Mad Money w/ Jim Cramer – Episode Summary (December 9, 2024)

Release Date: December 10, 2024

Introduction

In the December 9, 2024 episode of Mad Money with Jim Cramer on CNBC, host Jim Cramer delves deep into the current stock market landscape, highlighting significant movers, investor behaviors, and sector-specific insights. This episode offers a comprehensive analysis suitable for both seasoned investors and newcomers navigating Wall Street's complexities.

1. The $100 Billion Club: Major Gainers and Market Dynamics

Cramer begins by examining companies that have recently surpassed the $100 billion market capitalization mark, emphasizing their impact on the current market zeitgeist.

• Nvidia's Dominance [02:15]

  "When you have that trillion dollar cover, you can't sneer at companies that put on a lot of points in 2024."

  Nvidia's stock surged 180% year-to-date, benefiting from its pivotal role in AI and semiconductor industries. Cramer notes that Nvidia's influence allows investors to rationalize paying premium prices, even double what they did a year ago.

• AppLovin's Meteoric Rise [04:50] AppLovin experienced a staggering 907% increase, skyrocketing from $13 billion to $121 billion, with peak valuations reaching $142 billion. Despite a temporary 15% dip due to exclusion from the S&P 500, Cramer remains optimistic about its pivot towards e-commerce leveraging mobile gaming technologies.

• Palantir's Explosive Growth [07:30] Since its direct listing in 2020, Palantir has transformed into a powerhouse in military data analysis and AI. Cramer highlights its potential to revolutionize defense budgets by offering cost-saving solutions and advanced data processing capabilities.

• Spotify's Subscription Success [09:10] Spotify's 165% surge is attributed to the strength of its subscription model, mirroring successful strategies from Netflix and Amazon. Collaborations with high-profile artists and podcasters have fortified its market position.

• Private Equity Giants Apollo Global and KKR [11:00] Apollo Global and KKR each rally 93% and 91%, respectively. Cramer points out the trend of startups staying private longer due to the challenges of public offerings, favoring private equity investments as a lucrative alternative.

• Other Notable Movers

  • ARM Holdings: Up 87% with its strategic position in semiconductor architecture.
  • Progressive and Chubb Limited: Progressive surged 60% leveraging AI in pricing, while Chubb increased by 26%.
  • Citigroup and Palo Alto Networks: Citigroup entered the club with a 45% return, and Palo Alto Networks added to its gains despite recent volatility.

Cramer emphasizes that while these gains have created substantial paper wealth, the rapid influx of capital can lead to market vulnerabilities.

2. Airline Stocks: A Structural Shift and Sustainable Growth

Jim Cramer provides an in-depth analysis of the remarkable rally in airline stocks, attributing their success to strategic capacity management and structural industry changes.

• Record Rally and Performance [14:32] The US Global Jets ETF has soared 53% in four months, with individual airlines like Delta up 70%, United Airlines a staggering 159%, and American Airlines nearing 90% gains since August lows.

• Capacity Management as a Key Driver [16:45] Historically, airlines overextend capacity during boom periods, leading to price wars during downturns. This year, airlines have exercised discipline by limiting new capacity growth to low single digits in the second half of the year, enhancing pricing power and profitability.

  "The single most important positive development for the airlines over the past few months is the fact that domestic airline capacity has stopped going up as much as in previous years."

• Influence of Low-Cost Carriers and Supply Bottlenecks [19:20] Struggles among low-cost carriers like Spirit Airlines and Southwest, compounded by Boeing's production issues, have contributed to reduced oversupply in the industry. This bottleneck has further strengthened major carriers' market positions.

• Valuation and Future Outlook [22:00] Despite substantial gains, major airlines like United and Delta remain attractively valued, trading at around 10 times earnings estimates, well below the S&P 500 average. Cramer is optimistic that as long as airlines maintain capacity discipline, their growth trajectory remains sustainable.

  "As long as the airlines don't add too many new flights, I think the major carriers like United, Delta, and American, they can keep on flying."

3. Investor Complacency: Warning Signs in Market Indicators

Cramer expresses concern over signs of complacency among investors, using two key indicators: the CBOE Volatility Index (VIX) and junk bond spreads.

• Low VIX Levels [25:10] The VIX, a measure of market volatility expectations, is hovering around 14, its lowest since early July, indicating reduced investor fear and confidence.

  "When the VIX goes gets this low, it shows that investors aren't thinking much about what can go wrong."

• Narrow Junk Bond Spreads [27:35] Junk bond spreads have reached their lowest point since summer 2007, suggesting that investors are not adequately compensating for higher-risk corporate bonds.

  "When you look at the volatility index at trading at low levels and junk bond spreads getting their lowest interest rate premium since 2007, it is clear we've got an overabundance of complacency in this market."

Cramer warns that such complacency can lead to significant market downturns, as historical parallels indicate potential for substantial pullbacks when investors overextend their risk appetites.

4. Caller Interactions: Stock-Specific Advice and Insights

Throughout the episode, Jim Cramer engages with callers seeking advice on various stocks, providing nuanced perspectives tailored to individual queries.

• Datadog and MongoDB [09:21] Caller Dave from Illinois asks about Datadog's performance.

  "Up some, you know, some days Datadog is such a winner."

  Cramer acknowledges Datadog's growth but also recommends considering MongoDB for its strong performance.

• Coca-Cola Investment Strategy [10:22] Caller Craig from California inquires about taking a long-term position in Coca-Cola.

  "I think it is... You want to bet that a stock will come down to your levels that makes you feel more positive as it gets hit."

  Cramer advises strategic buying during price dips to average entry points, emphasizing Coca-Cola's strong dividend yield.

• Apple Amid US-China Tensions [29:08] Caller Susan from Texas questions selling Apple shares due to geopolitical tensions.

  "I am a big believer in owning Apple, not trading it."

  Cramer remains bullish on Apple, highlighting its resilience and potential growth even amidst geopolitical challenges.

• Intel's Foundry Business and Estee Lauder's Valuation [30:28] & [30:53] Bill from Massachusetts and Sam from Pennsylvania seek insights on Intel and Estee Lauder.

  "You know, not now. Let's just wait."

  Cramer recommends holding off on Intel due to current uncertainties and expresses reservations about Estee Lauder's valuation, preferring competitors like ELF for their value propositions.

5. The Pet Industry: Chewy vs. Petco Analysis

Cramer explores the divergent performances of major players in the pet industry, assessing the ongoing humanization of pets trend.

• Chewy's Resilience and Growth [31:20] Despite a recent 7% sell-off due to conservative guidance, Cramer highlights Chewy's strong fundamentals:

  "Chewy's Vet Clinics business also continues to show some promising signs."

  Chewy's expansion into Canada and successful customer acquisition through vet clinics bolster its growth prospects.

• Petco's Mixed Performance [33:15] Petco reported improved revenues and same-store sales but faced concerns over lower-than-expected guidance.

  "Management remains excited about the recent launch of their welcome to the family program."

  While Petco shows operational strengths, stock volatility remains high due to its low share price and recent market movements.

• Cramer’s Preference [35:00] Ultimately, Cramer favors Chewy over Petco for its superior business metrics and robust management, reaffirming the humanization of pets thesis.

6. Lightning Round: Quick Stock Opinions

In the high-energy Lightning Round segment, Cramer offers rapid-fire opinions on various stocks based on caller inquiries.

• Alliance Entertainment vs. Live Nation [39:06] Cramer advises moving from Alliance Entertainment to Live Nation, citing the latter's stronger performance and better growth prospects.

• Big Bear (BB AI) and Nebuchadnezzar Investments [40:07] He expresses skepticism about Big Bear AI stocks, recommending investors focus on more stable AI leaders like Nvidia.

• Novavax and Eli Lilly [40:50] Contrary to caller interest, Cramer downplays Novavax while highlighting Eli Lilly's significant buyback program as a positive indicator.

• Automation and Intel [42:08] Cramer suggests holding onto automation stocks due to their attractive valuations but remains cautious about Intel's foundry segment.

• Smith & Wesson SWBI [41:37] Despite a 4.5% yield, Cramer views Smith & Wesson as overly expensive, advising a cautious approach.

• PayPal and AI Investments [43:09] Cramer remains bearish on certain AI stocks within the fintech sector, recommending a focus on established players with strong fundamentals.

7. Potential Advertising Industry Mergers

In the latter part of the episode, Cramer discusses a potential merger in the advertising sector, analyzing its implications for the industry.

• Omnicom's Proposed Merger [44:02] Cramer critiques Omnicom's offer to merge with IPG at 3.34 shares for every IPG share, questioning the viability amidst antitrust concerns.

  "If you were suggesting me that we could see Omnicom try to merge within a public group two of the largest advertising agencies, I would have laughed in your face."

• Regulatory Hurdles and Market Impact [45:20] He anticipates strong resistance from the Biden administration's antitrust regulators, likely blocking the merger to preserve competition.

• Shift to Data-Driven Advertising [46:05] Cramer observes a trend towards advertisers bypassing traditional agencies in favor of direct relationships with tech giants like Meta and Google, leveraging their vast data resources for targeted advertising.

  "Advertisers go directly to Matter for everything they need."

• Future of Ad Agencies [47:00] Cramer posits that without consolidation and adaptation, traditional ad agencies may become obsolete, unable to compete with the data-driven strategies of tech firms.

8. Closing Remarks: Maintaining Market Vigilance

Cramer concludes by reiterating the importance of staying vigilant amidst market exuberance, emphasizing the need to recognize and mitigate risks.

"I have to keep them in front of you so you don't get too bullish, maybe cool down a little."

He urges investors to heed early warning signs like low volatility and narrow junk bond spreads to avoid potential market downturns, reminding them that complacency can exacerbate losses in volatile times.

Conclusion

The December 9 episode of Mad Money offers a thorough exploration of current market trends, significant stock performances, and underlying economic indicators that signal investor behavior. Jim Cramer's insights provide valuable guidance for navigating the complexities of today's financial landscape, emphasizing strategic investment approaches and caution against complacency.

Notable Quotes:

• Jim Cramer on Nvidia's Influence [02:20]

  "When you have that trillion dollar cover, you can't sneer at companies that put on a lot of points in 2024."

• On Investor Complacency [27:50]

  "It is clear we've got an overabundance of complacency in this market."

• Airline Capacity Strategy [16:50]

  "The single most important positive development for the airlines over the past few months is the fact that domestic airline capacity has stopped going up as much as in previous years."

• Chewy vs. Petco [35:15]

  "I think it's safe to say that the humanization of pets thesis... remains very much intact."

• On Potential Ad Agency Mergers [44:05]

  "If you were suggesting me that we could see Omnicom try to merge within a public group two of the largest advertising agencies, I would have laughed in your face."

This comprehensive summary captures the essence of the episode, highlighting Jim Cramer's key discussions, insights, and strategic advice, enriched with pertinent quotes and timestamps for reference.