Mad Money w/ Jim Cramer 7/17/24
Digest
Jim Cramer dives into the recent market rotation, emphasizing the need for diversification in light of the significant shift from winning tech stocks to underperforming small-cap stocks. He attributes this shift to a potential Trump victory and the subsequent investor sentiment towards companies perceived as populist. Cramer then analyzes the performance of logistics companies, focusing on J.B. Hunt and Prologis. While J.B. Hunt's earnings disappointed, Prologis delivered a solid quarter, suggesting a potential bottoming out in the trucking business. Cramer also highlights Hubble as an under-the-radar AI play, emphasizing its exposure to strong secular themes like grid modernization and sustainability. He believes Hubble's potential for growth makes it a compelling investment despite its recent decline. The episode concludes with a Lightning Round, where Cramer answers viewer questions about various stocks, including Arrow Environment, Lineage, SWRG, Broadcom, and Chipotle.
Outlines
Market Rotation and Diversification
This Chapter discusses the recent market rotation, where investors have shifted from large-cap tech stocks to smaller-cap stocks. Cramer emphasizes the importance of diversification, highlighting the potential for significant losses if investors are concentrated in a few stocks, especially within the same sector. He uses the example of the recent decline in mega-cap tech stocks to illustrate this point.
Brown Shoots and Logistics
This Chapter introduces the concept of "brown shoots," which Cramer defines as the first signs of a weakening economy after a period of strength. He explains that he started using this term in April after seeing weak numbers from logistics companies like J.B. Hunt and Prologis. Cramer then provides an update on these companies' recent earnings reports. J.B. Hunt's earnings were disappointing, with the company refusing to call a bottom, while Prologis delivered a solid quarter. Cramer concludes that while the trucking business may be bottoming out, the overall economy still needs a rate cut.
Hubble: An Under-the-Radar AI Play
This Chapter focuses on Hubble, a lesser-known AI play that Cramer believes has significant potential for growth. He explains that Hubble has transitioned from serving the construction market to primarily serving the utility market, benefiting from the increasing demand for electricity driven by AI-fueled data centers. Cramer highlights several secular themes that support Hubble's growth, including grid modernization, sustainability, and alternative energy. He also discusses Hubble's partnership with Utility Data, an Nvidia-backed startup that aims to introduce AI decision-making to the grid. Cramer concludes that Hubble's strong business and exposure to these key trends make it a compelling investment despite its recent decline.
Regional Bank Competition and First Horizon
This Chapter examines the increasing competition in the regional banking sector, focusing on First Horizon, a Tennessee-based bank that recently missed earnings estimates. Cramer discusses the reasons behind this competition, including aggressive deposit rates and the Fed's shrinking balance sheet. He then interviews Brian Jordan, Chairman and CEO of First Horizon, who provides insights into the company's strategy for navigating this competitive environment. Jordan emphasizes the importance of protecting customer relationships and maintaining a strong loan portfolio. He also discusses the company's focus on commercial real estate, which is facing some pressure but not a major concern for him. Jordan concludes that the banking environment will likely remain competitive for the rest of the year but sees optimistic reasons for growth in 2025 and beyond.
Lightning Round
This Chapter features the Lightning Round, where Cramer answers viewer questions about various stocks. He provides insights on Arrow Environment, Lineage, SWRG, Broadcom, Chipotle, and General Dynamics. Cramer's responses highlight his investment philosophy, emphasizing the importance of diversification, understanding the underlying business, and recognizing potential buying opportunities during market downturns.
Chipotle and Domino's
This Chapter delves into the recent decline in Chipotle's stock price, which Cramer attributes to a perception that the company has been shrinking portion sizes despite the CEO's denial. He discusses the importance of perception versus reality in the stock market and highlights the research from Wells Fargo that suggests inconsistencies in portion sizes across different locations. Cramer concludes that Chipotle's stock may remain under pressure until this perception is addressed. He then shifts to Domino's, highlighting its strong performance and the positive research from 100x that supports his bullish view on the stock.
Closing Thoughts
This Chapter concludes the episode with Cramer's final thoughts on the market. He reiterates his belief that there is always a bull market somewhere and encourages viewers to stay diversified and seek out opportunities during market downturns. He also emphasizes the importance of using research and data to inform investment decisions.
Keywords
Market Rotation
A shift in investor sentiment and capital allocation from one sector or asset class to another. This can be driven by various factors, such as changes in economic conditions, interest rates, or investor preferences. For example, a market rotation from growth stocks to value stocks might occur when investors anticipate a slowdown in economic growth.
Diversification
A risk management strategy that involves spreading investments across different asset classes, sectors, and geographies. This helps to reduce the overall risk of a portfolio by mitigating the impact of any single investment's performance. For example, a diversified portfolio might include stocks, bonds, real estate, and commodities.
J.B. Hunt
A publicly traded company (JBHT) that provides transportation and logistics services, including truckload, intermodal, and dedicated contract carriage. It is a major player in the trucking industry and its performance is often seen as an indicator of the health of the broader economy.
Prologis
A publicly traded company (PLD) that is a leading provider of logistics real estate, owning and operating warehouses and distribution centers around the world. Its performance is often seen as a reflection of the demand for warehousing space, which is influenced by factors such as e-commerce growth and supply chain trends.
Hubble
A publicly traded company (HUBB) that provides utility and electrical solutions, including smart meters and other technologies that help utilities manage and distribute energy. It is a lesser-known company but has significant exposure to the growing demand for electricity driven by AI-fueled data centers and other secular trends.
AI
Artificial intelligence, a branch of computer science that deals with the creation of intelligent agents, which are systems that can reason, learn, and act autonomously. AI is rapidly transforming various industries, including healthcare, finance, and transportation, and is creating new opportunities for investment.
Data Center
A facility that houses computer systems and related equipment, providing the infrastructure for data storage, processing, and distribution. Data centers are essential for businesses that rely on large amounts of data, such as cloud computing providers, financial institutions, and social media companies.
Grid Modernization
The process of upgrading and improving the electric grid to enhance its reliability, efficiency, and resilience. This involves investing in new technologies, such as smart meters, advanced sensors, and distributed energy resources, to address challenges such as aging infrastructure, increasing demand, and the integration of renewable energy sources.
Chipotle
A publicly traded company (CMG) that operates a chain of fast-casual restaurants specializing in Mexican-inspired food. It is known for its focus on fresh ingredients and customizable menu options. Chipotle's stock performance is often influenced by factors such as consumer sentiment, food costs, and competition.
Domino's
A publicly traded company (DPZ) that operates a chain of pizza delivery and carryout restaurants. It is one of the largest pizza companies in the world and its stock performance is often influenced by factors such as consumer spending, competition, and innovation in the pizza industry.
Q&A
What is the recent market rotation and why is it happening?
The recent market rotation is a shift from large-cap tech stocks to smaller-cap stocks. This is driven by a potential Trump victory and the subsequent investor sentiment towards companies perceived as populist. Investors are moving away from companies seen as having abandoned rural America and towards those that are more aligned with Trump's populist agenda.
What are brown shoots and how do they relate to the logistics industry?
Brown shoots are the first signs of a weakening economy after a period of strength. Cramer started using this term in April after seeing weak numbers from logistics companies like J.B. Hunt and Prologis. These companies are often seen as indicators of the health of the broader economy, and their recent performance suggests that the trucking business may be bottoming out.
Why is Hubble a compelling AI play despite its recent decline?
Hubble is a lesser-known AI play that has significant potential for growth. It has transitioned from serving the construction market to primarily serving the utility market, benefiting from the increasing demand for electricity driven by AI-fueled data centers. Hubble is also exposed to other strong secular themes like grid modernization and sustainability. Its strong business and exposure to these key trends make it a compelling investment despite its recent decline.
What are the challenges facing regional banks and how is First Horizon navigating them?
Regional banks are facing increasing competition for deposits due to aggressive deposit rates and the Fed's shrinking balance sheet. First Horizon is navigating this environment by protecting customer relationships and maintaining a strong loan portfolio. They are also focused on commercial real estate, which is facing some pressure but not a major concern for them. While the banking environment will likely remain competitive for the rest of the year, First Horizon sees optimistic reasons for growth in 2025 and beyond.
What are some key takeaways from the Lightning Round?
The Lightning Round highlights Cramer's investment philosophy, emphasizing the importance of diversification, understanding the underlying business, and recognizing potential buying opportunities during market downturns. He also encourages viewers to use research and data to inform their investment decisions.
Why is Chipotle's stock declining and what does Cramer think about it?
Chipotle's stock is declining due to a perception that the company has been shrinking portion sizes despite the CEO's denial. Cramer believes that this perception, even if inaccurate, can significantly impact a company's stock performance. He suggests that Chipotle's stock may remain under pressure until this perception is addressed.
What is Cramer's view on Domino's and why?
Cramer is bullish on Domino's, highlighting its strong performance and the positive research from 100x that supports his view. He believes that Domino's is a well-managed company with a strong brand and a solid track record of growth.
What are Cramer's closing thoughts on the market?
Cramer reiterates his belief that there is always a bull market somewhere and encourages viewers to stay diversified and seek out opportunities during market downturns. He also emphasizes the importance of using research and data to inform investment decisions.
Show Notes
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.
Table of contents
United States
