Mad Money w/ Jim Cramer 1/21/25

Summary

Mad Money w/ Jim Cramer – Episode Summary (January 21, 2025)

Release Date: January 22, 2025

Overview

In this episode of Mad Money, host Jim Cramer delves deep into the current state of the stock market, exploring the influence of political dynamics, sector-specific performances, and individual stock analyses. With a blend of insightful discussions and interactive segments with callers, Cramer offers actionable advice aimed at helping investors navigate the complexities of Wall Street.

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1. Market Dynamics and Political Influence

Trump's Impact on the Market

Jim Cramer begins the episode by reflecting on the bullish trends influenced by former President Trump’s policies. He emphasizes Trump's strategy of "buying the dips" during his administration, particularly when corporate stocks faced pressures due to his aggressive rhetoric.

• Quote: “When The Dow rallied 538 points. S&P gained point eight percent. The Nasdaq advanced zero point six four percent. Because after months and months of talking high tariffs, President Trump was very measured about trade barriers in his inaugural speech.” ([00:57])

Cramer discusses how Trump's initial hardline stance on tariffs eventually softened, leading to market rallies driven by more predictable and manageable trade policies. This shift has reinstated investor confidence, particularly in sectors sensitive to international trade dynamics.

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2. Semiconductor Sector Boom Driven by TSMC

Taiwan Semiconductor Manufacturing Company (TSMC) Earnings

A significant portion of the episode is dedicated to analyzing TSMC's exceptional financial performance and its ripple effects across the semiconductor industry.

• Quote: “Taiwan Semi delivered 39% revenue growth year over year, 57% earnings growth. These are extraordinary numbers.” ([14:15])

Cramer highlights TSMC’s robust revenue and earnings growth, attributing it to their leadership in high-performance computing and AI-related chip manufacturing. The company's optimistic guidance for Q1 2025—projecting a 33-37% revenue increase and improved gross margins—has ignited investor enthusiasm.

Impact on Semiconductor Capital Equipment Companies

The strong performance of TSMC has propelled semiconductor capital equipment companies such as Applied Materials, Lam Research, and KLA to significant gains.

• Quote: “Applied materials rallied 4.5% last Thursday and is now up more than 8% in the three trading days since the quarter.” ([16:30])

Cramer explains that TSMC’s increased capital expenditure plans, particularly towards advanced process technologies, have boosted expectations for capital equipment suppliers, leading to substantial stock rallies in these companies.

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3. Housing Sector and Interest Rates

Influence of Interest Rates on Housing Stocks

Cramer shifts focus to the housing sector, discussing how fluctuations in long-term interest rates impact homebuilders and related stocks.

• Quote: “Builders First Source has been a tough stock to own. When interest rates go higher...people buy fewer houses.” ([25:20])

He underscores the correlation between lower interest rates and increased activity in the housing market, benefiting companies like Builders First Source and Home Depot. Recent positive indicators, such as a surge in housing starts and rebuilding efforts due to natural disasters, have revived investor interest in these stocks.

Highlight on Builders First Source and Home Depot

Cramer recommends Builders First Source and Home Depot as prime investment opportunities in a potential lower interest rate environment.

• Quote: “If you believe the increase in long rates has mostly run its course at this point, then these two stocks should be very interesting.” ([28:10])

He elaborates on Builders First Source’s growth prospects driven by housing shortages and rebuilding needs, while Home Depot benefits from its acquisition of SRS Distribution and sustained professional business growth.

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4. Interactive Caller Segment: Stock Recommendations

Caller Insights and Jim’s Advice

The episode features several callers seeking Jim’s perspectives on various stocks. Cramer offers tailored advice based on his analysis, emphasizing long-term investment strategies over short-term trading.

• Caller on Toyota (00:09:18): Jim expresses cautious optimism but notes the challenges in the auto industry.
• Caller on Progressive Insurance (00:09:58): He praises Progressive’s AI integration and market positioning.
• Caller on Crowdstrike (00:10:36): Cramer is bullish on Crowdstrike, citing its strong cybersecurity business.

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5. Apple’s Stock Downgrades and Future Prospects

Analysis of Apple’s Recent Challenges

A significant portion of the episode is dedicated to discussing the recent downgrades of Apple’s stock and the broader implications for the tech giant.

• Quote: “Today, Apple fell from its spot as the world's largest company... What tech happened here?” ([40:00])

Cramer analyzes the reasons behind Apple’s stock decline, including reduced demand for iPhones, particularly in China, and concerns over AI integration. Despite these challenges, he maintains a positive outlook on Apple’s ability to pivot and sustain its revenue streams through services.

• Quote: “I expect more downgrades by people who want to get ahead of the big surprise.” ([41:00])

He argues that Apple’s consistent innovation and strong service revenues position it well for recovery, encouraging investors to hold rather than sell during downturns.

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6. Healthcare Sector: Pharmacy Benefit Managers (PBMs)

Impact of Potential Regulation on PBMs

Cramer delves into the healthcare sector, focusing on the role of Pharmacy Benefit Managers (PBMs) and the potential for regulatory changes under new administration policies.

• Quote: “These middlemen, whom Trump has pledged to knockout, collectively siphoned 7.3 billion... by marking up generic drugs.” ([31:00])

He criticizes the opaque practices of PBMs, suggesting that regulatory actions could significantly impact their profitability. This potential downside makes PBM stocks unattractive investments in his view.

RFK Jr.’s Influence and Food Industry Critique

Cramer also touches upon political influences, specifically RFK Jr.’s stance on food processing and its implications for the food industry.

• Quote: “He could really make a difference and strike a real blow against obesity, diabetes and the food makers and adulterers themselves.” ([38:00])

He remains skeptical about the immediate impact but acknowledges the long-term potential for positive changes in food regulation.

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7. Lightning Round: Rapid Stock Recommendations

Quick Takes and Stock Picks

In the Lightning Round, Cramer swiftly addresses various stock-related questions from callers, providing concise recommendations based on current market insights.

• ASML (40:44): “I think ASML is a remarkably great company and I think you should buy it.”
• Advanced Micro Devices (41:09): While acknowledging the company’s strengths, he advises caution ahead of earnings reports.
• Caterpillar (43:40): Encourages holding onto long-term positions despite short-term fluctuations.

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8. Key Takeaways and Final Thoughts

Investment Strategy and Market Outlook

Cramer emphasizes the importance of holding quality stocks through market volatility, highlighting the benefits of long-term investment strategies over short-term trading based on analyst downgrades.

• Quote: “If you believe them, you miss the big moves, the kind of moves you only catch when you're invested.” ([42:30])

He reiterates the significance of sectors poised for growth, such as semiconductors and housing, while cautioning against stocks negatively impacted by potential regulatory changes, like PBMs and certain food processors.

Encouragement for Investors

Cramer closes the episode by reinforcing his mission to educate and guide investors towards making informed decisions that can enhance their financial growth.

• Quote: “My mission is simple. To make you money.” ([01:22])

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Notable Quotes with Timestamps

• Jim Cramer on TSMC’s Impact: “[14:15] Taiwan Semi delivered 39% revenue growth year over year, 57% earnings growth.”
• On Builders First Source: “[25:20] Builders First Source has been a tough stock to own...”
• On Apple’s Downgrades: “[40:00] Today, Apple fell from its spot as the world's largest company...”
• On PBMs: “[31:00] These middlemen, whom Trump has pledged to knockout, collectively siphoned 7.3 billion...”
• Investment Philosophy: “[42:30] If you believe them, you miss the big moves...”

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Conclusion

This episode of Mad Money offers a comprehensive analysis of key market sectors influenced by current political and economic factors. Jim Cramer provides valuable insights into the semiconductor boom, the housing market’s sensitivity to interest rates, and strategic stock recommendations tailored to both novice and seasoned investors. By emphasizing long-term investment strategies and cautioning against reactive trading based on short-term market movements, Cramer reinforces his commitment to helping viewers make informed financial decisions.

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Disclaimer: The opinions expressed in this summary are based on the transcript provided and do not constitute financial advice. Investors should conduct their own research or consult with a financial advisor before making investment decisions.

Transcript

[Jim Cramer]

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[Jim Cramer]

My mission is simple. To make you money. I'm here to level the playing field for all investors. Always a bull market summer. And I promise to help you find it. Mad Money starts now. Hey, I'm Kramer. Welcome to Mad Money. Welcome to Kramer. People make friends. I'm just trying to help you make a little money. My job is not just to entertain, educate, but to teach you about days like today. So call me 1-873CBC tweet Mitch McRamer. The last time President Trump was in the White House, you always had to buy the dips. Buy, buy, buy. That he would periodically cause with his own saber rattling. You always had to purchase the stocks of companies he attacked because their stocks would never go higher anyway. You had to see the opportunity that his bluster hit. Even it was painful to do so. Those moments were the best times to invest. And that's what happened today. When The Dow rallied 538 points. S&P gained point eight percent. The Nasdaq advanced zero point six four percent. Because after months and months of talking high tariffs, President Trump was very measured about trade barriers in his inaugural speech. He didn't threaten prohibitive tolls at all. Maybe four years is a long time ago, but people seem to forget the Trump drill. The president loves the stock market. He always loves to send signals that all hell is going to break loose. And when it doesn't, well, guess what? The market flies. This rally is built on the back of tariffs. More specifically, smaller than expected tariffs that could grow bigger if countries don't play ball. It's built on the backs of new projects like Stargate, a new AI infrastructure initiative that's backed by Open Air, Oracle and SoftBank to put up new data centers filled, no doubt with orders from Nvidia Equipment. And it's cemented by the appearance of all the big tech executives at the new president's inauguration. What a difference in 2017, when Trump's presidency was contentious and a lot of executives didn't want to have anything to do with it. But let's go back to what's really driving today's markets. The tariffs, which turned out to be all bark, no bite, at least so far. Lots of people thought that Trump would kick off his second term by stoking a huge trade war against China. The repercussions would be gigantic. Sure, some money would come into the treasury thanks to the tariffs, but China might then retaliate, and then we come right back and tit for tat for tit for tat, and who knows where it would go. I didn't see it that way because Trump told me that it might not happen. I want you to take a listen to what he said right after he was elected, when I asked him, right here on the floor of the exchange about China. We have a lot of talks with China. We have a good relationship with China. I have a surprising relationship now. When the COVID came in, I sort of cut it off. That was a step too far. That was, as they say, a bridge too far. But we've been talking and discussing with President Xi some things and others, other world leaders, and I think we're going to do very well all around. Well, he said it. But for many, it's a remarkable turn of events. A light hand when it comes to China, maybe even lighter than President Biden, who throws a resistance, would constantly hector the Chinese, chiefly about advanced semiconductors, but also about their dubious trade practices. I think Trump finally realized that we never really got anything from the Chinese by playing tough. They didn't even try to appease us. They gave us nothing. Maybe he's got a plan. But no matter what, the actual tariff plan was a pure under promise over deliver riposte that got Wall street very excited about a new, more flexible Trump regime. When we saw the smoke Clear. Many investors were concerned that Trump was going to go after Mexico and Canada with everything he had. But because he eventually do that, at one point, no. Before taking the White House, he Talked about putting 25% tariffs on our two long standing trading partners immediately. But then when the America first trade policy memo came out, we saw that the administration wants to study the situation. Sure, he's still talking about renaming the Gulf of Mexico the Gulf of America, but when it comes. But when it comes to actual policy, it sounds like if he can find someone in Canada to negotiate with, he'll do it. And he's already getting a pretty business like set of answers from Claudia Scheinman, the president of Mexico. Again, the rhetoric was hot, but the reality was cool. Sure, there are some real harsh words for a lot of the environmental rules and regulations and grants that President Biden jammed through the last four years. Trump has no time for these. He says that oil and gas integral to making America great again. If you drill enough and produce enough, you're going to get lower oil prices along with American hegemony overseas. Because without high gas prices, Russia's got nothing. Makes a ton of sense, unless you're concerned about the environment, in which case there are obviously some real trade offs. Of course, it's not clear how much Trump can influence the oil and gas companies. They need more pipe to bring natural gas to market both overseas and domestic. The oil CEOs know that if they lose discipline at the best of the president, prices will plummet and they'll miss their quarters. But you never know. The oil executives were so disrespected under the Biden administration that maybe they could be a little more pliable and joy when it comes to Trump. Which brings me back to his this start to Trump's term versus his American carnage days from the previous administration. In the first go round, Trump really actually didn't have a lot of context with businesses we know outside of real estate and entertainment. They didn't know him and he didn't know them. This time around, business people know one thing very clearly. They felt targeted during the Biden administration. The agencies where the real power is seemed to be stuck with people who had tremendous antipathy toward business. In particular, they really had it in for any company was extremely successful and it made a lot of money for its execs and you a shareholder. The second thing business people know, Elon Musk. Look, I don't know a lot of executives who behind the scenes actually like Musk personally. But I also don't know a soul in business who doesn't respect him. Musk is incredibly successful, no denying that track record. We don't really know how much he can get done in Washington. Seems like he lacks a real power base to make changes. I fear he'll end up just being consulted with no influence. But just the fact that he's in the room makes CEOs more comfortable than they ever felt with Biden, who seem to recoil from them for fear of sending the wrong message to the rank and file. He never wanted a photo op with any business people. Lots of executives could see that Trump not only has no problem with rich people, but he sought them out for advice. Remember at the end, Biden's agenda agenda was controlled not by the Commerce Department's Gina Raimondo, who was relatively business friendly, but people like Jonathan Cantor and the Justice Department's antitrust division. Lina Khan, the ftc, Jennifer Granholm, the energy Secretary who warned of exporting too much liquefied natural gas. The real energy regulators, the epa, or Merrick Garland, the Attorney General who was deeply focused on Apple's powerful grip on cell phones. Don't tell the Apple sellers who drove the stock down 3%. More on that later. Now, if you don't trust big business, you probably like the heavy hand, you like the regulation. But if you ran one of these companies, you were often blindsided by a subpoena or maybe even a lawsuit. No dialogue ahead of time. That's not how things have been done in this country. Until Biden, there had always been dialogue. Unless you thought that you were a crook. If they thought you were a crook, no dialogue. These execs felt like they were all treated like crooks, though under Biden. Maybe you think that's a partisan thing, but I never heard anything like this about Obama ever. He was all business. In the last go around. Trump did lay into companies that were moving operations to Mexico. He did opine that Amazon abused the post office. But those were all buying opportunities. This time he carried a big stick going into the White House, but spoke softly once he was in Scotch and 1600 Pennsylvania Avenue. We'll stay this way. What did we learn about Trump the first time around? You could never be sure the difference on day one. He knows business people, Silicon Valley. He knows how things work. You may like him, you may hate him, but the bottom line, if you're attack titan, Trump will take your call. In fact, he'll call you Biden. I don't know if he knew who they even were, and he certainly didn't bother to Call them. In the end, I think he preferred to sue them if you own stocks, which is why you watch me, Trump's method is a heck of a lot better for your portfolio. Brian in Colorado. Brian.

[Caller]

Hey, Jim, I just recently read your book Make Money Carefully. It was really great. I really hope you consider writing another. Helped me make a lot of money.

[Jim Cramer]

Thank you. How can I help you now?

[Caller]

Hey, so you've been consistent in your general caution regarding investment in the automakers lately, but I wanted to ask you about one of them that's recently set some optimistic goals going forward and also made it clear that they're looking well beyond auto manufacturing with a recent large investment into space tech. Jim, I'm looking for your current thoughts on ticker tm Toyota.

[Jim Cramer]

Look, I like Toyota more than I like many of the American automakers. But again, it's still in the auto business and that's a real tough neighborhood. And I care about the neighborhood. Joe in Georgia, Joe Kramer. How's it going? Not bad, Joe. How are you?

[Caller]

I'm doing great. I've got a question. I've started a small position in Progressive and I've been very interested in this. It looks like they're taking market share from Geico, consistently raising sales and free cash flow. And I want to know, is this a good one to add to a.

[Jim Cramer]

More I hear behind the scenes over and over again that they are the most AI related, auto insured, the best in pricing. I salute you for going with Progressive. And you go to John, South Carolina. John. Hey, Jim on the call. Glad to have you. Great to have you on the show. What's up?

[Caller]

Longtime listener, second time caller, member to call.

[Jim Cramer]

Thank you very much. Don't forget our Thursday meeting at noon. How can I help? My question is about Crowdstrike. I've established a position with a cost basis just below 320.

[Caller]

Did I trade and take some of the profits hold?

[Jim Cramer]

I think Crowdstroke is, I think Crowdstrike is going up big from here. I think that cybersecurity business is terrific. I think that they are just now beginning to play offense after that glitch that heard. I do think that this is the time to own Crowdstrike and to own what George Kurtz has built. All right. This time around, Trump knows more people, more business people and they know him. If you own stocks, if you're watching me, you probably do. That's a good thing, everybody. Tonight, Taiwan semi earnings sparked a broader run up among the semiconductor, conductor, cap stock, capital equipment stocks. I'm breaking down its report and the fact and the best pin action I've seen in Asia. Then I'm taking a closer look at the leader of last week's rally and revealing what stocks I think could build higher in a lower rate environment. And after my time at the J.P. morgan Healthcare Conference here in San Francisco, I'm giving you my takeaways and eyeing the road ahead for the sector. So stay with Kramer.

[Producer]

Don't miss a second of Mad Money.

[Jim Cramer]

Follow imkremer on X.

[Producer]

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[Jim Cramer]

Look, there are a lot of great things going on last week. So so many. They really didn't get to cover them all in depth. So aside from the quarter expected inflation meetings and the terrific bank earnings, let's talk about another huge positive last week. We had a very encouraging earnings report from Taiwan Semiconductor Manufacturing Company, AKA Taiwan Semi or just TSMC for short. The world's leading semiconductor manufacturer reported excellent numbers early last Thursday, which was strong enough to spark a strong rally for basically the entire entire sector. Yes, this stock is that important. While Taiwan Semi itself was only up 1.5% by the end of last week, the company's commentary was so positive that the Philadelphia Semiconductor Index finished the week up 5.4%. Even lowly worm intel managed to become one of the five best performing stocks as we've under last week up more than 12%. And many other chip plays had huge gains, especially the semiconductor capital equipment names. Let's talk about this. There's a reason these stocks ran Taiwan Semi delivered 39% revenue growth year over year, 57% earnings growth. These are extraordinary numbers. Neither of those were big surprises because the company releases monthly revenue results. So we had a very good idea of how much money they were really making. But you know, what was the surprise? Taiwan Semi guidance for the first quarter 2025 in the first quarter, Taiwan SEMI expects revenue of 25 to $25.8 billion, which would represent an increase of 33 to 37% year over year. And based on the company's exchange rate assumptions, they're expecting gross margin profit between 57 and 59%, up from 53% in the first quarter of last year. Now all these numbers, they were substantially ahead of expectations. That's what you need to know. Management explained that the company's strong results in the fourth quarter were driven, not surprisingly, by the High Performance Computing Division, which encompasses the AI and smartphone end markets and made up 53% of their sales in the quarter. Taiwan Semi's leadership in manufacturing accelerators, like in videos best chips remains the key driver of their success. The best analog is indeed in video. Taiwan Semi said that after accelerator revenue tripled and accounted for about 20% of revenue in 2024, they expect it to double again into 2025. Imagine thinks the strength in this theme will continue for a while. Over the next five years, they expect the revenue to rise at a 20% compound annual growth rate and AI is the main catalyst for that growth as Taiwan Semi expects a mid 40% growth rate for accelerators during the same period. Now like I said earlier, the pin action from this Taiwan Semiconductor was extensive and some of the biggest beneficiaries were the semiconductor capital equipment companies that. Well, these are huge, huge makers of equipment that Taiwan Semi buys. Applied materials rallied 4.5% last Thursday and is now up more than 8% in the three trading days since the quarter. Amazing. First supplier Lamb Research gained 4% on Thursday. It's now up 7% over three days. KLA rallied 4.2%, is now up more than 7% since Taiwan Semi quarter. That is serious pin action. So why did Taiwan Semi Quarter spark such a big rally for the semi equipping capital equipment sector? Simple. In addition to all of its bullish revenue and margin guidance for the first quarter 2025 and the positive commentary about its long term revenue growth potential, Taiwan Semi also disclosed its capital equipment budget for full year 2025. It was enormous. Company expects to spend 38 to 42 billion dollars in capex this year which would be up between 28 and 41% from last year and was well above the 36.4 billion number that Wall street was expecting. By the way, management said that about 70% of his capex budget will be spent on quote, advanced process technologies and quote again equipment to make GPUs and other accelerators, basically chips from Nvidia and their imitators. I was very surprised that it didn't go up even more last week. It's catching up now just in case you were concerned all at the Taiwan Semi management expects this money to be well spent. They said, quote, a higher level of capital expenditures is always correlated with higher growth opportunities in the following year. These guys know what they're doing. That robust capital equipment expenditure guide is why the semiconductor capital equipment group has caught fire over the past few days. Capital spending from the world's largest foundry and that's a name for big manufacturing facility means money spent on the massive big ticket pieces of equipment supplied by the Applied Materials, Lam Research, KLA and Dutch ASMLs of the world. The fact that so much of Taiwan Semi capex budget is going towards advanced process technology is also a huge positive because those are the latest and greatest and most expensive pieces of equipment these capital equipment companies sell now. But there was more to this move than just the explicit numbers that Taiwan Semiconductor we put out. While the semiconductor capital equipment companies have been terrific long term performers and started out last year hot, do they basically been losers for the past six months or so. In fact, these stocks sold off in the second half of last year, so only Applied Materials and Kelly actually finished the year in positive territory, and all four significant underperformed the S&P 500 in 2024. Maybe I haven't missed any of everything here. Throughout that time, the narrative has shifted from immense opportunity represented by the latest chips like AI accelerators to concerns about why the full opportunity might not be realized. Whether that's because of some unsubstantiated rumor about delayed production for Nvidia chips, we hear that constantly, right? That drove the stock down last week or more recently, the export controls that the United States was trying to impose to limit development by some of our greatest geopolitical foes, especially China. These companies gave up billions of dollars in business when Biden cracked down on Chinese ordering periodically. Concerns also merged by the hyperscalers are certainly investing lots tons of money in infrastructure now. Maybe the investments aren't sustainable and will need to be pared back in the future, perhaps substantially. And an uneven process in the market for some of the more basic chips hasn't helped the group either. Long story short, I think the breakout in the Semiconductor Capital Equipment Group is a reflection of investors starting to think once again about the scale of the opportunity. Not about what's dismal, but the opportunity ahead for for these companies. Taiwan Semi's management team spelled out that opportunity so eloquently in its earnings report and the associated conference call last week, and investors finally began to realize that some of the restrictions on some of our most advanced semiconductor technologies might soon be coming to an end as the Biden administration's time is over. I'm not sure about that. That's what people are thinking. Oh, by the way, of course, on a day when Oracle, Salt bank and OpenAI also announced plans to spend $100 billion on new AI infrastructure, just for starters, I'm also not as concerned about the idea that the hyperscalers might need to slow down their spending, partly because I've heard from Nvidia Jensen Wong over and over about the impressive returns on investment that customers can get from their purchase of his most advanced AI product. Frankly, I don't think the opportunity for these semiconductor capital equipment companies was ever really that diminished even when their stocks were getting clobbered last year. There was just a perception problem, and it's always hard to move the crowd when a group's out of favor. But with its bullish report Last Thursday, Taiwan Semi was able to remind investors how powerful this theme is. Remind you how powerful this theme is. Essentially resetting the entire narrative for everyone operating the high end semiconductor world, including the semiconductor capital equipment companies that stood out as some of the biggest beneficiaries. Bottom line, I want you to keep in mind as we hear from the rest of the industry that Taiwan Semi has a tremendous understanding of the business and they're insanely positive about the future of chips that can power AI. I know the action group seems long in the tube, but in truth maybe we're still in the early years of a once in a lifetime new industrial revolution and you need this equipment to stay ahead of the crowd. That money's back at the brick.

[Producer]

Coming up, could a decline in interest rates get the housing sector back on track?

[Jim Cramer]

Kramer's giving you two names to play the move next.

[Producer]

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[Comcast Engineer]

Every day thousands of Comcast engineers and technologists create connectivity solutions that change the way we work, live and play. Like Kunle, a Comcast engineer who is focused on revolutionizing the in home Wi Fi experience today and for the next generation. Learn [e-mail] wi fi.

[Jim Cramer]

Last week we finally got some positive action for the stock market in 2025 with the S&P 500 gaining nearly 3% and turning positive for the year. Cooler inflation data pushed down long term interest rates and we got flooded with great earnings reports. So what performed best during last week's rally? When you look at the top performers, there are really some interesting patterns here. Two of the big banks that reported strong quarters made the list. Both Goldman Sachs, which we own for the Chapel Trust and Citigroup rallied 12%. A couple of semiconductor names like their applied materials like Semiconductor Capital Equipment and even the lowly intel, Both also roughly 12% higher thanks to the amazing quarter that I just talked about from Taiwan sent me. Oil service giant SOB was in third place up almost 13% after reporting a terrific quarter on Friday that nobody was looking for. United rentals was in second gaining nearly 15% on the news that it's trying to acquire its competitor, H and E Equipment Services. You rarely see an acquirer rallying on takeover news, less the shareholders really believe in it. Right? But at the very top of the list was a name that I've talked about a lot that most people don't even put in the conversation, which is wrong. It's a company called Builders First Source that's the nation's largest supplier of building products, prefabricated components and value added services to homebuilders and contractors. I've been recommending Builders First Source for years now as a play on the idea that we have a structural shortage of single family homes and even if everybody builds like crazy, it'll take years to fill that shortage. However, Buildings Builders First Source has been a tough stock to own. When interest rates go higher, like they've been doing for the bulk of the past four months, rates go higher, mortgages and home equity loans get more expensive, people buy fewer houses, and so the builders don't need to buy as much stuff from Builders First Source. When you look at its stock versus the yield in the 10 year treasury, you can see that it peaked in mid September at just over $200 and then fell more than 30% from its highs before it bottom earlier this month. That's entirely because the yield in the ten year went from 3.6% to 4.8% during that time. Remember, percentage gain is really huge on that. Last week though, long term interest rates pulled back and Builders for a Source came back to life. So to make things crystal clear, this stock will only keep working if the bond marketplace bought long rates start rising again, then rallying. But last week showed that even a relatively modest pullback in rates can send this stock soaring. And if you're willing to believe that rates can keep falling, then I have to say the Builders for Source is a fantastic stock for this environment. Of course, last week 70% rally wasn't entirely about interest rates. On Thursday night the stock caught a very enthusiastic coverage initiation for Raymond James. With an outperformed rating, they argue any bad news is already baked in and Wall Street's not giving Builders First Source enough credit for what it does. Well, I think they're going to be right the very next morning. We learned that December housing starts came in well above expectations. Overall housing starts were up 15.8% month over month, rising to a seasonally adjusted annual rate of 1.5 million units. Wall street was only looking for an increase of 3%. Highest annualized housing starts in 10 months most of last year, anything related to homebuilders struggled as housing starts consistently came in below expectations. Once it became clear that the Fed wasn't going to cut interest rates as aggressively as Wall street was hoping, the builders pulled in their horns. Then when rate cuts in the Fed finally did materialize in the final months of the year, it didn't help because the bond market went in the opposite direction. Very strange behavior. And long rates soared. It's the long rates that really matter in this industry because that's what the mortgage rates are about. So it's encouraging to see the builders get a more confident, bit more confident into, into the very end of the year, signaling that there could be more building activity going forward. Let me give you one more reason. Like Builders First Source, the substantial rebuilding effort that's ahead of us in multiple parts of this country. Because of hurricanes Helene and Milton in the Southeast last fall fall. And the wildfires that hit Southern California earlier this month, there are tens of thousands of homes across Florida, North Carolina and California that will need to be repaired or rebuilt entirely. That means more business for Builders For Source and its compadres. You know, while we're on the subject of housing, there's a reason we own Home Depot for the Chapel Trust. In fact, we've been steadily buying shares in this one since September based on the idea that it should be a winner in a lower interest rate environment. Environment. While we haven't exactly gotten that lower rate environment, Home Depot stock has held up pretty well these past few months. It's actually up modestly since September. Something I'll talk about at the CNBC Investment Club meeting at noon Thursday. I will tell you if long rates start to cooperate, then Home Depot stock could really shine. I think it'd be one of the best stocks in the Dow. Last year, Home Depot did a relatively large deal. It put this $18.25 billion acquisition of SRS Distribution, which let them move further into the part of the market where Builders First Source operates. That's the professional space. The deal is already benefiting Home Depot. When the company last reported earnings in November, its sales were up 6% year over year. Despite the fact that still cautious. Do it yourself first. While the shoppers, they, they went into Home Depot less and spent less per transaction than in the year before. That didn't matter because they did so much professional business. Home Depot also called out hurricane related demand in the quarter. But I think it's going to play out over multiple quarters or even multiple years like the fires in the Southland now Again, just in case I wasn't clear before, both Builders First Source and Home Depot are stocks that need lower interest rates to truly thrive. If you believe that long rates are still headed higher from here, and that's a perfectly sound thesis, these stocks will struggle. But if you believe the increase in long rates has mostly run its course at this point, then these two stocks should be very interesting. Bottom line, once the macro backdrop is right, then Builders First Source at Home Depot stand to benefit inordinately from both the persistent housing shortage and now the additional business that will come from the vast rebuilding efforts underway in multiple states impacted by natural disasters recently. So if you're in the camp that expects lower rates, those are two terrific stocks to buy right now. Let's go to Brian in Pennsylvania. Brian.

[Caller]

Hi Jim. Thanks for taking my call. Hope you stay.

[Jim Cramer]

Oh yeah, a little chilly out there. No doubt about it. How about you?

[Caller]

Pretty good. We had negative nine this morning up here in the Poconos.

[Jim Cramer]

Well, I'm putting that in the cold camp. What's going on?

[Caller]

Jim? I've been building a position in Caterpillar since November. I've been following your advice by buying a little at a time which has worked out well. I've got a better average cost that way, but I'm still about 5 to 10% away from my target quantity and are scheduled to announce earnings next next week. Should I complete my purchase before that or should I wait until after earnings? What do you think?

[Jim Cramer]

We're not going to put a gun to your head like that, Jim. Bumblebee is building this company for the long term in a complete different fashion from the old Caterpillar. This is not a quarter to quarter stock the way CAT used to be. This is a multi year move and I think you're part of it and I would stay there. Let's go to Mike in Oregon. Mike?

[Caller]

Hi Jim, this is Beaver. Mike in Oregon, longtime viewer club member and second time caller.

[Jim Cramer]

Yes, and I'll be sure to be on that call on Thursday, please. Thank you.

[Caller]

Will do. I'd like to thank you for all you do for investors and in helping me retire three years earlier than I planned.

[Jim Cramer]

Well, congratulations to you. Thank you.

[Caller]

Thank you, Jim. Last month I swapped out of my position in Stanley, Black and Decker to start a position in Home Depot to reduce my tariff exposure. I've also been reducing my position in Honeywell, so since last fall and I'm now light in industrials. I've been considering adding to my position in Dover but have been reluctant to violate my $175 cost basis. Jim, is Dover still a buy here or should I?

[Jim Cramer]

Wow. Yeah, I mean I'm preparing my talk for Thursday and I'm still including Dover as a buy. I understand the Trim and Honeywell, we did the same thing today. I'm not going to give up on Stanley, Black and Decker because I really believe the rebuild will help them. But I think you're doing sound things. I think Dover is about to break out. It's not that expensive when it's finished reshuffling his portfolio. I think I go with that one. And thank you for being so close follower of the club and what we're up to. I want to go to Denise in Minnesota. Denise, hey there.

[Caller]

And Happy New Year to you, Jim.

[Jim Cramer]

Same to you, Denise. How can I help?

[Caller]

Well, this particular food company, unlike a lot of them, doesn't have the unhealthy foods. This is a seasonings company. They went through a couple of bad years. Things are looking better, but I don't know what the future holds. What do you think of McCormick?

[Jim Cramer]

Okay, I think you raised all the right issues, which it is not one of these companies as adulterated food. However, the pull of a sector is so powerful in this particular market that no matter what McCormick does, it will be kept back by its compadres. So I'm not sure you want to pull the trigger in that stock. Now if anybody's expecting lower rates, I think Builders, First Source and Home Depot are well suited for that environment, especially given the other housing factors we're seeing right now. I like that Home Depot so much now. Much more man Monday, including my take on where the health care middlemen stand in the new Trump administration. Plus today Apple fell from its spot as the world's largest company company. I'll tell you what it means for my own it don't trade it thesis and of course, all your calls. Rapid fire in tonight's edition of the Lightning Round. So stay with Rainbow. If Elon Musk or anyone else in the Trump administration is serious about balancing the budget, they need to go after the one part of health care that's universally low, both inside and outside the industry. I'm talking about the pharmacy benefit manager middleman that President Trump has already started to target. Let me say from the beginning, from the outset, it is very hard to balance the budget. The executive agencies are all staffed by people who know how to protect their turf and a lot of what might need to be cut is pretty darn popular. But there's some easy savings to come by if you go after the pharmacy benefit managers. The FTC has done this gigantic amount of work on these health care middlemen. So far they came up empty handed. Maybe they just didn't get a chance to get it done. For instance, the FTC recently singing out Cygnus Express scripts, CBS is Camarc Rx and none other than United Health's Optim RX is Friction. Expensive friction. These middlemen, whom Trump has pledged to knockout, collectively siphoned 7.3 billion for the six years the FTC measured through 2022 simply by marking up specially generic drugs. Hey, why don't we throw in Sinkora McKesson and Cardinal Health, although I think the latter is doing a lot more besides just middleman. These are the drug distributors and they're part of the FTC's version of the problem too. Now that 7.3 billion alone is it's chicken feet. I know that compared to the federal budget deficit. But if the government wants savings in Medicare and Medicaid, it's certainly enough to make it very tough to own these stocks. See, Medicare is where the money is. Three things define our deficit. Social Security, health care, and just paying the interest on your existing debt. Social Security is called the third rail of American politics for a reason. Interest payments on our bonds are mandatory. You can't scrap the full faith and credit the US government, which leaves health care. If I were looking for a way to shrink the deficit, I take a hard look at what happens with drug pricing and drug rebates. I question whether any company should own both the pharmacy and a pharmacy benefit manager. And I'd open up the pricing on everything, every little thing, and create a commission to ensure that there's some rationality for what the federal government will play, will pay. It's crazy. That's the only place where I think our government can find real savings that won't make too many people angry. President Biden stunned the not ready pharma industry with the ira. Medicare negotiation passes Now I remember when I was the Kramer from Kudlow and Kramer in the early part of the century and we discussed this issue endlessly. My colleague Larry Kudlow said it would never happen. It was too dangerous to market. Innovation of Medicare uses bargaining power to negotiate lower prices. I heard that too many drug companies would leave the country. It would stifle, stifle all innovation. I came in a different way. I said that the VA negotiates prices. Why shouldn't Medicare? Besides, virtually every other government on earth does the same thing. So where the heck are these, these companies Going to go. Dozen years later, Larry became President Trump's chief economic adviser. And the drug companies were still untouchable. They were perceived to be off limits, too powerful to take on. But I think the drug companies were caught off guard by Biden's initiative against them, something that was buried in what was basically an infrastructure bill. They were stunned further when a second list of drugs subject to price negotiations came out last week. Or at least they seem to be stunned by the turn of events when I talk with them behind the scenes at the J.P. morgan Health Care conference. But one thing's for certain. These drug companies aren't moving anywhere. It was an idle threat. Not only that, but I think Big Pharma is now on a mission to tell their side of the story about how the middlemen are. They're the ones who really rip us off. Go back to the $7.3 billion figure. I think Elon Musk and his buddies at Doge can dig in and find out, find out other costs to the system that will make the 7.3 billion small change. And I think they could call for a different way to distribute jobs, drugs. I got an idea. Maybe they should call for a commission rate like the 6% commission when you buy a house in this country. So this opaque system of rebates, that office gets a lot of profiteering. Any middleman, like a. Because like a Mark Rx should get the same commission for helping drug companies dispense their drugs, not one penny more. Real bad for their stocks. I know, but the government could generate a lot of savings. Isn't that the point? Sadly, Biden's FTC seem to have spent more time trying to stop two handbag companies from merging than it did trying to get health care costs down to creating more competition. Hey, maybe that can change under the new regime. It can't. I just can't emphasize enough how despised these middlemen are by the rest of the industry. With technology as it is, with the ability to know where and how everything needs to go and how to charge for it, I have no idea how this current process survives. I can argue we don't even need these companies anymore. But nothing rational is going to come of this unless some agency really champions it and the President gets behind it. Or to put it another way, while everyone was concerned about the conference, about Robert F. Kennedy Jr. Hoping he wouldn't be confirmed as Health and Human Services Secretary, the real battle is convincing the public that it's not the drug company screwing over everybody, it's the middlemen. And how about RFK Jr. I think there's a lot of fear that what he really means what he says about vaccines, that he really intends to track down them. The people around him are much more vituperative on the vaccine issue than he is. I'm almost sure of that. Where's he really? I want you to go to the January 6th edition of the New Yorker. I want you to read the piece by Drew Cool are it's called, quote, why is the American diet so deadly? End quote. If you didn't know about what are about RFK Jr. You'd say, Geez, why can't someone in our government do something about this? It's all about the processed food and what it does us. It's disgraceful. I think RFK knows that he shouldn't waste too much of his time in political capital and vaccines when he could be devoting himself to changing our food regime, which is a disaster. There are a handful of food companies left and they all trade as if the world of hurt is about to come down on them. Maybe it will. The issue with RFK though is that you can't expect the American people to give up on the cause of their bad diets. So don't give up on owning the GOP Dash 1 weight loss drug stocks because I think the government's got to pay for it. I think Medicare and the health insurance companies will pay and they'll pay a lot. We can't kick these foods because they're like drugs. We need drugs to combat these drugs. Lots of people are fretting about how Novo Nordisk GOP1 now going to be regulated by Medicare price controls. As someone who owns Eli Lilly from my travel trust, I gotta say I was glad to see Novo on the list because I wasn't even sure Medicare would even pay for them all. The bottom line. Yes, we got tons of talk about Drugs at the J.P. morgan Healthcare Conference last week. But when it comes to emotions, they're riding high about middlemen and about RFK Jr. But the only ones who should be trembling are the pharmacy benefit manager middlemen and those who adulterate our food. I am no fan of the middleman and I'm all in on RFK when he's talking about food, I hope he sticks to that rather than the vaccine stuff. He could really make a difference and strike a real blow against obesity, diabetes and the food makers and adulterers themselves. I would not own the stocks of the middlemen or the food processors. It's a long four years and for them the Pain. The house of pain hasn't even started. They have. Money's back after the break.

[Producer]

Coming up, Kramer takes your calls.

[Jim Cramer]

And the sky's the limit.

[Producer]

It's a fast fire lightning round.

[Jim Cramer]

Next. It is time. The shot, of course, is hitting us out. Bye bye. Seltzer. Just narrow close. Awkward at the time. My staff prepares the graphics of the we playing the sound and then the lighting round is over. Are you ready? Skiing tight. Time for the light round. Crimson, buddy. Let's go with Paul. New York Paul.

[Caller]

Hey, Jim. One time, first time caller.

[Jim Cramer]

Okay. I'd like to know what you think. Think of rgti. Okay. It's a quantum stock. These are short squeezes. If you want to participate in a short squeeze, this is better than most. How about that? Let's go to Reese in Pennsylvania. Reese. Hey, Kramer.

[Caller]

I want to get your opinion before I open a position on afml.

[Jim Cramer]

I think ASML is a remarkably great company and I think you should buy it. Let me tell you, I also like Lamb Research. Let's go to Andrew in Utah. Andrew.

[Caller]

Hey, Kramer.

[Jim Cramer]

What's going on? Not much. How about you?

[Caller]

Not much. Not much. So, yeah, My question today is with Advanced Micro Devices. I'm just wondering if, you know, the stock being down, you know, year over year, if it's.

[Jim Cramer]

If the stock's on sale or if it's a buck. Look, I think that it's a great company. I do think that there's a lot of people who believe that they will not be able to deliver on this quarter. I therefore, for them, reluctant to get in ahead of the quarter. And we did sell the stock a little bit higher for the Chabot Trust. Let's go to Ken in Texas. Ken. Yes, Jim.

[Caller]

I'd like your opinion on my situation. About 10 years ago I bought Dow and Dupont and they merged. They split up, held the Dow, Dupont and Cortitas. Since that time, I'm playing with the house's money, basically.

[Jim Cramer]

Basically.

[Caller]

And I'm drawing $900 in dividends per month on Dow. But its price keeps sliding and I'm nervous whether I should continue to hold or sell and move on.

[Jim Cramer]

I don't want to sell it here. We might be at some sort of trough at this very moment in Dow pricing. So I think you should hold on to the stock. Let's go to Jim in Connecticut. Jim.

[Caller]

Jim, I do not own a pit stock since I sold my zotas at over 600% profit, thanks to you.

[Jim Cramer]

What about Elan? Elan, not my favorite. I do think that the Pet. Look, I like Chewy. I know that's a pedestrian way to look at things, but I think that Chewy is the better bet for this group. Let's go to Ryan in Arizona. Ryan, I want your opinion on a healthcare technology company that focuses on Medicare Advantage plans and uses an AI based platform to help physicians improve chronic disease management and patient outcomes. Do you think this type of innovation has the potential to disrupt the industry and compete with the larger players or do you see it as a potential acquisition target? The company I'm referring to is Clover Health Investment Ticker clo Okay, that is just a total spec. I mean the kind of stocks that we talk about in health care I think are much better than this. This company loses a lot of money. I'm not recommending stocks on Mad Money of companies that lose a lot of money. Let's go to Connor in Pennsylvania, please. Connor. Hey, Jim, Kyle, what's up?

[Caller]

Hey, Jim, I'm a young investor and I've been watching your show for about a year now and I want to thank you for your 2020 dividend stock. They're off to a great start.

[Jim Cramer]

Thank you.

[Caller]

My question is that I spent most of my last year buying Cleveland Cliffs with anticipation that it would go up after Trump in the election.

[Jim Cramer]

Okay, it did go up a bit.

[Caller]

In November, but it's been very flat since. Do you think I should sell?

[Jim Cramer]

No, I don't want to. I mean a lot of the commodities I think can bottom here. This stock has come down, down, down, down, down. I cannot count in the selling Cleveland Cliffs at this level. And that, ladies and gentlemen, is the conclusion of the Lightning Round. The Lightning Round is sponsored by Charles Schwab. When is a miss? Not a miss? When it's totally expected, that's when. Which brings me to Apple. Today, Apple fell from its purchase the largest company on earth. It's now worth less than Nvidia after sinking 3.2%. What tech happened here? On the surface, I tell you that Apple caught not one but two downgrades which were brutal because while one of them was a buy to hold, the other was the dreaded hold to sell. This kind of downgrade is usually the problems of companies showing dismal failure several down quarters in a row followed by the big give up, perhaps even a changing of the car. Apple superficial problem. Demand not enough of it, especially the phone. Everything seems to be going the wrong way here. US demand seems tepid. More important, China demand seems to fall off a cliff. There's apparently a problem with artificial intelligence for the iPhone in China. Apple doesn't have a partner again. Apparently that's going to cause them to miss the quarter. Worse, they're going to miss the next quarter, too, which means they'll cut their forecast for the next quarter. When they report, they say it's going to be a shortfall and an estimate cut of epic proportions, calling into question whether Apple's growth has come to a halt. There'll be endless downgrades and someone may even evoke what met, as Mark Zuckerberg said in his seminal Joe Rogan interview, that Apple hasn't invented anything since Steve jobs passed away 14 years ago. They're claiming it'll be a brutal shocker, that no one will see it coming. There's just one problem. How can something this widely telegraphed, this well known to speculate on, still be a surprise? Today's the birthday of our executive producer, Regina Gilligan. Well, surprise cupcakes, after the show. There. The proverbial cat's out of the bag is still a surprise. I don't think so. Same goes for Apple. I expect more downgrades by people who want to get ahead of the big surprise. Analysts want to downgrade it now, ahead of its report on Thursday of next week, perhaps so they can upgrade it after the bombshell so it's not too late to sell. Right? Isn't that the thrust of all my comments? Wrong. I've been recommending Apple for 20 years now because it makes the best products universally love. When something goes wrong, which is apparently the case now, Apple will pivot. It will fix it. It will do what's necessary to please the customer. At the same time, it has the fabulous revenue stream. That service stream. Anytime you see an Apple charge that you pay, and you most likely pay it automatically, the money goes into the service revenue bucket, which keeps growing and growing and growing as more people tap into something Apple offers. Mike Chapel Trust has owned Apple forever. We had to sell some late last year as an answer to a really high quality problem, owning too much Apple versus the rest of the portfolio. We'll talk about that at our noon Thursday club meeting. Now consider this. If you owned Apple for the past 20 years, you'd be up 17,588%. 17,588% if you include dividends paid. $100 invested in Apple stock back then would now be worth nearly $21,000. So why isn't everyone who owns Apple millionaire? Simple. Because of days like today. Because of analysts who have no faith. Because of all the people who think that the company's best days are behind them. If you believe them, you miss the big moves, the kind of moves you only catch when you're invested. Not fitting in and out like a cat jumping multiple times onto a stove you had to hold on even if it were for dear life. What will turn things around this time? Maybe Apple finds a partner in China for AI. Maybe the next version of the iPhone is radically better. Maybe the Vision Pro is better than the competition from Metta. If you're keeping score, maybe there are new additions to the revenue stream. Maybe everyone knows it'll be terrible turns out to be less terrible. Hey, everyone knew Netflix was going to be great tonight. It turned out to be really great and the stock went up more than 100 points. I don't know what it will take to turn Apple stock around. I just have faith that Apple will pull it off. That's why I don't mind days like today at all. These days are the price you pay for greatness sometimes because you never know when you can get back in. This is the price you have to pay. That's why I say own Apple, don't trade it and don't sell it unless the position gets so big that you have no choice. That real high quality problem that happens to Apple shareholders all the time. Like I said, as always, more market Solomon. I promise I've had just for you right here on Man Money. I'm Jim Cramer. See you tomorrow.

[Comcast Engineer]

All opinions expressed by Jim Cramer on this podcast are solely Kramer's opinions and do not reflect the opinions of CNBC, NBCUniversal 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 Cramer as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Kremer's opinions are based upon information he considers reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy and it should not be relied upon as such. To view the full Mad Money disclaimer, please visit cnbc.com madmoneydisclaimer when you're with Amex Business Platinum, you have the card that works just as hard as you do. You give 150% to your business and so does your card. With 1.5 times Membership Rewards points. On select purchases, you earn rewards that can take your business further and with complimentary access to more than 1,400 lounges globally, including the Centurion Lounge, you can stay up to speed no matter where your business takes you. That's the powerful backing of American Express Terms and Points Cap Applied. Learn [e-mail] AmExBusiness.