Transcript
Geico Narrator (0:00)
Geico presents a 30 second podcast between your podcast Today's story is shared by one of our listeners. It's called Betrayed by a Bill. It was in that moment I caught who was staring back at me in betrayal or more like what, my insurance bill. With trembling hands, I grabbed my phone and switched to geico, saving about $900 in the process and never to be betrayed again. Now that was bloody riveting.
Fidelity Representative (0:26)
It feels good when the story ends with savings.
Jim Cramer (0:28)
It feels good to Geico.
Fidelity Representative (0:30)
Building a portfolio with Fidelity Basket Portfolios is kind of like making a sandwich. It's as simple as picking your stocks and ETFs, sort of like your meats and other topics, and managing it as one big juicy investment.
Geico Narrator (0:46)
Mmm.
Fidelity Representative (0:47)
Now that's pretty good. Learn more@fidelity.com baskets Investing involves risks, including risk of loss. Fidelity Brokerage Services LLC Member nyse, SIPC
Jim Cramer (1:01)
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 Market. Other people make friends just trying to save a little money over here. My job. Entertain, explain. Call me 1-800-743-CBC. Tweet me at Jim Cramer. Some like it Cold, right? That's a little twist on a famous movie, Some like it Hot. But it's also a formula for investing that's going way out of style. I think it could return soon, maybe sooner than you might expect. See, the averages got hit today. Dow dipping 180 points, S&P sliding point for 1%. Nasdaq losing 0.89%. But we know that certain parts of this market are. That is hot as a just fired pistol. Tonight, though, I want to praise the other parts of the market, the parts that have been marked down already, which makes them less vulnerable to surprises. And I'm talking about health care. A group that used to represent safety always has some growth but is now considered poison. These are now unbelievably. Health care is a value stock right now. And I like value, especially when it's attached to a growth industry like health care. We need growth because it seems like, well, it's slowing in some very unlikely places, at least historically. It's caused me to rethink some kinds of growth and gravitate towards others. Why? Let me explain. Especially if you watch the show, you know what I'm talking about. Last night we had Bill McDermott, CEO of Service. Now on the shelf for a perfectly good quarter, one that passed the August rule of 50 revenue growth rate plus profit margin equals more than 50 very good sign for a cloud software play. There were huge signups. Many clients embraced their AI controller model, letting them automate their workforce and more. But here's the problem. In an era where artificial intelligence can mimic very good software businesses, it's hard for ServiceNow stock to get a decent valuation. Too many on Wall street are terrified that this kind of company has no future. Hence today's staggering 17% decline for this stock. ServiceNow, this stock is now down a ghastly 44% for the year. 44% plus. Even though surface now stock has already been pummeled, that doesn't necessarily mean it's gotten cheap. As Ben writes it, Melius tells us, lots of their employees get stuck its compensation. If you were to treat that as real cash compensation, as you and I might then even after today's dramatic fall 103 to 84 and change, stock sells at 37 times earnings. Much more expensive than most of the S and P. Now, I've gone over everything that McDermott told us about a half dozen times. Here's my conclusion. ServiceNow is doing exactly what it's done for years, but it's no longer going to be given that same price during these multiple because artificial intelligence is cheaper. And even if it doesn't wipe them out, it can put pressure on pricing and you don't get a premium model multiple. If your company's pricing is under pressure, the markets change, the buyers turned into sellers. Doesn't mean ServiceNow isn't a great company. It is. But institutional money managers who determine the prices that you see won't pay up as much for that for that kind of greatness when it's an enterprise software vulnerable to the great disruptors we talk about all the time. The stunning decline in the stock rocked the software index, taking almost every one of these down as holders believe that their software stock could be the next victim of anthropic or open AI. Probably an exaggeration. Some groups, like cybersecurity, have a lot less AI displacement risk. Private equity groups got crushed too, as they own the debt of many cloud software companies that have gone private in the past. That debt's now under suspicion for the same reason ServiceNow got rocked. It could be unfair, but no one's going to let you get your money back from these things. These aren't vacuum cleaners, people. There's no warranty and certainty. Certainly no returns. How about this For a stock caveat empty. At the same time we got hit by big layoffs and matted. Today came midday. But I think Mark Zuckerberg is being efficient. When the market heard that it's firing 10% of its workforce, it read that is meaning that the business must be faltering. That's completely untrue. That's his style. But the pin action hurt a lot of stocks. They didn't overcover. He's sufficient. There's, he's efficient. It's like that. All right. Microsoft's offer also offered buyouts. All right, that stock got hit too. We can't presume anything anymore. But we do know the software stocks got wobbed not just by ServiceNow but by Microsoft. We're not used to seeing the sector get hurt like this. This sector has been charmed since 1985 and if these stocks have didn't have any fluff in them then. Fluff? Then it wouldn't be so hard now some of this markets just play negative. I mean look, Tesla reported, all right, I liked everything they said and I'm not, you know, I'm sound like you hang out with Elon Musk, but I will tell you that what he's going to do with robots is revolutionary. You want to sell that stock, you're selling robots, you're selling full self driving cars. You're selling the future. But go ahead, sell the future. I'm not a sell the future, I'm a buyer. The future. Now apparently, apparently that's no longer good enough. Maybe you have to have like the super future. Let's hope that intel with magnificent surprise top and bottom line tonight can turn things around. What an amazing quarter from Lip Bhutan has been there for one year and one month and it's almost a mirror. It is a miracle. It's a miracle. It's a miracle. I'm looking at my staff as helm. It's a miracle. They're talking about a miracle too over there. All right. Now it can't cover the stench of enterprise software though. I don't think anything can cover the stench of enterprise software. Even like the absolute best kind of cologne or perfume. Or like Chanel. I think Chanel is still good, right? I mean, what else people use these days? All right, anyway, so how. Chance. My wife likes chance. So how do you protect your portfolio from these kinds of brutal declines? I got an idea. Why not own some stocks that have already been polar pulverized, already been gaffed, already been filleted even as they represent very good companies. Why not some health care. Let me give you some examples. Let's start with a solid company with a stock that sells at 7/11 times earnings. CVS. I'm all buying it for the Chapel Trust, but we held off because we have too many positions. CBS owns Aetna, which I think is a pretty good. Well, it's not as maybe as good as UnitedHealth. A pretty darn good company. Reported tremendous quarter earlier this week. But UnitedHealth is certainly the ballpark. I think Aetna is good. CBS owns 8,932 drugstores. Not that long ago there were three big drugstore chains. Rite Aid, Walgreens and CVS. Rite a buy Walgreens got taken privates now pulling back from a huge number of stores. They may not even be a factor at this pace a few years from now because they're private that we don't really know what it is. But I know something. CBS CEO David Joyner gave you a terrific quarter last time. I think it's only going to get better as the competition disappears. I prefer CVS to service now. Okay, I'm out there. Next. I'm a huge believer in Cardinal Health with the stock that's just been annihilated or that I reason I think a vicious rotation out of health care. Cardinal is down from 233 to 204. Speed the quarterly estimates repeatedly shifts its model from being a pure middleman to be a drug and drug wholesaler to be a manager of services to its clients offer. Given the complexity of large independent medical organizations. Cardinals filling a gap in management for some specialty chains that really don't know how to run their own business. I think there's maybe many more to come. High growth that now trades at less than 20 times earnings to be Cardinals is steel. Although we've been buying for the travel Trust and admittedly I started early. Some would say wrong. Okay. Or how about a stock they talked about earlier in the week that's doing nothing? J and J Johnson Johnson triple a balance sheet one of only two. The other being Microsoft changes the best pipeline of potential blockbusters of any pharmaceutical company yet it sells a little less than 20 times earnings. These are just. These are discounts. Okay. Finally we're going to get to the one that you're going to buy tomorrow. Right? UnitedHealth Group. Here's a company that just reported its first solid beat and raised quarter in a very long time. Returning CEO Steve Hemsley, who turned UNH into a juggernaut before he retired in 2017, is back and he's doing the same thing he did for years the last time he was CEO. Produced the best earnings and biggest upside surprises. In the real they're not ty miracle, they're not made up. And none of that jack stuff. Yet after all that, after putting up the best managed care earnings I've seen in ages, stock still sells for just 19 times earnings. But this group is hated. The man is just getting started. The stock deserves to be much higher. Okay, here's a little clue. Unh. We do a little Cinema Verte here. You know, I like the Cinema Vertex. The UNH is at 354. This stock was at $600 last April. April of 2025. You know why I like these stocks so much? Because if they come down further, you can just keep buying them hand over fist. Because you know what? When they go down, they actually get cheaper. Cannot say the same thing about the vast majority of the tech stocks, particularly software. Bottom line, I think these quality health care names help to balance out your portfolio right now. Given you something that can't be savaged by a displacement that I can tell good balance. Something tells me you're going to need it. And the stench of software. I have to ask my executive producer. You got anything like a perfume? No, no. No perfume. All right. I tried. I tried to help the group. Don't have it. No perfume. All right. Let's go to Nick in Connecticut. Nick. Hey, Jim, it's Nick from Connecticut. How are you doing? I am doing well. How about you, Nick? Beautiful spring day here in Connecticut. Listen, I'm a longtime listener and club member.
