I know, the stock goes from being down in pre-market trading to close up more than 13 bucks, and that's where Amazon shouldn't go into the first place. That quarter was excellent. All right, how about a more controversial one? How about proctoring gamble? This stock tends to be strong in the markets week, so you can expect it to get back to something, but when I went over the quarter, I saw huge sales, exploding gross margins. I tried to get it, changed the last two quarters. Procter's costs had come down. Way down. And this time courtesy fluctuations didn't wipe out the gains from those savings. Plus China's a key market for them. It had been abysmal. It's finally starting to turn. That's huge. Oh no, it was a good quarter. Yet the stock traded down almost $4 at the open. As I told Jeff Marks, my partner at the CVC Investing Club, in a fit of fury, by the way, I can't be this wrong about a stock, not one that just reported. Before I come in today, I had studied the last two quarters cold. I knew they're comfortable as cold. I knew the weaknesses, the improvements, chapter and verse. And I was steamed. So I told both people on the squawk of the street and club members in the morning meeting that the initial pullback was a fabulous buying opportunity. And the sellers. You know nothing. Next thing you know, the stock erases all the losses and all the finishes of the block. They're almost a dollar. The early action was just playing wrong. It was stupid. And everyone took their cue from those initial sellers who clearly hadn't done any homework. Well, let's just call it the blind leading the blind. This stuff tries to be crazy. I'm trying to teach here. Now you understand, I'm not performing magic. It's not alchemy. And there are of course situations where the crowd's right. The stock deserves to go down. In many cases, you don't want to fight the tape. So you don't want to fight the tape intact. I've been saying that for weeks. But we need to make exceptions when we have the history. We know the expectations. And we have the confidence that the selling simply doesn't reflect the reality of the situation. Look, it's really important to have confidence when you're in this business. But that's what we teach in the club. Conference comes from doing the homework though. Those who sold American Express down to or procter and gambled down in this floor simply hadn't done their search. Their judgment was arrived. So advised. My advice to them, if you don't want to do the homework, stop trading individual stocks and just go buy an index fund. I promise it'll do better than whatever the heck you think you're doing selling the stocks of companies that you don't understand and haven't done enough work to be able to do it right. I'd like to say this always will mark it somewhere. Now, I'm starting to find it just for you right here on Mid Money. I'm Hugh Kramer. See you Monday. Last call starts now. 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