>> mergence, monsanto. possible upside. >> what is this music? >> patsy cline! >> okay, okay! >> two years digitalized medical records. >> i'm mooels melissa lee.watch. see you back here on monday. have a great thanksgiving. gobble, gobble. "mad money" starts now. 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 cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. i'm just trying to make you some money. my job is not just to entertain you but to educate and teach you. so call me at 1-800-743-cnbc or tweet me @jimcramer. when is a loss a good loss? when is it a bad loss? what makes for a strong
investment versus a weak one? and what happens when the facts change? tonight i'm going to show you in real term what's can go right and what can go wrong because i want to teach you how to learn from both my wins and my mistakes so you can replicate the wins at home but avoid the losses. these are all taken from real life investments made with my charitable trust, where we document every trade in realtime so we know what went through the minds of both jack moore, our research director, and myself contemporaneously as we tell you what we would do before we pull any trigger. so often we're restricted because if i mention one of the portfolio stocks on air on season, the trust is frozen, and the trust can't take action. but we can tell you what the trust would have done. sadly, because of the restrictions the trust really can't do as well as you might be able to do the bulletins from actionalertsplus.com.
but these lessons we'll learn tonight, they encompass all the moves we could have made and did make. i'll spare you the gritty details of the actual bulletins although we write them, i think, with kind of elan. but i wanted to fill you in on the misjudgments that lead to losses and the correct thinking that leads to gains. first let me describe the process by which my charitable trust works. i set it up a decade and a half ago as a way to be able to keep my hand in the stock market even as my contract wouldn't let me own or trade stocks, so i can do the show free of any conflicts. it's designed that so that any profits whether from capital gapes or dividends, go to charity, enabling me to give away over $2.5 million since we started. it had many co-portfolio managers and research directors during this time and we've always worked hard together. it's a true collaboration, where decisions are made when both the research director, in this case, jack moore, and previously co-portfolio manager stephanie link, now a portfolio manager at
tia craft and still a regular on both halftime report with scott wapner and closing bell. at all times we try to run a diversified portfolio, seeking out the best ideas for value, income, and growth. we divide the portfolio into these segments and rank the stocks within them. so members who subscribe to the newsletter can pick among the stocks that suit their needs. i always liked the idea even as it often expoised me to an intention level of public scrutiny. i didn't give up the lucrative world of hedge funds where i had been before 14 years before that, where i managed to gain 24% per year versus 8 prls for the s&p for a less remuntive world for the sake of pain and suffering. i wanted to show you how real portfolios think with an open hand when they make decisions. unlike the way these money managers present themselves on television. i put it like that because when i see portfolio managers on tv, they never seem to make any mistake. they never seem to do anything
wrong, and i've seen thousands and thousands of interviews. that's just plain unreal tissic, people. in fact, to go a step further, i their mock perfection is very discouraging as it's led to a belief that there's no way you at home could ever do things right. so you might as well give your money to a robo adviser or index fund. of the many misconceptions about me, the most wrong head san diego i favor index funds. i'm so in favor of diversification as a way of playing defense, and that's what an index fund gives you. but i am also a firm believer and always will be that if people want to own individual stocks -- and they still do, although in admittedly decreasing numbers each year -- they should have the tools they need to help them. and they need to understand what makes for a good stock pick versus a bad one. why would you ever want to own an individual stock? because if you use a fund that mirrors an index, you're accepting the mediocre portion of the index along with the good
portion. plus you know you often have insights that are useful in investing, and they can be parlayed into excellent decisions. this didn't used to be such a radical idea. the notion that individuals shouldn't own individual stocks has really only come into the prominence in the last decade and a half as the indirection proponents have become more ascending. they never seem to be able to put a nail in the coffin the individual investor's right to research and pick stocks of their own liking. they can't refute that it's a terrific thing to do and think they'd be able to choose when you want to pay your taxes by selling or not. they don't extol the virtues of not having to report to other investors, something that hurts longer term decision making in virtually every hedge fund and mutual fund out there. that's why i send the industry of money management does you such a disservice on television because the combination of their
seeming perfection coupled with the debasing of your own abilities is a toxic brew for do it yourselfers, even as so many brokerage houses correctly extol your chances and your ability to do homework that leads to positive conclusions. recently we've taken a much more of a club approach to action alerts plus, a kind of membership where we conduct forums to help each other with ideas. do we have any empirical evidence that individual investing works beyond my own record as a professional? is it all arrogance to think that you can do it yourself and you shouldn't check some boxes and send your money into someone who is either knowledgeable but won't talk to you or is lacking in knowledge but has a handbook of answers or for that matter is just a machine? all i know is that when i worked at goldman sachs advising wealthy people with their stock portfolios, i was astonished at how often they crushed the market simply by looking at companies and making decisions based on how those companies and their managements might do.
these were my clients. and that was at a time when there was far, far less information than we have now about companies, especially now the web allows us to find out more than ever. information is more perfect these days. everyone seems to have equal access. but the simple fact is i watched people clobber the market regularly, and i've always therefore resented those who tell you you can't do it yourself. i saw it with my own yiez. doesn't it both you to be told that you're basically a fool and an id yolt if you try to manage your own money? it bothers me. it's kind of like going to home depot, asking a question among the orange-aproned salespeople, and being told, that's only for the pros, not for the do it yourselves. i would find that to be astoundingly stupid and an arrogant judgment. you should feel the same way about those who tell you that you can't do it yourself. the only real difference is the home depot people aren't trying to get your money from you whereas all the people who
constantly hype their own prowess or denigrate those who would love to try to do it themselves are driven by the desire to get you to surrender your assets to them. it's kind of their business model. now, these pros just aren't questioned about their motives, which to be fair would be quite rude. so they look like they're always acting in your best interests, and they very well might be most of the time, particularly if you don't have the time, the inclination, the temperament or the ability to make sound judgment about stocks and bonds. but here's the bottom line. let's say you actually do. let's say you have the time. let's say you have the inclin agsz. let's say you have the desire to do it yourself. let's say you want to save money, not pay a percentage of your assets to someone who may not be better than you are when that percentage can add up to big numbers over time. then you know what? this show, tonight's show, it's for you. beth in connecticut, beth. >> caller: jim, for my i.r.a., i have a 15-year time horizon. it is okay to be all in a
diversified stock portfolio like the s&p 500 index? >> yes, absolutely. that's exactly, beth, what i would recommend. i think that's a great way to handle it, and i think that's exactly what you should do. nick in arizona, nick. >> caller: jim, booyah. >> booyah. >> caller: i had a question about with all the recent mergers and acquisitions that have been going on, how does one maybe try to look for the next possible acquisition, or how do you position yourself to maybe make money on that? >> you tend to look at the sector and see when there's sector activity like in the food groups or the telco group. you look at ones that seem to not have a bandwidth to be bigger and someone else could gobble them up and therefore raise their numbers. that's really the pattern that i've used over multiple years. ben in florida, ben. >> caller: hey, jim. thank you very much for everything you do. i listen to your podcast every morning on my way to work.
>> thank you. >> caller: i just have a quick question. i've called before, and you've blessed my diversified portfolio, and now i need a little help on how to adjust my cost basis when trading around a position. >> sure. well, i mean, look, i usually don't like it unless a stock has gone up 25%, i don't want to take any off. stock goes down say 20%, i buy back the stock that i took off. it's in a bunch of my books. you know what, these days for action alerts, i'm actually discouraging a lot of trading. i don't want to have too much trading because the trust doesn't want to incur the fees. but it certainly makes sense if the market has a big spurt up and your stock went up with it to take a little bit off the table. all right. ready to take your financial future into your own hands? then tonight's show is for you. i've got the lessons you need to know to get ready to do it. plenty more "mad money" ahead. you've often heard me say the biotechs can be a great place for speck lagsz, but there's four rules you need to know before you ever buy one. make sure you've got them. then it's one of the worst possible actions you can take
when it comes to your money. i've made it myself, and now i want to help you avoid it. find out if you're at risk. and my cautionary comments when it comes to investing in commodities. so stay with cramer. >> announcer: don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer, #madtweets. send jim an e-mail to email@example.com or give us a call at 1-800-743-cnbc. miss something? head to madmoney.cnbc.com.
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this show tonight is all about learning from my mistakes and from what i got right from my charitable trust. we're starting from the proposition that you do want to do it yourself, meaning manage your own money. and what i would hope you'd do with this show is help yourself to try to figure out if you could actually do it on your own, or maybe it's just too difficult and you got to send it to someone else. that's okay. no sin. i want to start with the classic
mistake, the choice of stock in the company itself. drug stocks. it's a sobering one for anyone trying to profit from pharmaceutical innovation. we started from a simple proposition. find companies that are doing break through medicine that have something in the pipeline. that's really what drug stock investing is about. the idea behind this kind of investing came about from something that happened to me in the late 1980s, before i started my old hedge fund. merck, at the time the greatest pharmaceutical company in the world because of its magnificent reputation for new drugs while constantly improving on old ones, had pioneered work with the harvard medical school that showed a link between heart attacks and cholesterol. the company discovered a cholesterol lowering agent, but wall street was skeptical of both the linkage and the category. therefore, it was considered to be an unimportant new drug. little did they know that statins would become the
greating selfing class of drugs in history, led by lipitor. i can recall merck doubling, the stock just doubling when the sales came through. ever since, i've been looking for the next nerve acor from a pharmaceutical company that has an established stable of drugs. that he very important because what you want to avoid is a company that has only one or maybe two drugs in the pipeline that one day might or might be approved by for use by the fda. anything like that could be too risky for you. the ones that never got approval and ended up limping along forever until they were put out of their mystery. i've had tremendous success isolating these kinds of companies, the good ones, whether it be bristol-myers from its break through cancer therapy or celgene when its exploitation of the blood cancer drug or regeneron with its franchise to help keep macular degeneration at bay. it's one of the most important kinds of stories you could own, and you should always be on the lookout for the breakout. in the last few years, my
research director, jack moore, and i have found two situations that fit the rubric. both companies trying to solve the biggest crisis of the baby boomer generation, alzheimer's. there's a couple things you need to know about alzheimer's. first is millions upon millions suffer and will suffer from it. second, there is no serious treatment that can hold the disease off or maintain it at an acceptable level. third is that many have tried and failed to find a cure. but fourth and most important, if you have a medicine that can reverse brain plaque, which is thought to be the cause of the illness, it would be the biggest drug in the history of all time. billions of dollars at stake. the company thasz that's had the best success so far at early trials is eli lilly, the indianapolis giant. we've gone to hear them several times over the years as they've reported on the progress of the drug. we selected it for the charitable trust knowing that lilly has many other irons in the fire, a good balance sheet, and nice sized dividend. in other words, when we purchased the stock in the high 70s, we had excellent hopes that
it would reveal data points that showed some success in its battle against alzheimer's. but in the past few times the firm has spoken about the drug, we detect aid more prolonged set of obstacles. finally when lilly spoke not that long ago, we sensed less optimism on the drug's prospects. we weren't alone. the stock dropped to the low 70s after its presentation of some of the findings of the drug. out of frustration, the trust sold eli lilly, not happy with how long it would take for this alzheimer's story to play out. we ended up taking a small loss on the stock. now, there are four lessons here. first we were dead right to be sure that we had the upside of the other drugs, the reputation of the firm, and the good dividend. it allowed lilly's stock to bottom, that dividend in particular, and contained our loss. so lesson one, if you're going to speculate, make sure there's something to fall back on. lesson two is trickier. the stock ultimately bounced back as others decided prospects were better than we thought, and
they didn't discontinue their work on the drug. that meant the stock bounced and bounced hard after we sold it. so your takeaway, if you did enough homework to know eli lilly has enough in the pipe away from the drug to keep the earnings up basically, you didn't need to sell the stock when this one drug didn't pan out. at the very least, cow have waited for more of a bounce and sold it at a higher level. really surprised that we did this. big mistake by me. third lesson, the time to buy a stock with a potentially amazing drug is after people have given up on it but before the trials are discontinued, which often happens. that's when expectations are at the lowest. we took a swing at lilly when many people were already excited about the property pects for the anti-alzheimer's therapy rather than waiting for a down series of days or the dying down of any talk about the medicine, which is kind of like maybe it works, maybe it doesn't. the investor event where it was talked about first, the one that
really intrigued us, was very well attended. we were far from alone when we bought the stock. so, therefore, we paid too much for it. the trust overpaid. it was far better to wait until it wasn't top of mind for any investors. that would have been just a few weeks after the meeting. the fourth and final lesson, when you're investing in a drug company that's going after especially intractable disease like alzheimer's, be more skeptical than you'd be with a disease that's easier treat. this happened with biogen too. so many drug companies have failed trying to fight alzheimer's that it's way too arrogant to bet that you're on the right path with any one company's research department. so here's the bottom line. when you're going to invest in a company with a potential cure for an intractable illness, make sure the drug company you're investing in has multiple drugs away from it in the pipeline and a good balance sheet as well as a dividend to protect the down side. second, if the drug doesn't initially work but it hasn't been written off, expect a bounce. a better time to sell.
third, don't buy the stock when it's still a ton of hoopla out there about its new drug. wait until the fuss dies down and get a better price for the stock. finally, when you have a drug company against a dwult disease that many others have failed to cure, please be more skeptical. there is a reason that others fail. it's an incredibly problem to solve. the company you like might fail too. investing in biotech can be a challenge, but now you've got the rules to help you invest. still more "mad money" ahead. i'll help you avoid a rookie mistake that plagues many investors. then the truth about investing commodities that if you're not careful could cost you dearly in your portfolio. and it's time for me to take on my biggest challenge of all. your tweets. i'm answering the questions you've been sending @jimcramer, #madtweets. stay with cramer.
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and in the admittedly limited world of of the stock market, right is whatever makes you money without breaking the law while wrong is whatever loses you money. as an investor, it's the easiest thing in the world to tell the difference after the fact. hindsight is 20/20. it's much harder to get things right in the moment when you're emotional and you're simply trying your best to predict how things will play out in the future. that's why i want to educate you by looking at some of the moves made by my charitable trust, which you can follow along by subscribing to actionalertsplus.com. the idea behind the newsletter is that we can help you become a better investor by playing with an open hand, issuing bulletins before we make our own moves, not to mention telling you what we'd like to do in an ideal world if the trust weren't subject to all kinds of restrictions. fortunately these bulletins give us a terrific glimpse into how we were thinking at the time, contemporaneously. we, meaning my research director, jack moore, and i, which allows us to learn from our moves and make judgments
about what we were doing at that moment that was so darn wrong. one of the great verses dove it yourself is you can be patient with the well researched idea you like. you don't have to punt or dump the stock if it doesn't work out immediately. you don't have clients breathing down your neck who get angry if you're not making the money month after month or in some extreme cases even day after day. unlike a hedge fund manager, you can take your time waiting for a terrific story to play out. you don't have to be so hard on yourself. but it's a big mistake to forget that fact, something we did when the charitable trust bought tyson foods back in the $40 range. jack had come from the research department of barclays. he had done a considerable amount of homework on tyson. what you might recognize as the maker of ballpark franks, jimmy dean sausage. that deal allowed tyson to branch out. we wanted to be early, to get in
before everyone else realized the transformation that would cause a re-rating, meaning shareholders would pay more for the stock because it would have a stronger, less earning stream. it traded as a full-line food company that would allow it to charge more for its merchandise regardless of the price of the raw tfoodstuff. numbers were most likely going to go higher than the consensus, meaning that what the analysts who follow the company were expecting the company would earn when it reported. there was just one problem. the hillshire merger came together more slowly than we had anticipated. the result, when tyson reported, the street was disappointed. you know what happened? instead of raising the numbers as we're so used to after these deals, the numbers were cut. i didn't see us as being early.
i saw us as being wrong, and we told subscribers that we had screwed up. so we had the charitable trust cut its losses in tyson. they were small because we bought the stock right. however, we did give up too soon. sure enough, literally the next quarter, we saw the very gains and synergies we predicted and tyson never looked back on the way to a 50% gain from where we sold it. >> the house of pain. >> our mistake, we had done all the homework. we had faith that the situation would totally work out in the end, but we didn't have faith in ourselves and our own homework. we didn't have patience. in reality, the right move was to buy more, not cut and run because the situation was beckoning. if we didn't already have a position, we probably would have taken one. there was no reason to take the action other than our own disgust that we did. that's never enough to justify disavowing what ended up being a terrific payoff. we were angry and bummed and took action, and it was wrong. how about this one.
this was a doozy, star wood hotels. we had come to love the work of the former ceo and thought he had tremendous operating skills, allowed him to turn this domestic chain into a worldwide powerhouse. what we didn't know is fritz had a restive shareholder base that was unhappy with his progress. when the company dismissed him, the stock fell, and we were totally missfified why anyone would find fault with his track record. not long, star woodstock to sto vaulted on a takeover rumor. then starwood dropped back to the mid-60s where we got a takeover bid from marriott that failed to generate much support and the stock actually fell on the lose. it kept going lower as it reacted to the faultering world travel picture. starwood is one of the most painful positions the trust had in a very long time. we decided to hold on to it,
hold on to it until the pain got to be too great and then fell to the 50s. we were of two minds. first, whenever we get a bid, i like to be able to ring the register. i tell you that all the time. but this combination seemed so great, i thought the stock had to go higher, not lower. that inself was a bad judgment. second, we totally ruled out the possibility that another buyer, who would like star wood in the 70s would still like it since it fell in into the 50s. when it had a move up, we booted it. big loss. mistake number two, not long after a chinese hoe tetelier ca in. we left 15 bucks on the table after that loss. should we have seen the bidding war come something that's a hard one. but we certainly should have been patient enough to wait for something good to happen. we believed in the synergy between marriott and starwood. we simply had to stop caring we had missed out on higher prices and when now stuck with what
seemed like a -- first we could have bought more as starwood fell, which if we truly believed in it as we said we did at the time would have been a terrific idea. or we could have bailed after we got the takeover news. we didn't do it. or we could have just held star wood and stayed patient. we didn't do any of those things. we got disgusted, took our bat and ball and went home. don't act on emotion. don't go against your homework. if you think that a stock deserves to go higher, then why don't you wait? no one's looking. you can afford to be patient. don't give up on your best ideas before they have time to pan out. eric in texas, eric. >> caller: hey, mr. cramer, a big san an towio booyah, to you sir. i have 50 stocks in my portfolio, and they're all
dividend payers. they kneeled about less than 2.25%. other than the payout ratio and retained earnings on the balance sheet, can you tell me what other metric i can use? >> you have a cash flow analysis in stay mad for life that is the one i've always referred people to. the book is a very in depth analysis of how to calculate the cash flow, which is more important than the earnings per share in terms of trying to figure out whether the company's dividend is safe. tom in new jersey, tom. >> caller: hey, jim. thanks for taking my call. >> sure. >> caller: a week or so ago, you had mentioned that you got a portfolio of about $10,000. you have a basket of stocks, about five stocks. >> right. >> caller: if that portfolio grows with the help of "mad money" to like $100,000 or even $ $1 million what would be the number of stocks that you would suggest to be comfortable with? >> i'll tell you, what the problem is that to really follow a lot of stocks -- we follow a lot of stocks for action alerts
because there's two of us, and we do a huge amount of homework. most people have a very hard time following more than ten stocks if they have a regular job. that's the max that i would tell you you can handle. that's after many, many years of looking into this. right and wrong in the investment world can be a lot tougher than black and white. but when you avoid making emotional decisions and rely instead on the homework and the homework that you've done, i bet you'll have positive results. there's still much more "mad money" ahead, including what you must know before investing in any energy stocks. this is required material, folks. don't miss it. then you know i always tell you to lock in profits but there are some times when selling can be just plain wrong. plus this is the most interactive show on the planet nor a reason. your mad tweets are coming up, so stay with cramer.
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welcome back. tonight we're learning lessons from my charitable trust, actionalertsplus.com, both got and the bad so you can be a better do you it yourself investor. let's delve into a series of costly mistakes i made when oil peaked in 2014 right through the oil market bottom in february of 2016. frankly there's so many mistakes here it might take a whole segment to figure them out and explain them. first when you're investing in commodity stocks, you must immediately recognize that it doesn't matter which one you hide in. better, worse, higher growth, better balance sheet. when the underlying commodity gets hit, they're all going lower. i've tried to buck this principle by adopting a high-growth deep-value strategy where the charitable trust bought the highest quality company, which in this case was
eog, and the one that i thought had the most takeover hopes, marathon oil. i was wrong on both counts. >> the house of pain. >> first, even as eog had the best properties, including amazing one in the eagleford shale and the permian basin, ones that actually made money when the oil was in the 30s, nobody cared. oil stocks traded like they were all parts of an etf, and no one cared at all that eog might have been better or worse than the others in the etf. every one of these oil stocks with the exception of exxon mobil had spent too much money and they weren't able to rein in spending fast enough to deal with the declining price of crude. mare thathon decided to split o its refining and marketing decisions from its exploration and production business at what amounted to the top of the cycle in crude. without that refining cushion, marathon was about as vulnerable as any of the cash-strapped independents. we saw the stock plummet from the 20s to the high teens before
we booted it. fortunately we dodged the trip all the way down to $7 where the company had to issue more shares just to stay afloat. unfortunately, the trust took a major loss, which did not endear us to subscribers. it wasn't all that bad in the oil patch, though, because we had had some foresight when it came to the combination of kinder morgan at the entity's ceo rich kinder put together deciding we had been greedy and not ring the register on that. even though i had written rich kinder up as a brilliant executive, he was the first major ceo to slash his distribution, which effectively revealed how kinder morgan had much nor than just toll roll exposure. that should have been the sign that the master limited partnership group had become unstable and their yields were unsafe even though he had changed his company to a c corp. yet after the examining the group to see which company could maintain its yield, we went right back in and bought etp because it was rapidly expanding
hit its footprint. not long after the stock spiked, energy transfer profits plunged. and while we ended up buy something low and selling all of it higher, it was not one of the trust's finer moments. the moral? don't think that you can outrun a commodity grim reaper, even with a derivative situation like a master limited partnership that's supposed to be so safe. and there's no such thing as a toll road that you don't have to worry about even though i thought there were regardless of the price of oil. if oil goes down, something does happen. companies don't pump enough, and if they don't pump, they can't pay the pipeline kpz, or they don't need them. and those very high yields could be illusory. something good, how about this? one of the hallmarks of the charitable trust since i've been working with my current research director is that we let the best ones ride. we don't take short term gains on our winners when they think
they're worth a great deal more than they're selling for. but there are times when one of our stocks rally so far, we do have to take action. that was the case with the 50% gain that we had in starbucks stock. near the end of 2015, star boxes shot up to the 60s. at the same time, its earnings growth was about 17%ment you can pay up to twice the growth rate, but we felt this run had happened too far, too fast and would begin to attract sellers on the first sign of any flagging growth. so we decided to ring the register in this longtime core position. sure enough, starbucks reported an ever so slight deceleration in same-store sales in china and the united states in its next quarter. nothing really all that visible even to the naked eye. but the stock fell and fell hard, losing almost ten points almost instantly. we started to actualliy rebuild the position. it's a rare stock that equal the height that comes with a 30
prices earnings multiple. finally there's the stock of walgreens. we had bought it for the charitable trust back in the low 80s because we liked the changes being made after the overseas purchase of alliance boots. we recognized the company wanted to do more acquisitions. in late october 20 15rks walgreens announced theab acquisition of right aid and its stock went flying. i had little faith the deal could go through quickly, so we sold as much as we could before the stock started coming down. oh, man, did it come down. it was a huge win and ultimately we watched as walgreens got clocked back to the high 80s and low 70s. i only wish we had the same forefigfor foresight with regard to allergan. here you had a fantastic situation where allergan, a pharmaceutical company, was being bought by pfizer for a princely sum of roughly $360 a
share. while the stock didn't trade that high, it climbed to the low 300s. the government had issued regulations regarding these tax inversion deals, regulations that allergan and pfizer had followed incredibly closely. the two companies specifically crafted the zeal to make the terms laid out by treasury for approval. but then the government totally changed the rules on the companies, literally making it so this very specific deal was totally spiked and not others. i didn't see it coming. and allergan quickly shed 100 points. what did i do wrong? i trusted the government to keep its word. love it. didn't see it coming. and allergan shed those 100 points. yeah, you know what? in an era where deals have been killed left and right with the most activist antitrust department in 50 years, i don't think there's necessarily a reason to believe that any deal is going to be a given going through, especially one that is now politically unpopular. yeah, i trusted the government to keep its word.
meanwhile, the government claimed there was no word even offered and allergan and pfizer were acting as rogues. that's simply not true. the government changed the goal post. but if i knew enough to take profits from walgreens on the spike, why didn't i know it would be too dangerous to hold out for the merger? simple answer. i was greedy, and the bottom line is that in this business, greed is just plain bad. don't let anyone on or offscreen tell you otherwise. "mad money" is back after the break.
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for most of tonight's show i've been talking about what you can learn from the mistakes i've made running my charitable trust, which you can follow along at actionalertsplus.com. it's got a club feel to it. but now let's talk about what you can take away from some very specific wins that did defy the odds. the first is facebook. it's hard to remember when facebook was considered a disappointing company that was failing to live up to its potential, but this stock was viewed as a real loser for the first year after it basebapubli. down right confusing how a bunch of smart people could have been so baffled by this change in the way we consume information. didn't they know better? i watched the stock get pummeled and saw a lot of famous people's names give the stock the boot. but i'm a huge reader of conference call transcripts and when facebook was trading in the 20s, it reported a good quarter. they talked about how they were
switching rapidly to mobile adoption. as they made the switch, you could tell the advertisers were flocking to it. so many people have been blown out of the facebook by facebook's disappointments that they were in no mood to listen to the positive story. given we didn't have a position in the stock and we didn't feel down or upset, we bought facebook for the charitable trust in the mid-20s, and we were fortunate to participate in a huge rally after that. how were we able to hang on? each quarter showed such an ip provement in the numbers that the earnings multiple wasn't expanding. then there's panera bread. here's a company that had lost its way. the ceo has come on "mad money" repeatedly to talk about all the flaws of the chain, a place i love. we even had father's day lunch there once. the ceo said the lines were too long and you were basically standing in a mosh pit. his word, not mine, as you awaited your order. he said he was going to change all that and do a reinvention. when a chain decides to do a
makeover, it starts by testing things out in one city. if it's a success, you can bet it works in other parts of the country too. we made panera a pick in our holdin holdings. sure enough, the rollout is a smash hit. the stock had a great run. finally there's apple. i know there have been billions of blog entries and newspaper arts about how it's doing, and since the death of steve jobs, whether it's deteriorated. so many people seemed so to believe that the best days are behind it. i see apple is reinventing itself with a service revenue stream that could ultimately be large enough we could put a price on it. not yet. i see that stream easily augmented by acquisitions. i see the iphone franchise has being not as global as it cob, and i see the ceo spending a gigantic amount on research and development that could pan out. there seems to be an inherent
bias against the stock that stems from apple's own past success. the stock has spoiled us because the iphone seems like it can never be made better. the truth is that the service revenue stream is going to transform apple into something much bigger provided it can make a series of acquisitions to augment that stream in a timely fashion. that's why i've been saying that apple stock should be owns, not traded. whenever apple gets stalled, wall street becomes frustrated because you can't afford to take the long view if they bolster the service stream, which would offset any margin issues. the bottom line, solid growth stories are hard to come by. and when you find them, you need to hang on to them for the ride. don't switch out into inferior merchandise simply out of frustration or out off boredom. stick with cramer.
it over @jimcramer, #madtweets. here's one from scott, who asks, what advice would you give to someone wanting to day trade in this market? my advice is, unless you want to quit your job and do nothing but stare at your screen, please do not do it. it's way too dangerous. even then, i don't think that people will have enough edge these days, and the market's too thin to really do well, and the algorithms are really in charge. i'm going to say don't do it. next we have a tweet from @add bru bruins. i want you to read one up on wall street by peter lynch. it's available on amazon, and it will be a great read and get you involved in trying to figure out how what you see can turn into what money you can make. coming up we have a tweet from @ksd, who is asking me about my garden. do you start your plants from plants or seeds? on my way out to get stuff for a
garden, i do a mixture. i like to buy some speeeds for radishes and and for carrots. also for some tomatoes, and definitely for beans. i never do anything other than -- although, yeah, there we go. other than in beans. look at that. nice-looking guy. but here's the thing. when it comes to the tomatoes that i get from home depot, i've had fabulous success. so my flats do work better, but i do want to thank some of my camera people like frack, who gave me some good seeds that worked very well. that's frack. he gave me seeds. i'm not kidding. he did, and i thank him. now we have a tweet from pa dion, who writes @jimcramer, thank you for being so nice to my friends visiting the city. you made their day. i always tell people i am so honored that i have a show, and they bother to even watch it. so, yes, if you come up me and you want to take your picture with me, i am more than happy to do it, particularly on the flor of the exchange.
next up is a tweet from @randall e clayton. he asks @jimcramer, thoughts on friend of some restaurants charging more, paying employees more, and banning tips. i don't know. i got to tell you from bar san miguel, that if you ban the tips, you ban the good people from working there, and that's not the way to maintain an establishment. so why don't you stick with cramer. a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods?
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>> today when it comes to motor vehicles, there are lots of rules. we're told where to drive, how fast to go. there are rules that dictate design, rules meant to keep us safe. [snores] [engine revving] but tonight... [airplane engine roaring] we turn the world upside down. and we throw the rule book out the window. my wife is gonna kill me. i'm diving headfirst into the insane world of sidecar racing. i'll get behind the wheel of a monster truck... i've done some dumb things on this show, but this is right up there. to fulfill that primal urge to flatten everything in my path. whoo-hoo! and we