Transcript
Jim Cramer (0:01)
My mission is simple, to make you money. I'm here to level the playing field for all investors. There's always a bull 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 up here. My friends, I'm just trying to save you a little money. My job is not just to entertain you, but to educate. But there's like today in context. Call me 1-800-743- CNBC. Tweet me at Jim Craver. You might believe you own a portfolio of totally diversified stocks. But if you lost a ton of money today, you're probably not as diversified as you think. That's because high flying stocks are a category by themselves regardless of what sector they belong to. Now days like today, the high flyers, well, they all get slaughtered. They fare much worse than the averages. So after the sell off with The Dow lost 451 points. SB declined.343% and the Nasdaq said 0.47%. I want to prove that you need to think twice before you pile all of your money into the most volatile stocks out there. The momentum plays. I mean this especially for some of you younger investors who use options and ETFs to make what amounts to bets on these stocks. Because I know you got your clocks clean today. See, you never want to lose a huge amount of money in any one day because the real challenge in this business is convincing yourself to stay in the game. And nothing is more discouraging than seeing everything you own get clobbered. So let's talk about speculation. Informed speculation that can lead to big time investing as long as you are disciplined and don't roll it all into the highest of flyers and nothing else. The most secular stock in this entire market right now is Palantir. That's a data analytics of artificial intelligence company that is loved, love, love, especially by young people. I'm basing that speculative crown on its ridiculously high valuation with the stock selling 497 times this year's earnings. And that's after falling nearly 15% over the past two trading sessions. Now I am a big believer in Palantir as a decent spac. I've listened to Alex Karp, the charismatic borderline messianic CEO talk about how the the company should be valued by the abstruse rule of 40 where you add its revenue growth rate to its operating margin. And if you get a number north of 40, well then you've got a good business. On the last conference call Karp said pounds. Your sales growth rate and its operating margin together added up to 81%. 81. 81 is the best in the entire market. Does that mean it's worth 197 times earnings? Not on a daily. Today, this consulting and data interpretation company, among so many other things, does a huge amount of business with the Defense Department. And we're now hearing chatter that the defense spending could be cut back by 8% in each of the next five years. Now, I could make the case that Elon Musk, the head of Doge, might actually appoint Palantir to cut the fat, or you could easily argue that Congress and the courts will never let the defense budget get cut without an actual piece of legislation. But today, that didn't matter, did it? The stock, which had gone up for weeks, gave back a huge amount of money in the last two days. Why now? Some of us, the Defense Department. But some of it was simply that Palantir has gotten too expensive, which is why we're starting to hear chatter about insider selling plans. It actually doesn't bother me, though. See, most of all, what really happened is about the shareholder base that turned tail. Palantir is mainly owned by retail investors who are true believers. They love Karp and his irreverence and his baggage show about how everyone at Palantir is much smarter than you and I. They think this Stock belongs to 1000, not at 106 where it went out today. Is there some metric to justify that, that price? None whatsoever. For the owners, the traders, it's all about charisma and brilliance. And take take their word for it, they do tremendous work for customers, work that pays off soon if you hire balance here. Now, most of these kinds of shareholders don't intend to sell. But it gets a little too dicey on days like today and yesterday for most owners. That's because there's another cohort of owners, red hot mutual funds, who are addicted to stocks like Palantir. There are managers who are mesmerized by things like the rule of 40. They buy into every cockamamie method of valuation. They have total contempt for those of us who like to have some rigor, some methodology that can make it so you can buy a stock and justify buying more on the way down as it gets cheaper. These managers are not investing, they're simply taking chances. And as long as they do so somewhat wisely with a plan to buy more on the way down, while measuring each quarter for the showmanship, well, then maybe they got a winner. But on days like Today, let me tell you, they are your worst enemies if you own stocks like Palantir. Because when I see all of these kinds of stocks go down at once, I know there's some big time money managers are bowing out. They've gotten bearish and they're taking every one of your stocks down with them. Remember, I have no problem with this kind of speculation. I've been telling people to buy to every dip if they're willing to take the risk. Including, by the way, this one. I actually am encouraging you to pick one or two speculations, that's all, and own them. Have no illusions. If they don't work, you'll be up speculation creek with the power without a paddle. Which is why I don't want to own five or six of these. Then why am I even counting this kind of activity? Well, because when it works, it works spectacularly. Take Amazon. Hard to believe now, but. But for years I heard that Amazon was ridiculously overvalued. Endlessly. I was willing to go long after spending some time with them. Publicizing Confessions of a street addict in 2002, I saw that they could easily wipe out the bookstore industry, maybe even the rest of retail. But I recognize it was speculative. If you had conviction, it made you a fortune. Netflix and Tesla is no different. They looked incredibly expensive the whole time. At certain moments you had to suspend any sort of sense of rigor and prudence stocks and you had to hold on for dear life on days like yesterday and today. Most investors I know can't do it. Or they do it in options. Now they're done. They're done. They have nothing left. Yet. There are some amazing opportunities all over the place if you're patient. Take Caravana, which reported last night saw its stock plunge 12% today in response. At no point could this stock be justified on the basis of any metric earnings. Sales rule of 40, nothing. But when I use it to buy a new car, which we didn't like when we got it, they took it back. They said nothing. I was sold. Carvana was the single digits back then. Without a good balance sheet. It took a restructuring and infusion of capital turn things around. But last night the company reported a quarter that many thought was weak enough to sell. I disagree. And even after this decline is settled at $247 and change, nice run from the single digits of years past. How about Kava Group, the restaurant chain that may be the next big thinkers? It sells fresh, healthy Mediterranean food for a reasonable price, of course. The Stock trades at 191 times earnings. Who can possibly justify that? Only a person who believes that Kava could be the next Chipotle, one of the greatest performers of all time. You put $1,000 but into Chipotle when it came public. 120,000. Now, how about Applovin? Here's a company that links mobile game advertising with players. It was the best performer, the NASDAQ 100 last year, up over 700%. For the year, it looked like the most expensive stock in the universe. But then when we saw the quarter not that long ago, it turned out that bottom was it was making a fortune. It now sells for just 68 times earnings. Sure, that's a lot, but it's much cheaper than it used to be. You have to stick with it through days like today when it closed down. Most cannot do that because they own five or six or ten of these kinds of stocks. And those people were obliterated. And they don't know what to do other than turn off the tv. Stop investing in. There you go. Now, let me go back to what I said at the beginning. If you believe in these companies and you can stomach dicey balance sheets, you should buy by all means, own a couple of specular stocks. You keep in mind many of your fellow shareholders will want to cut and run when they see all their stocks clobber. Meanwhile, there are professionals who own nothing but speculative stocks. And if they choose to look at it all at once, as is the case we saw in the last two days, you can be annihilated. That's why, even though I am the only person I know who comes on TV and actually recommends speculation, albeit in an informed way, I urge you to diversify your portfolio beyond speculative stocks, because these things all trade together. Bottom line here, my primary goal is, and this show, is to keep you in the stock business. I want you to stay in the game. I can't do that. If you own nothing but Palantir, Carvana, App Love and all the others that trade and you trade nothing but options and ETFs. Include them. @ the end of the day, you simply won't know what hit you. Which means the next time we get a daily Today, I don't want you to sell everything and possibly give up on the entire island class. If you have just two of them, though, you'll make it through and be able to buy more into weakness that everyone else is fleeing because they can't take the pain. But you'll be able to. Let's go to Masood in Maryland. Masood, greetings Mr. Kramer, how are you?