← Mad Money w/ Jim Cramer
Mad Money w/ Jim Cramer
Mad Money w/ Jim Cramer 9/11/25
00:44:23
Listen to Jim Cramer’s personal guide through the confusing jungle of Wall Street investing, navigating through opportunities and pitfalls with one goal in mind - to help you make money. Mad Money Disclaimer
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- [00:00]
Jim Cramer
Sa. Hey, I'm Kramer. Welcome to Mad Money. Welcome to Kramer. I'll be. My friends.
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Caller
I'm.
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Jim Cramer
I'm just trying to make you a little money. My job is not just to entertain, but to explain. Figure out how days like today could even happen. So call me 1-800-743- CNBC or tweet me at Jim Craver. The cynics just can't believe what's happening in this market. They're so used to finding reasons to be bearish that they're being overrun by positive events. They are genuinely baffled by the tape. On this terrific day where The Dow gained 617 points as we jumped point 85% and the NASDAQ climbed point 72%. With all three averages closing at record high, can these negative stay baffled? Will they have to commit, convert, get bullish? I don't know if they can do it, but they're going to have to. If they're going to, they want to stop losing the money that they have under management. And by the way, keeping assets under management is the name of the game on Wall Street. Before I get to what happened, let me go into why it is so hard to convince the pessimists to turn positive. It's the toughest thing to do. First, ever since the great crash in 87, the most quotative commentators and Money matters have almost always been bearish, maybe extremely bearish, and of course, erudite. There's a sense that you simply aren't that smart if you're a bull. If you're too positive, people just don't take you seriously. You're a gad fly. It's only gotten worse since the Great Recession when things really went curfewey. And those who were bullish during that period, well, they were annihilated. How are they annihilated? They were annihilated by YouTube clips of them saying anything good about any stock under the sun. So why ever bother to say anything good about a stock under the sun? Why would be bullish? Second, we do admittedly have a fraught backdrop. 37 trillion in federal debt, president that can sink the market with a single true social post and the rule of law for many seeming to be in doubt. Third, does it really make sense? Does it make sense to be bullish? As China, Russia and India get closer while our country seems hard pressed to find allies, you look at the headlines, sometimes it feels like the world's spinning out of control. The war in Ukraine is not ending. The war in Gaza is not ending. We offended The Koreans with this Georgia ice raid and on and on and on. To which I say, hold on, we don't trade on Ukraine. I'm not thrilled to see Russian drones over Poland, but it doesn't matter to individual companies and their stocks. We can't sell stocks off a budget deficit, especially when interest rates are going lower as they did today. The skeptics think that's insane. Everything I just said, they want to sell stocks on current events, especially this morning, slightly higher than expected Consumer price index number. How the heck can treasury yields come down on a bad inflation reading that's not supposed to happen. They are baffled. But at the same time we got that CPI number, we got initial jobless claims number of 263,000. Experts were looking for 235,000, but there it is again. I mean, come on, that's a bad number, right? When you're using a bullish prism, you focus not on the CPI but on the jobless claims. And that number cements the possibility of not one but but multiple Federal Reserve interest rate cuts. Which brings me to the painful truth about the bear camp. The bears simply weren't in the business or weren't even alive the last time we had a market like this. You got to be old enough like me to remember they don't realize that you can have sessions where amazing things happen. I told you, this was the year of magical thinking. In the 80s and 90s. It used to happen all the time. Consider just the last 24 hours. The list of amazing things is mirror just myriad. First we saw one stock at 100 hundreds of billions of billions of dollars to its market cap. Not on earnings, not on sales, but on a forecast. Oracle, not that long though, was a slow, steady software company before deciding to reinvent itself as a fast data center builder a couple of years later. And Wall street accepts the fact that Oracle is going to be the biggest data center builder. It requires a total suspense of disbelief. And that's something that the Sardinics. Sardonic cynics. That's a good one. Sardonic cynics can't and won't accept or even appreciate. But that's really the point, isn't it? Some can't believe, some don't want to believe. Still others think it's too late to believe. Unlike what you hear, by the way, this is not a case of fomo. That's just so wrong. People think it's funny to say fomo. These people have no problem missing out at all. They hate this market. The problem is that unless they run their own money, in other words a family office, which is the case with the most revered bears, the so called smartest people on earth, they simply don't know how to get bullish. That's right, blind to the positives. They can't figure out this market. It goes against their critical faculties. They think that you're a fraud if you switch direction. That's actually wrong though because you see their investors have plenty of fear of missing out and expect their money managers, when they pay a fortune to to pivot, direct, be flexible. They aren't paying huge fees to miss out. Which means that between now and the end of the year, when the reports come out about how they did, these bearish managers are going to have to at least pretend to be bullish and put some money work because otherwise investors will pull all their money out. How will they be so ideologically determined to stay bearish? Right now they're being barraged with the question how much Oracle do we own? Surely beyond Oracle, no, they selling at a very high multiple was therefore wrong to own, at least for them. Second, there are plenty of stocks that are cheap right now that are going to be less cheap as they go up. These bears though they don't think they should be going up either. The stock of JP Morgan trades like a small cap bank stock, just ripping through level after level after level. Yet it still only sells for 15 times earnings. After the investors find out that they don't own any Oracle, they can ask, well maybe at least own some JP Morgan, right? But the skeptics say, you know, we don't own JP Morgan. It's an inflationary environment. They think they know better than we do. But the stock is the arbiter. Then there's the IPO Morgan. The bears are looking at the number of deals and are saying oh man, the Wall Street IPO machine has gone crazy. But any market historian knows that that's simply reminiscent of previous good times. It's more of a beginning than an ending. When you see these deals, the Wall street promotion machines barely gotten started. Go buy some Goldman Sachs. Then there's the research. As you might expect, when a stock has been going higher on nothing, it's going to catch a downgrade. This morning Apple, the stock of Apple, caught one downgrade. It was hideous. After some analysts said he wasn't impressed with their new phones. I didn't like their so called not so hot AI strategy. Now in another tape, another day Apple stock would have been obliterated by this buy. To hold this one Apple goes up $3. Finally, during less ebullient periods, whenever you get some good news in the morning, you can be assured something bad will come later in the day that you can hang your bears hat on as the market sinks. No, not in this tape. Are you kidding me? In the midst of a typical update comes a story about, I mean, Jeff March sitting next to Jim. There's a potential. There's a takeover bid for the heavily for, for Warner Brothers Discoveries. And come on, they got so much debt not that long ago, the skeptics were shorting the heck out of this one because that hit his B balance sheet. They got the whole zeitgeist wrong. You see, in a bull market that balance sheets what has kept the equity valuation down well below where it should trade to the owners of the potential acquirer of this company, Paramount, Skydance. Including the Ellison family. Yeah, the one that owns most of the larger share of Oracle. This potential acquisition is just a rounding error. Larry Ellison is worth over $300 billion. If someone's to buy Warner Brothers for 4,40 billion he owns 3, is 300 someone's buy for? Hey, but that could be good. Look, when you have that much money, you don't need to ask yourself that question. You certainly don't ask your kid that question. The moral of the story, when there is this much money sloshing around, okay, when there are funds and families with trillions of dollars being put to work, it's awfully hard to ignore what they're going to do with that money. The Bears have probably made very little money going into September, which is supposed to be a very bad month. And so if they're going to invest, they want to wait at least until the markets get smacked around. But it's not. The clock of the year is ticking. It feels a lot like the 90s. And they only have four months to hope that this market goes lower so they can get in, even if that means abandoning their whole ideology. But the bottom line, if the bearish money doesn't pull the trigger soon and become buyers, their investors will go somewhere else and then the bull market won't be the manager's problem anymore. Brian in California. Brian.
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Caller
Booyah, Coach Kramer.
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Jim Cramer
Booyah, booyah, right back at you. What's happening?
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Caller
Right on, Jim. I'm a first time caller and a charter club member.
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Jim Cramer
Yes. Let's make, let's make some money together, Brian.
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Caller
Coach, Coach. I've owned this star for several years now with nothing to show for it. What do I do, Coach? Buy, sell or hold air bnb.
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Jim Cramer
Oh, man, I've been looking at it too, and I'm telling you, that whole class of equities from that period that came public, they're all on fire. Except for this one. I think you buy Airbnb. All right, listen to me. The clock is ticking on this year for the Bears. And if the market doesn't go slightly lower soon and they can't put their money to work, well, they're going to have to abandon their ideology or abandon the idea of being money managers. On Man Money tonight. Health care has been one of the worst performer sectors this year, but Johnson Johnson started to stand out from the group. I'm running through the reasons why. Then Axon. Axon has been one of the great growth stories over the past few years. Do you know why I think the outsized gains can continue? I'm digging into the company's latest numbers to see where it might be headed. And then Apple. This one during Dr. Pepper stock has gone from bubbly to flat over the past few weeks. I'm taking a look at what's behind the move and maybe it is time to take a sip of the stock. Stay with CR Foreign.
- [11:10]
Announcer
Don't miss a second of Mad Money. Follow imKramer on X. Have a question? Tweet Kramer. Hashtag mad mentions. Send Jim an email to madmoneycnbc.com or give us a call at 1-800-743, CNBC. Miss something? Head to madmoney.cnbc.com.
- [11:41]
Jim Cramer
This year, Health care has been the worst performing part of the market by far, which is what makes the handful of winners in the group all the more impressive. Take Johnson and Johnson. As of Last night's close, JJ was the 10th best performing health care stock in the entire S&P 500, up 21.5% for the year. Now, if you've been paying attention to this one, that might come as quite a surprise. JJ still has major litigation overhang. And more important, it's primarily a pharmaceutical company in a market that hates pharma. Or at least we thought it did. Nearly every other big pharma name is solidly in the red for the year. So how the heck did Johnson Johnson defy the gravitational pull of this health care bear market? First off, while JJ is mainly a drug company, it's not just a drug company. It's also got a terrific medical device business that accounts for 36% of their sales. Their medtech division has been a terrific source of steady growth. This part of the company focuses on four major areas cardiovascular, orthopedic surgery and vision. The cardiovascular business has been a standout, bolstered in recent years by JJ's nearly $17 billion acquisition of BMIT and its roughly $13 billion deal to acquire Shockwave Medical in the spring of last year. JMJ also has great franchises and really exciting technologies in other areas like robotic surgery, neurovascular care and digital health. But because it's still the smaller part of the business, I feel like their MedTech unit is still underappreciated. Too many investors view J and J as just a drug company. It isn't. However, I've got to say their drug business is terrific. After spinning off their over the counter business as Can View two years ago, they're left with all the good pharma stuff. With a much higher growth rate, the over the counter portfolio would be a real headache right now. Health and Human Services Secretary RFK Jr. Apparently wants to blame Tylenol use during pregnancy for allegedly causing autism. I don't buy it, but what matters here is the Tylenols not changed problem anymore. Of course, like many mature pharma companies, J and J has some patent patent cliff issues. That happens. Their most important drug, Stellara, which is treatment for psoriatic arthritis and other autoimmune conditions, is starting to face generic competition for the first time this year, resulting in a 39% sales decline in the first half of the year. That's what happens when a drug goes generic. But we've not done this for a long time and JJ has done a fantastic job to move past this big patent expiration in the first two quarters of the year, JJ's pharma business has been has both grown and outperformed sales expectations by fairly wide margins despite the enormous revenue hit from Celera. Overall, the analysts are looking for 5% growth from the pharma division this year, which is incredibly impressive given that their biggest trucks down 39%. What's driving this performance? First in the immunology business, JJ is a drug similar to Stelera called Trim Fire, and that's picking up a lot of the slacks. And Fire sales are up 25% for the year, and they were up 31% in the second quarter. It's not yet big enough to fully make up for the lost delay or sales, but it certainly helps. More importantly, JJ has a fabulous oncology business that's simply on fire, with sales up 21% in the first six months of the year. On JJ's most recent conference call, the Cerebral CEO Joaquin Duato opened his remarks with a discussion of the oncology portfolio. And he said at a bullion about this business, predicting that JJ will be number one cancer treatment company by 2030 with oncology sales of a staggering $50 billion. To Auto went on to call out three particular areas of strength in multiple myeloma, J&JS treatments. In every line of therapy, they're now treating 80% of myeloma patients. Second in lung cancer, the company's chemo free combination treatments are proving very effective. And JJ is seeing strong prescription growth in doctors. Third in bladder cancer, which has just been a death sentence. Frankly, the company just received a priority review for its first of its kind drug releasing system, which JJ expects to launch later this year. That'll be big. Frankly, there's more to the pharma strength than I have time to get to because the drug business here is so enormous. In total, JJ has 13 drugs with double digit growth rates. And overall, the rest of the drug portfolio is growing up so well. That loss again, loss of exclusivity for stellar afterthought. So there's a lot to like about the core business. But what about the top lawsuits that held this stock back for years and years? As, as I've mentioned before, this issue hasn't exactly been resolved, but the stock's been able to come roaring back because Wall Street's finally able to look past it. Now that's happening for a couple of reasons. First, over this year, JJ changed its legal strategy. Previously, they tried to fix the problem in one fell swoop with a big across the board settlement, including a prepackaged bankruptcy of a subsidiary that would be used to pay off the plaintiffs. That move was blocked by the court. So JJ decided they just do it the old fashioned way and fight these lawsuits one at a time in court. And so far, you know what? They've done a pretty good job. They have good track record now in terms of beating these talc claims one on one. I also think there's a feeling that at this point, the plaintiff's lawyers pursuing these cases have overplayed their hand, as JJ put it in their announcement that they've been returning to the tort system to fight tout claims. Let me tell you, this is how hard, how hard fighting they are. Quote, the disclosures made under oath in the Red river bankruptcy affirm that the TALC litigation is a plaintiff lawyer driven fake tort premised on junk science and fueled by third party litigation financing, including from foreign sovereign wealth funds, end quote. And by the way, for what it's worth. I also think the change administration has helped JJ on this front as well. President Trump's not exactly as big fan of lawsuits unless they're coming from him maybe. But he does seem to be a fan of jj. Which by the way, he credits for making his hair look so beautiful. So after a couple of years where the stock was in purgatory, JJ is now having a standout year. In spite of the overall weakness in health care, especially in pharma, they're defying the broader, broader group because they have the right portfolio with a robust medtech business supplementing the core pharma business and no over the counter business to drag them down. And because JJ's drug division has proven to be much stronger than expected across several major areas, especially oncology. Wall Street's no longer fixated on the TAC lawsuits or the fact that their number one drugs now facing generic competition. And look, despite the nice gain to start the year, JJ still only sell for 16.5 times this year's earnings estimates below the market multiple with a nice yield that's just under 3%. Very rare. Triple A balance sheet. Bottom line here. With so much momentum but still a reasonable valuation, I think JJ can keep running maybe for a while. The next target is the company's early 2022 all time high of 186 and change within sight up less than 10 bucks from here. After that I say it could could go through $200. We have money's back in.
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Announcer
Coming up, can this law enforcement software company keep its momentum going? Cramer is going deep into Axon next.
- [18:35]
Jim Cramer
There are a couple really winning companies I like to check in on from time to time. And some of them get better with every single look. Consider the case of Exxon, XO and Enterprise. That's the law enforcement technology play. Formerly known as Taser International. They now make both non lethal weapons and police body cameras along with evidence management software to handle all the video from those cameras. Now here's a stock that's rallied almost 800% over the past five years. Individual stocks make it so much money, including a 26% gain for 2025. And I am proud to say that I have liked this one all the way. I think it's just got more room to run to. And I'm going to take what you all know, Taser. These devices have been adopted by a majority of state and local law enforcement agencies in this country. Even after decades of service, Taser remains in growth mode. Their latest model, the Taser 10 launched in 2023 has been adopted faster than ever. These non lethal weapons account for a third of Exxon sales and the business was up 19% last quarter. But don't forget this is a razor. Razor played business model. Every time you use the Taser, you need to buy a new cartridge. That's what money is. The future of Axon though is all about body cameras and evidence management software. But within the hardware side of the business, Exxon now offers surveillance drones as well as a suite of tactical indoor drones to help with high risk situations. They have counter drone technology too. Look. In fact, their sensors and frequency jammers are actually being used by the Ukrainian army to fight Russia. Although Axon sees this becoming more of a security business here in the US focused on areas that need high levels of protection. They've got virtual reality training equipment too that helps police officers for everything from traffic stops to active shooter response. While this VR segment is still a small part of the business, about roughly 10% revenues, it's going like crazy. Up 87% last quarter. Yet another reason why Exxon could deliver knockout set of numbers. When the company reported last month this was the sixth consecutive quarter with 30% plus revenue of the Very few companies can do that. Rarefied atmosphere plus management sees a line of sight to bookings growth in the high 30s range this year too. Not surprising given that the company saw some of the largest deals in its history last quarter. But the biggest driver of earnings, and the reason I am so darn optimistic on Axon, is this software and services division. While just under half of total revenues, it makes up 55% of the company's gross profits. Because the margin is so high, software and Services had a 75.6% gross margin in the latest quarter. Thanks to the strength year, Axon reported annual recurring revenue growth of 39% in its most recent quarter. This isn't a junior company. 39%. Even more encouraging, their software growth came mostly from Axon generating more business from existing customers. They had a net retention revenue retention rate of 124%. Now anything over 100% means you're getting more business from your old customers. And look, this isn't anything new. Exxon's retention rates have been near 120% for more than 20 consecutive quarters. They're loved in the end. Law enforcement just really thinks this Axon software package is terrific because they have the number one digital evidence management platform. Their tech lets police, security, store organize and share evidence from a centralized location. The vast majority of Axon devices are sold with an accompanying evidence management license, for example. The body camera business is mainly a way for the software division to get its foot in the door. On top of that, Axon has all sorts of digital tools that help with real time operations like location and service area monitoring. And all of this plugs back to that evidence management platform along with the company's AI enhanced productivity tools. The goal here is to have fewer police officers stuck on desk duty. Now this includes products like Draft One, that's a generative AI assistant that converts body worn camera audio into structured draft police reports, or Redaction Assistant, which quickly removes sensitive content by simply clicking words anywhere in a transcript. There's also priority ranked Video Audit, which uses AI to scan transcripts and other data points and then ranks videos by importance so police departments can focus on the most critical evidence first. Now these are just a few of Axon's main many productivity enhancing software tools, but they stand out because management highlighted them last quarter as being real time savers. Officers saved an estimated out and I thought this number was incredible. 12 hours per week. When they use Axon's video audit software, they save 11 hours per week from the police report software and 10 hours per week from the redaction assistant. Individually, that's some nice time savings. And when you put it all together, it's a game changer for law enforcement. This is something Axon CEO Rick Smith, who's been with us since the show began, told us the last time he was on Mad Bunny. Take a look. We want police out, keeping our streets safe. And unfortunately they've been bogged down just doing paperwork and data entry. And this is one of those things. Look, it's not the sexiest AI in the world, but automating bureaucracy has huge dividends in productivity. And that means effectively, it's like increasing a police force 50% effectiveness overnight because those cops are spending more time on patrol and not sitting behind a desk. It makes so much sense, doesn't it? Just makes so much sense. Like you watch all those cop shows and they're always miserable when they're in the station house. They want to get out there trying to find the bad guys and helping us. Look, this is incredibly important to police departments around the country. Exxon's own research finds that only 14% of law enforcement agencies they surveyed reported being fully staffed and that on average, patrol officers spend just 46% of their time on active policing, with the rest of the time devoted to the boring administrative stuff that Rick Smith trying to get rid of. Exxon can't totally emanate paperwork, but they can make it a lot less time consuming. That's a great secular trend. So it's no wonder that their software product bundles have become increasingly popular. Exxon's AI era plan bundle saw 150 million in bookings last quarter, which is huge given that this Plan sought just 100 million in bookings in all of 2024. Now the company keeps launching new products like Real Time translation for body cameras, Policy Chat to give officers easy answers for policy questions, unlimited smart detection for auto identifying humans, and videos Auto Transcribe, which turns hours of audio trans audio recordings into searchable time sync transcripts. Every new software tool makes the whole ecosystem more valuable. And it seems customers are taking notice. On the last conference call, management pointed out the quote here. Every quarter that goes by indicates more and more of a contribution from new products, with new products, by the way, making up over 30% of bookings this quarter. Just what you want. One more point. Exxon has been making a fortune, but most of that's from the United States. Management's gotten increasingly optimistic about their ability to expand into Europe and the rest of the world. They also see funding tailwinds from the one big beautiful Bill Act. When I spoke to CEO Rick Smith, he noted that Taser adoption within the National Guard remains far too low, leaving plenty of room for growth. Certainly if the president wants to use the National Guard like a police force, they got to be outfitted like a police force. That might not be your ideal policy, but it's certainly a great business opportunity for Exxon. Here's the bottom line. While Exxon's a big for the year, the stock has now pulled back more than 15% from its August highs. And I think you're basically getting that incredible last quarter for free here. Anytime this stock pulls in, I'd be a buyer. It's had a great run. I can't say it is just beginning. I can say though, that Exxon has been so creative and so helpful to police departments that I think the stock could continue to rally for a very, very long time. Let's take some questions. Why don't we start with Alfredo in Florida? Alfredo?
- [26:10]
Caller
Yeah, Jim. How you doing? Jim, I have a question. After witnessing Oracle success in their earnings, what does this mean for a company like Cisco? Can Cisco achieve similar results in the next earnings and beyond? And what is your opinion? Is it a buy, hold or sell?
- [26:28]
Jim Cramer
This is a great question, Alfredo. We own it for the Chabell Trust. It's not done anything. It's not done anything. I wish that Oracle were more relatable to it. It's not. The problem here is that Cisco doesn't have the kind of growth that those companies have. But why do we own it for the trust? Because it doesn't have the risk. And I think that not every stock has to be in there making it so that you're going to get something that be a big pop like Oracle. I like some slow and steady. Got a good yield. You got good management. Now we're going to go to Nico in Illinois.
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Caller
Nico, Jimmy Cho. Gotta say we're surprised the NYSE and its board didn't catch my roaring twenties booyah some short months ago.
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Jim Cramer
I am myself surprised and chagrined by that. How can I help you?
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Caller
Oh yeah. Well Jim, let's get to business. With all the unreal noise surrounding tariff how does a real money indicator like Zim or even Symbotic influence the supply chain and commodity market?
- [27:25]
Jim Cramer
Nico Stump. Jimmy, chill. I don't know. I don't know that company and I feel bereft and actually somewhat down by the fact that I don't because I can't help it. But I will do more research and I will come back to you. Thank you. Now I like Axon's long term growth prospects and given the stock's recent pullback, I think now is a great time to start a position in the company. Hey, by the way, much more mad Bunnyhead. Including. You're gonna love this one. My take on the announcement of Keurig Dr. Pepper's breakup place. Many of you guys know Keurig. You have one at home and I had a Dr. Pepper for lunch today. This stock has paid it over 20% over the past month. I'm going to tell you whether it's tons of Fire or not, and it's been 24 years since the tragic events of September 11th. I'm sharing my memories from that fateful day and why it's more important than ever that we never forget. And of course all your calls around fire in tonight's edition of the Lightning Round. So stay with cricket. Over the last three weeks we've seen a stunning meltdown in the stock of Keurig Dr. Pepper, which has lost over 21% of its value ever since the company revealed a rather ill advised breakup plan. In fact, the stock's down so much I'm actually wondering if this stock I really didn't care for is now a buy opportunity. For those of you who haven't been following this one, Keurig Dr. Pepper is one of the biggest beverage companies in America. Although it often feels like an afterthought versus Coca Cola and Pepsi. Despite the fact that Dr. Pepper overtook Pepsi as the number two soda in America last year. They got a huge house of brands. Canada Dry, snapple A&W7 up. And of course the Keurig brewing system, which is obviously a very different business model. That brings me to the cause of this sell off. Keurig Dr. Pepper as it currently exists was created in 2018 when Keurig Green Mountain acquired the old Dr. Pepper recently. That transformative merger. The stock was a solid performer climbing from the mid-20s to a high of 41 and change. Oh, they made a fortune during the pandemic as at home coffee consumption skyrocketed. But the stock struggled to gain ground in the past three years after the pandemic ran its course. Now look, some of that is because of worries about the GOP Dash 1 weight loss drugs. I thought to be not that good for soda business. Some it's about people going back to the office and not need a cure machine at home. And some of it's just the rise of energy drinks as an alternative to coffee. That said, Keurig Dr. Pepper sales and earnings actually never stopped growing even as the stock went out of style. The Wall street fashion show. So what's the real problem here? On August 25th, Keurig Dr. Pepper announced plans to acquire JD Pete's P E T S, another major coffee company for about 18.4 billion in cash. Once that deal is complete, they plan to break up the company into a soft drinks business and a coffee business. In other words, it's a planned merger breakup. Like United Technologies merged its Aero Aerospace business with Raytheon for splitting into three separate entities. Once the news broke, the stock got just pulverized and the meat itself is what's gotten kind of crazy. I think it's made a ton of sense for Keurig Dot Pepper to break itself up. Coffee business and soda business actually don't really belong under the same roof. Once you spin off coffee, the two separate companies can focus on what they do best. And when you look at those two companies individually, you know what? I'm finding them pretty attractive. The coffee business will instantly be the largest pure play in a $400 billion growth category led by four $1 billion plus brands. Coffee should be a lower growth in soda business, but the scale of the business gives them plenty of opportunities to cut costs. Especially with the JDP merger. The soda business could be higher growth with better margins. Initially and without coffee, it should be much more nimble to be able to pursue even more growth opportunities, especially in categories like energy drinks. We're curing Dr. Pepper's late to the game, but starting to gain ground thanks to the acquisition of Ghost late last year. But if this breakup so great, why the heck has the stock plunged more than 21% in the last few weeks since it was announced? Okay, for starters, even though spinning off Keurig is a good idea, it's obviously a tacit mission at the old Keurig Dr. Baba merger was a big mistake. Madness. Basically letting us know that they've been off track for the past seven years. Well, I don't know about you, but that doesn't inspire a lot of confidence over here. But at this point, the original merger is ancient history. So far I've seen a few criticisms of what Keurig Dr. Pepper is doing that really hit home. I first to do with the Pete's acquisition. In order to complete the merger, Keurig Dr. Pepper is going to have to lever up. According to the deal announcement, quote, the transaction will be funded through a combination of new senior unsecured and junior subordinated debt and cash on hand. End quote. At the end of the day in June, the company had just over $500 million in cash on the balance sheet. So given that this is an $18.5 billion deal, they're going to take on a lot of debt. They're going to be levering second. Some people think that Keurig Dr. Pepper is paying too much for pizza. Especially when you consider that before the breakup, this acquisition will shrink the company's margins. Wall street hates shrinking gross margins. Finally, the whole transaction is way more complex than it needs to be. Not only do you have a merger breakup, but you have an international merger breakup because Pizza is headquartered in Amsterdam. Long story short, the Bear see this as a needlessly complicated story and risky way to break up the company. Sure, Dr. Pepper could have just spun off the coffee division without buying Pete's first would have been a much cleaner story. The breakup would would have happened a lot sooner. You know what? All these criticisms are fair, but the deal is happening. The question you ask is whether or not at this point, with these prices, you think the Keurig Dr. Pepper stock represents value. We only care about where stock is going, not where it's been. If you want a company with a perfect track record of strategic decision making, whoa, this one is not for you. But if you want a company that's finally headed in the right direction with a stock that's gotten too cheap, then I think Keurig Dr. Pepper makes a lot of sense. First, they're right to break up the business. In retrospect, there there were never any real benefits to combining a coffee machine company with the soda company. Wall street likes bite sized companies that are easy to understand. There's a constituency of investors who'd happily buy pure play Dr. Pepper and another constituency who buy a Pure Play jury. But I don't think there is that much of not, let's say not a ton of overlap between these two groups. This is how breakups create value. Money managers who were turned off by the combined entity might happily buy one of the components as soon as it trades separately. Second, in terms of valuation. Now this is what really intrigues me. I think finally the stock has gotten way too cheap. If you use Keurig Dr. Pepper's current enterprise value, that's the metric we're going to use here. The enterprise value and divided by the company's trailing twelve months earnings for interest, tax, depreciation and amortization, or Ebitda, you get an enterprise multiple of 8.5%. This is a metric we like to use in merger breakup situations. Coca Cola is an Enterprise multiple of 21. PepsiCo is at nearly 14. Of course, that ignores the new debt the Keurig Dr. Pepper is going to have to take on to buy the jdps. But even if we assume that they're going to Plan to borrow 1818 billion. The stock would have an Enterprise Multiple of 11.4, which is still a huge discount to Coke and a small discount to Pepsi. I think this gap is pretty compelling. Of course there will likely be twists and turns over the next year and a half as this merger breakup unfolds. So I need more details before having real conviction in the new companies that will be created by the breakup. But the bottom line, regardless of how curing Dr. Pepper got to this point, I think the breakup could unlock a tremendous amount of value given how much the stock's come down since the announcement. I think you have to be a buyer here, not a seller. As shocking and contrarian as that is the current Wall street wisdom on the matter. Fed money is back after the brink.
- [35:19]
Announcer
Coming up, Kramer takes your calls and the sky's the limit. It's a fast fire lightning round.
- [35:26]
Jim Cramer
Next it is time. It's on the light round convention. Bye bye bye soldier. Only the clockwise and my stepper is going to be playing some and then the lighting round is over. Are you ready? Thanksgiving Daytime, the rival cameraman. Let's go to Steve in New York. Steve.
- [35:49]
Caller
Hey, Big Jimmy, chill.
- [35:51]
Jim Cramer
Thank you, man.
- [35:51]
Caller
What you do for us. Thank you for all you do for us everyday people every day.
- [35:56]
Jim Cramer
Thank you.
- [35:57]
Caller
I'm in a wheelchair. This is all I can do for income. I'm on margin. I know that's not good. I own 500 shares and want to add to this. To me it seems like a patriotic purchase as well as financial. What do you think of mp?
- [36:14]
Jim Cramer
Okay, first I want you to. I want you to do well. I want you to get off margin. MP materials. I don't want you to buy more with margin. I like. I think the stock the company has convinced me Latinsky convinced CEO that it is worth more than it's selling for. I had been a little bit worried because it had doubled. I think you're fine, but don't, please don't buy any more. You're fine with what you have. Let's go to Angel California. Andrew, we got Jim. Booyah.
- [36:39]
Caller
So this tiny company is working to obsolete the EpiPen by putting the drug in an oral dissolving strip that you.
- [36:45]
Jim Cramer
Can put in your wallet.
- [36:46]
Caller
And it had a successful phase three trial.
- [36:49]
Jim Cramer
Have you heard of Equestive Therapeutics? No, I've not. But if that's what they do, I've got to be very, very interested. I have an EpiPen because of a problem I have and that would be remarkable if we could get that. I have to do more work. Let's go to Blank in Tennessee. Blake.
- [37:04]
Caller
Hey, Jim. It's an honor for this club member to speak to the chill man.
- [37:07]
Jim Cramer
And I wanted to get.
- [37:09]
Caller
I wanted to give a blatant congrats on 20 years of mad money. And also a special congrats to newlywed Ben Stodo.
- [37:18]
Jim Cramer
Oh my. That was some blowout wedding. I tell you, Lisa and I had a great time at it. Congratulations. Best wishes. Let's go to work.
- [37:25]
Caller
Hey, I'm calling you on what was a company spun off from Honeywell, which I know the club loves the stocks at a 52 week high. An upgrade for Morgan Stanley and some insider buying. What are your thoughts on ticker R Zi residual?
- [37:41]
Jim Cramer
Okay, so candidly, when it was first spun off, I was not a fan because I did not think rates were going to come down and really be good for the housing market. Now that's precisely the kind of stock that you should be buying. I've been saying to the club that Home Depot is the best stock to buy right here for the last 40 points. I like it but I think residual is interesting even up here. Let's go to Joe in Illinois. Joe?
- [38:03]
Caller
Oh yeah Jim, we are. Hey. A company by the name of Lens Therapeutic has a new eye drop product called Viz. They have full FDA approval and promise to rid you of your reading glasses for 10 hours. With samples of this shipping in October and full rollout later in Q4. Is this the kind of stock where values in the eye of the stockholder or one where hindsight.
- [38:25]
Jim Cramer
This is. No, this is the kind of stock and let's understand each other. I don't know the stock. I don't ever cuff it. I never just say on air. You know what that sounds like good stock because that you don't deserve that and you're my boss. I will look into this one too. I think this sounds very interesting. Like the EpiPen stock that we heard earlier. The replacement pen. Let's do some work. We'll come back, we'll use. We'll talk to Ben Stodo who just had those like terrific nuptials. Let's go to Tom and Oregon. Tom.
- [38:52]
Caller
Well thanks Jim for taking my call. You have made me thousands. Good question and a good shout out by the way to the railroad police all over the United States on this date of 9 11. But my question is with the Burlington Northern bowing out of the CSX and the UP and NS and the CP and kcs. I'm wondering that CNI Canadian national getting.
- [39:21]
Jim Cramer
In Canadian national is way too cheap. You get that 2.7% yield. You've got very low price charities multiple. I like Canadian nut. And that ladies and gentlemen is the conclusion of the Lightning Round.
- [39:37]
Announcer
The Lightning Round is sponsored by Charles Schwab.
- [40:03]
Jim Cramer
We must remember. If we can't remember, we must learn. And no matter what, we must give. Yes, I'm talking about what happened 24 years ago. The cataclysmic 911 tragedy that killed so many. I never thought about it much at the time. But there are now millions and millions of American adults who were too young to remember or who hadn't even been born yet that terrible day. A few blocks from here is an amazing museum that tells you everything about that day that you need to know. It's a hard museum to walk through without shedding a tear or more than that. But I urge everyone visiting New York City to go there, take the day off, contemplate. I wish that every school in the nation made it a field trip so that those not alive then can understand just how sad 911 was and how much was lost. The museum is thoughtful and comprehensive. It will teach you what happened that day and you'll learn a lot, even if you've lived through that tough period. I was down here that day, paralyzed, transfixed by the the possibility that we were next to be hit. Our building, right across the street from the New York Stock Exchange, was locked down and the sky turned black for hours as the wind blew the smoke our way. I remember looking out the window and thinking it was simply too dark. At 11am a total terrorist made eclipse of the sun just a random thought while I tried to call Pop to tell him I was alive, but there was no dial tone. After four hours, the fabulous people from the fire department let us out of the building. I had no idea of the losses, especially the first responders. I thanked them perfunctorily. I always regret that. We walked toward the east river and I thought it was snowing. In most places it was 2 inches thick. The snow, I learned later, was ash made up of steel, glass, aluminum and, yes, people, people who are no longer with us. At Pine and William street, there were charred remains of hundreds of research reports from Dean Witter, a former division of Morgan Stanley, that had been blown our way. People wrote these people who were most likely no longer with us. When we got to the East River, a police boat picked us up and took us to a first aid station in New Jersey to be checked for injuries. I had none. They then let us out near a highway. I hitched a ride on the interstate. To whom? The driver, oblivious to what occurred. Back then, I worked at TheStreet.com, the online publication I started in 1995. We lost a cherished employee on 9 11, Bill Meehan, a fantastic strategist who doubled as chief market analyst for Cantor Fitzgerald, a firm that almost got wiped out, losing 658 people. Just awful. I was in touch with Bill pretty much every day, including that day, and then I wasn't. Never again. If you worked on Wall street, you knew somebody. Cantor, we all knew people because the firm was made up of convivial folks who covered you with gusto. Today I went over to their headquarters as part of Cantor's annual charity day. They took some pictures, a lot of selfies, did some trades, and most important, I got to raise money for charity. In this case, I chose the Baby's Heart Fund, which raises money to teach doctors how to do pediatric heart operations, among so much else for infants with congenital heart defects. My wife, Lisa, lost a child after complications from a heart transplant. Grace was two and a half years old. We raised money so fewer children die like her. It's a fabulous cause. I used to think nothing good could ever come from 911 can or Fitz change that. Thank you for your kindness everyone. Remember, recall, learn. We must never forget what happened on that gorgeous but horrifying September day 24 years ago. I like to say that there's always a bull market somewhere. I promise. Try to find it just for you. Right here on Mad Money. I'm Jim Craver. See you tomorrow.
- [43:45]
Disclaimer Narrator
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. Kramer'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.