Skip to main content

tv   Mad Money  CNBC  January 13, 2017 6:00pm-7:01pm EST

6:00 pm
was in big trouble. obviously they have. there's a lot of educational materials on the web. great stuff. >> a great run. it looks like our time has expired. see you back here next 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 you. so call me at 1-800-743-cnbc or tweet me @jimcramer. our playoffs, our championship. that's what earnings season means to me. it's a time when companies, not
6:01 pm
presidents or interest rates or macro concerns, control their own destinies. today we got some decent numbers from some major banks, and they cast a rosy glow over much of the session until some late-day profit-taking came in and the bulls' nemesis, oil, turned down. with the dow ultimately dipping five points, s&p advancing just 0.18%, but the nasdaq gaining 0.48% to still one more all-time record. who is in the playoffs next week? let's start with tuesday since the markets are indeed closed for mlk day. before the open, we hear from morgan stanley and united health. i like them both. i think morgan stanley can report a clean, strong quarter although i don't know if the reaction will be as positive as the other banks. in large part because there's investor enthusiasm for the deregulation agenda of president-elect trump and morgan stanley has already withdrawn from some of the areas that had gotten overregulated. still i think this franchise is
6:02 pm
undervalued even at its 52 week high. if you've got a long-term perspective, i recommend using any potential decline to do some buying in morgan stanley. i feel the same way about united health, unh, which we declared this week is the biggest winner in the hmo business if obamacare gets repealed. they've developed the best health care outcomes business away from the traditional insurance role. unh is such a smart company and year after year it has crafted and created new markets and new business lines that are additive to earnings. it would be a gift if this one came in after reports. now, after the close tuesday, we get results from csx, the railroad. we want to hear about the business line that is coal, specifically what the company projects about coal given that donald trump will be in charge starting a week from now. trump promised beleaguered coal mining states that they'd have relief from his white house. i think that's a big reason why csx's stock has been so high.
6:03 pm
it had pretty much built in the idea that coal would be going away under hillary clinton. now i think it will be here to stay. that's fabulous news for this railroad. we also want to hear if there's kind of a, let's say, before and after story. before the election and after the election, because if business has gotten better, then the theme of a stronger economy will resonate throughout the market. csx can have that kind of impact. wednesday starts with earnings from two key financial institutions, goldman sachs and citigroup, and i have to tell you that these two will be the most prone to going down after they report if only because they're coming in after so many other good quarters. still, i urge you to think about how little citigroup's stock has really done over the years. actionalertsplus.com club members know i like citi because the ceo is doing a terrific job of getting out of the last of the bad loans while pulling out
6:04 pm
of unprofitable overseas markets and making bigger bets in good ones. i also like the stock is still selling below its book value of $64, which is absurd because that's real book. it's been scrubbed clean by the government. the government owned a huge chunk of this company. i believe citi will be able to buy back a lot more stock than peel realize and be able to offer the kind of dividend it's capable of paying without stretching the balance sheet, something that should happen under the new administration. i love this article this morning in today's "new york times" by jim stewart, talking about government sacks. it is true there are going to be an awful lot of goldman people in government. i believe, as i'll demonstrate later in the show, that goldman will start to be valued the way it used to be before the great recession, as a stock that trades as a premium to the banking group, pretty much the premium it's been able to gather as it lid the dow to these vaunted levels. i think it can flmeander after e
6:05 pm
quarter. when the trading window opens soon after the earnings report, you might have a dip down. i bet there will be a large number of insider sellers after this incredible run. how could they not? if you do want to buy into goldman sachs, wait a day, maybe two after they report, and then pull the trigger. after the close, netflix reports. now, here's a case where the analysts have floged it and floged it so much ahead of the quarter that the company better blow away the numbers, or its stock will be hammered. mire take? it's been a great run. anyone who watches this show knows i love the company. i love the stock. but at this point, in this particular iteration, i think you got to say you missed it, simply because so many analysts have already pushed netflix up, no, i don't think apple will buy them eitherment i urged apple to buy netflix even as high as $75, but above $130? i think it's too late for apple
6:06 pm
to buy them too. thursday morning we hear from keycorp. even though this bank stock rose 1.59% in today's trading to a 52-week high, i think there's plenty of room for it to go higher after some consolidation. business is great. regulation is getting less important, and the ability to return capital could make key a cheap stock still. if it goes down on any goldman or citi disappointment before it, chance to buy. union pacific reports too, and in many ways as csx goes, so goes unp except they have a big mexican business, so we have to be wary of the trump factor. >> not a trump stock, not a trump stock. >> i say take a pass on this one for the moment because of political concerns involving mexico. after the close, the cheapest stock in the dow jones average reports, and i don't mean ibm, which also prints its numbers. i'm talking about axp, american express, and i think this company, with a stock that so lagged the group, could see some
6:07 pm
truly outsize performance. here's the deal. american express is easterning what it earned two years ago, and it sells about 15 points below where it was back then. given the recents run in discover and capital one, not to mention mastercard and visa, i think it's time for axp to run too. i'd be a buyer on tuesday. ibm, harder call. i think it's cheap, and i've been saying that for ages. it's got more fast growing businesses to crow about than it used to, including cognitive intelligence. will it be enough, though? it might be, ybut i still don't expect the stock to get back to its old highs because the legacy business is a killer. friday brings earnings for two of my charitable trust favorites, schlumberger and general electric. i think schlumberger will be its cautious self but we'll talk about -- if the big oil companies are going to maintain any production growth at all. i believe that news will be well
6:08 pm
received. general electric needs to flesh out its merger with baker hughes and how aggressive it wants to be. i want the combine the entity to bile national oil anadarko once the oil related business it a separate company. otherwise it should be a quarter where g.e. talks about redeploying capital for aggressive. they need to pay more in dividends and borrow money to buy back more stock if it has hope to trading up to the mid-30s. i implore the ceo to do so. it's a reasonable ask, jeff. it should be granted. but you know what? it may not matter because friday is inauguration day and judging by the excitement that's come from the pre-white house trump, i don't know if anyone will care about anything else that day, including the possibility of good numbers from both companies. bottom line, the playoffs are here, and there's money to the made in the financials, industrials and the oils. but let's not buy anything that's moved up too much. a better opportunity might await.
6:09 pm
let's go to jeff in ohio, jeff. >> caller: hi, jim. booyah, baby. >> booyah, jeff. what's up? >> caller: i like your show. i got a question for you about l. brands. they have a good ceo. is this a good buy on their stock purchase? >> i'm not recommending any retailers. you're absolutely right, he's the best there is, but it doesn't matter. i think retail is challenged by both the border tax and the mall problems, and this was the year where the mall really did -- just not there for you. greg in ohio, greg. >> caller: hey, big jim. how are you doing today, buddy? >> i'm doing good, champ. how about you? >> caller: all right. i've been following aks for a long time. bought it, sold it, bought it. it really dropped the last two days and there was no reports on it. i want to know what's going on. >> it's people saying enough is enough. apparently there was a report out this week saying that the commodity prices are going to come down. the second half is going to have a lot too much steel. my suggestion is always, the one
6:10 pm
i like is new core through thick and thin. maybe it doesn't have a shooting star effect like ak steel, but new core is there to stay. it's lasting. all right, everybody. it's game time. the market's vips are ready to shine, and i bet those are going to be the financials, industrials and oils. on "mad money" tonight, donald trump made his name and fortune from real estate, but real estate stocks have tumbled since the election. i'm sitting down with federal realty trust ceo to see how it's managing the unknowns. then did you see the big moves in jpmorgan, bank of america, wells today? i'll give you a look at what's ahead. and with interest rates rising, much of the market has been focused on the big games i just mentioned. are they missing a buying opportunity with some of the regional players? i'm sitting down with first horizon's ceo after earnings to see how that company is faring. so stick with cramer. >> announcer: don't miss a second of "mad money." follow @jimcramer on twitter.
6:11 pm
have a question? tweet cramer, #madtweets. send jim an e-mail to madmoney@cnbc.com or give us a call at 1-800-743-cnbc. miss something? head to madmoney.cnbc.com. d aruc
6:12 pm
6:13 pm
6:14 pm
lately there's been a lot of chatter about the slow or not so slow death of bricks and mortar retail in america. the truth is a little more complicated than that. some types of retail, the kind that offer an experience you can't get anywhere else, or products that can't be easily sold online or you need quickly are doing just fine. so where does that leave a company like federal realty, a real estate investment trust? we know that the reits fell out of favor last year as it came clear that the fed would be raising rates, making the yields less attractive and that's a big reason why federal realty stock is down from its peak last summer. however, the company continues to put up solid results. it yields close to 3%. still not enough of a reason to own the stock itself because of the way treasuries are but it begs the question what do we do with a high quality, well manage
6:15 pm
the reit like this in the current environment? let's check in with don wood, the president and ceo. mr. wood, welcome back to "mad money." good to see you, sir. >> jim, good to see you. thanks for having me. >> i felt your last conference call was -- i'm going to use a word i don't usually associate with you, a little wistful because you basically recognized you have to do a lot of renovation in order to stay relevant. it's not like the old days. you can't just put up a shopping snen and expect it will work. >> jim, there is no doubt that in the united states of america, there is more retail gla per capita than anywhere in any major country. the country is over retail. the country was overretailed before we started talking about online and anything else like that. so obviously the country remained overretailed. now, that's a big macro point of view. >> right. >> it comes down to specific real estate. and, yeah, you absolutely, and what we're trying to do is not look at 2017. we're trying to look at 2020,
6:16 pm
2025, make sure that what our product is, is the most flexible and relevant for today's retailers, not yesterday's. >> i got to tell you you're the only guy doing it, and that's why i'm worried about the other guys. >> well, look, i don't think that's true. >> okay. you know the organization. but i read through, and a lot of people are saying, don't worry, don't worry. i read yours and when i say wistful, i say what you're saying is i'm worried, and that's why i'm fixing it. >> look, i am a protect the down side guy. i do protect the down side, and real estate is a long-term business. retail is a middle-term business if you will. but the real estate itself is long-term. you start building something today, you just made a 50-year decision. >> right. >> so you better be right. >> i'll tell you, when i looked at -- you mention the a and p, three sports authorities. you know, don, i know you list some guys that in your presentation, and i'm not going to single any of them out, you
6:17 pm
abo but i look at them and they all seem like good brands but maybe they could be in trouble too. >> you certainly can't paint a big, wide brush to every retailer, but many management teams in both retailers and in real estate companies across the nation are scratching their heads, trying to figure out where we're going to be. >> right. >> it's not easy. some of them have done a really good job at being able to figure out their niche. you know what's a tough spot? the commodity stuff. >> yes. >> not here, not there, just kind of in the middle and existing just to exist. >> would you ever turn those people down as tenants when you have space? >> it's not about turning those people down. you know, this isn't a period where rising tide lifts all boats in my view. you certainly need to have product that is attractive and flexible to those tenants who are making the best pitch they can in terms of their relevancy for the next ten years.
6:18 pm
i would choose those all day long. >> i'm listening to your conference, i'm hearing about splunk. i'm hearing about mixed use, residential. these are all things that you have to do. you spend a lot of money to do it. fortunately you borrow at great rates because you're so conservative. but the complexion of these retailers -- >> of course. >> what you're doing as changed so much. >> splunk is an office tenant as you know. >> right. >> for us. and the notion of -- i think i'm saying something that everyone would agree with. the reason they chose santana row where we are is because of the environment that we created. it's not an office building out in the middle of suburb ya that would work for their workforce, for what their workforce demands in terms of services, to what they're looking for over the next 20, 30, 40 years. so the creation, the investment today in 2016 and 2017, for the future is what has to happen if you're going to create the
6:19 pm
relevancy of real estate that allows you to push rents for years to come. >> what does happen, we are overstored. this is really that moment, don, where if you're overstored, you're not going to -- you know, if you're a marginal player, you're not going to make it in the next three years. >> jim, this is not brain surgery. it is supply and demand. you're completely right. but all store space is not created equal. >> right. >> so you got to spend a little bit more time, dig deeper into the real estate locations, dig deeper into the supply/demand characteristics of those locations, and you got to have two guys fighting for a space. when you have that, you've got some good stuff. we've got most of that but other stuff we need to fix. >> it's interesting you talk about when things need to be fixed, some of the tenants don't do as well when they're doing some reconstruction. >> of course. remember, retailers are businesses, and those businesses have their own business plans trying to figure out what works for them, and not all of them have figured it out. >> not yet.
6:20 pm
but i've got to ask you, new president coming in. hate him or like him, i'm getting a sense that business is a better feel. are you getting more phone calls? are there more people that want to expand? just the toner. >> no, not yet. i would say it this way. you know, boy, that election was a surprise to a lot of people. >> right. >> and it happened in our business during a period of november, december, january. retailers are doing their holiday sales, and in the middle of that, the notion of new real estate and expansion in real estate hasn't happened yet. so there's a tail. i'm hopeful just as you are, but i'm cautiously hopeful. >> last question. you say that you need two tenants fighting. do you, in your back of your mind, say, all right. amazon's got that guy beat. how much is that in your head? >> oh, man, you know, the notion first of all there's a lot of things about amazon, including the bricks and mortar part of amazon, which is a very interesting dynamic. >> that you would know better than anyone. >> it's an important dynamic
6:21 pm
there because that is a great holistic company trying to vertically make sense all the way through the chain. that hardly is, though, the only game in town. and what you're seeing companies do, some of the ones that are particularly progressive, is upping their service level so that it's not just about price, and it's not just about some of those other peripheral things. it's about the quality of lifestyle. is this working out for me to go to you and go to your bricks and mortar, order online, pick it up at the store, et cetera? there are retailers out there that are doing that extremely well. those are the ones i want to court more than before. >> even in the time since we've known each other, it's evolved. but you're evolving with it. >> you gotta. >> that's why i keep recommending your stock. that's don wood, the president and ceo of federal realty trust.
6:22 pm
when you ask me can a retail reit make it? a shopping center one? this one can. "mad money" is back after the break. >> announcer: coming up, can investors count on banks to earn returns in the donald trump economy? we're taking more than just a passing interest after earnings from the big banks this morning. cramer sits down with the ceo of first horizon national when "mad money" returns.
6:23 pm
w us.. l lsson a
6:24 pm
let me ask you something. what would happen if we started valuing bank stocks on earnings instead of all the nutty stuff we've been evaluating them on for the last couple of years? what would happen if we looked at how much money the banks could make and decided, hmm, that's cheaper than a lot of other stocks. let's sell those others and buy the banks. well, that's exactly what's happening and what happened
6:25 pm
today. and i have to tell you it's a sight for sore eyes. you see, banking is actually a pretty darn good business. it's just been ages since we've been able to remember that. taking your deposits and investing them either in risk-free assets or in loans with higher interest rates is a phenomenal business. these companies make money when they turn the lights on in the morning. i think that's what was behind the moves today in the big banks, and after they reported, even if much of those gains were repealed by the oil-related pullback this afternoon. take jpmorgan. here is a company that had 11% deposit growth and 14% core loan growth. double digits. they'll give you big earnings number when the fed raises rates and they're going to raise rates repeatedly as we all expect them to do. currently jpmorgan is selling at a ridiculously low 12 times earnings. under what circumstance is that a correct valuation given how consistent its earnings are, how many business lines it
6:26 pm
dominates, and how little competition there is these days for a national banker and how few bad loans they have? it's crazy cheap. same with bank of america. it too has phenomenal loan and deposit growth with the lowest percentage of loan losses in the bank's history. bank of america has 600 million in profits built in for next quarter, and with four rate hikes this year, it can make $3 billion extra. it has tremendous momentum and fantastic expense control. further, the remaining big banks that are all companies that were able to carve up the nation and take the gigantic share of the market, something that would never have been dreamed of before the great recession. the government only let it happen at the time because it was the only way to avoid a wave of bank failures without straight-out nationalizing the losers. now the big banks are finally, after all these years, reaping the benefits of that consolidation. how tremendous is this consolidation factor? well, consider that even the
6:27 pm
scandal-tarnished wells fargo had 6% deposit growth. that would be like chipotle having 6% same-store sales growth after its unfortunate e. coli incidents. sure, the company didn't open as many accounts as it might have liked, but you would have expected wells to experience deposit shrinkage, not growth for heaven's sake. but they have too big a national footprint to be avoided by many individuals and companies alike. no wonder the stock rallied 1.5%. this was great growth for certain -- considering the circumstances, even though people immediately said, oh, lighter than expected, they don't anyhow to read these quarters. if hillary clinton had won the white house and the democrats had taken the senate, then these banks might even be under real scrutiny for how much money they're making now. i spent much of last year fretting that elizabeth warren would be holding hearings, a real salem witch hunt. hey, she's from massachusetts, about the concentration of power these major banks have. under trump, though, i think
6:28 pm
there be a recognition that the banks have too much capital and they need to be allowed to divvy more of it to their shareholders or make more home loans, something that's been a real sticking point with the regulators. plus the compliance expenses will now have peaked, and i believe there will be automation replacing a lot of the expensive people who currently examine the paperwork. i think the paperwork will be reduced too. all these changes, the earnings per share, the growth of the business, the decline in expenses, the build-in profit growth from rate hikes, mean one thing. the bank stocks can now be valued not only net interest margin or book value or loan losses and justice department fines, but on earnings. on earnings per share. and on earnings per share, they're among the cheapest stocks in the entire stock market. let's go to edvine in washington. >> caller: hi, jim. how are you? >> i am real good, partner. how about you? >> caller: i'm doing real good. i'm up in the evergreen state of washington. i have co-america, cma stock,
6:29 pm
and i am concerned about the effect that the trump administration will have on our banks in the near future as the value of it is up higher than any other time i've owned it. and i read an article something about they were going to be taken over, but they didn't say who. should i keep this or sell it. >> i got to tell you that's absolutely what the chatter is, the scuttlebutt is, that they are going to get a bid, that it's for sale. the stock has had a major run. it is not the highest quality bank, but i believe in the banking industry, and i think we'll look back and say why did cramer tell him to sell it at 69 when it went down to 63-4, and he couldn't get back in. my advice to you is stay long, continue to own it. good things are happening in the banking business. i think that stock will look like a bargain three years from now, and that's the parameters i want to use. all right. what a sight for sore eyes. the market's finally evaluating bank stocks on earnings, and it
6:30 pm
is pulchritude. that's right. much more on "mad money" ahead. did the market get first horizon's earnings wrong? i'm sitting down with the ceo to find out why there's more to the numbers. then dex com's performance hit some speed bumps in 2016, but the stock is up nearly 30% today. >> hallelujah. >> what's the heck's going on on that one? i'm investigating. and a finally friday edition of the lightning round with the week that was that you've got to stick with. stick with cramer.
6:31 pm
6:32 pm
and they're absolutely right. they say that it's hot... when really, it's scorching. and while some may say the desert is desolate...
6:33 pm
we prefer secluded. what is the desert? it's absolutely what you need right now. absolutely scottsdale. earnings season kicked off today with a host of bank results, and while you could argue that the numbers were somewhat mixed, i liked what i saw. take first horizon, one of the larger regional banks in the southeast with a decent-sized wealth management business and a smaller fixed income. the company reported a small top and bottom line miss which sent the stock down about 2%. there's actually a lot to like in this quarter if you look under the hood. they delivered stellar 14% deposit growth and fantastic 11% loan growth. these are excellent numbers, and their net interest margin, what they make by lending on your
6:34 pm
deposits, climbed by 18 basis points to 3% for the first time in ages. plus when you take a longer term view, this is a stock that's run up more than 60% since we last spoke to the ceo nearly a year ago. i got to believe it actually has a lot more room to run given that it could be -- well, if we get a bunch of rate hikes, it's going to be fabulous. let's take a closer look with bryan jordan, the chairman and ceo. mr. jordan, welcome back to "mad money." >> thank you, jim. it's going to be back. thanks for having me. >> bryan, i think things have changed. i think the country has changed. i think your business has changed. i think the stock is reflecting that. are you feeling that level of optimism that a small business index showed that was terrific, that a lot of the companies are telling us the lenders are doing better. is it in your area too? >> absolutely. we're seeing a tremendous amount of enthusiasm. post the election, we saw consumer confidence pick up. we saw small business confidence pick up. we're seeing it in our borrow s
6:35 pm
borrowers, people are willing to borrow money to buy properties, build plants and equipment. we've seen requests for loans go up. we're seeing a tremendous amount of momentum and feel very, very good about the outlook for 2017 as we start the new year. >> do you think it is sustainable or just the election occurred and people are glad there's no more gridlock, or is it something lasting? >> i think it's probably going to be lasting and sustainable if we can get a little bit of relief on regulation and a little bit of improvement in interest rates and growth in the economy. we've been in this low plus or minus 2% range. if we can move it up 50 or 100 basis points with some systemic change coming out of washington, being fiscal policy as well as taxation and regulatory policy, i think this could be sustainable and could be a pretty good run for several years. >> so give me an example. give our viewers an example of what kind of regulation that may have been stifling good borrowers' chances to be able to
6:36 pm
build a business or buy a house? >> yeah, from the financial regulatory standpoint, take buying a house. know your customer and some of the regulation that came out following the financial crisis and the implementation of dodd/frank as an example. and so the amount of detail that is required to get a loan approved, the amount of time, it puts back closing. there's a whole lot of regulation that's made it difficult for customers in that regard. but i'd say it's broader than that. i'd say it goes to, you know, trucking companies' abilities around environmental regulations, energy companies. so there's a whole lot of opportunity in my view to see regulation pull back both on financial institutions, let us get back to supporting our customers in our community and helping the economy grow. at the same time, giving the businesses in our communities the opportunity to be aggressive in the way they build their business, hire people, and build for the future. >> now, a lot of people have been telling me, jim, you're way
6:37 pm
too bullish on this group. i come back and say, i got a come that's got 14% deposit growth, got 11% in loan business growing, that has ability to be able to pay a good dividend, buy back stock. this is kind of what i want. this is better than a company that grows 2% to 3% that's in a packaged goods business or a utility that grows 3%. this has been a changed business, what we call a re-rating business. do you agree that at last, after all the work you've done, that the regional bank growth business is what it was like in the '80s and '90s could be back? >> yeah, i agree. a lot of it depends on the ability to get some progress in washington, which i think we will get. but i agree with you. i think our business is very well positioned to grow. our state where we principally bank in tennessee and the mid-atlantic market and then in houston are well positioned for growth. i think the industry's sector is
6:38 pm
well positioned for growth. i think there's a lot of pent-up demand in the company econoecon. i don't think it will take a whole lot of encouragement to see the economy and business or the business environment take off over the next couple of years. >> if the fed were to raise rates three times, how would it impact your bottom line? >> well, it helps us substantially. we're positioned for higher rates. if you get 100 basis points, we pick up something like 4.5% on our net interest income or about $37 million. so in round numbers, you can say about two-thirds of that. so we'd pick up $30 million area -- excuse me, three quarters of that, so about $30 million in net interest income and pre-tax income. so we're positioned for higher rates. we think rates are going to go up. we think the fed is going to continue to move. we've built in a couple of moves in our plans for 2017, and the market seems to be leaning towards maybe 3 or more at this point. >> well, i got to tell you,
6:39 pm
those who have stuck with you have made a ton of money. i don't think it's over. bryan jordan, chairman, president, and ceo of first horizon, thank you so much for coming on the show, sir. >> thank you, jim. >> all right, look, if it comes in, that's a gift. these are the new growth stocks for the next few years. first horizon. "mad money" is back after the break. arevp ie heitisio
6:40 pm
6:41 pm
6:42 pm
>> announcer: lightning round is sponsored by td ameritrade. it is time! it is time for the lightning round on cramer's "mad money." that's where i take your calls rapid fire. you tell me the name of the stock. i tell you to buy, buy, buy or sell, sell, sell. we'll play this sound -- [ buzzer ] -- and then the lightning round is over. are you ready, skee-daddy? it's time for the lightning round on cramer's "mad money." we'll start with kim in new jersey, kim. >> caller: hi, jim. i want to give you a big booyah from new jersey. thanks for taking my school. >> booyah back at you. what's up? >> caller: i'm long on yahoo, and i don't know how to evaluate it given that it's being split apart. >> well, it's done. it's done. we're just going to take the cash and we're going to do some better things with it. even an index fund over that one. let me tell you, you're done
6:43 pm
there. let's go to joseph in connecticut, joseph. >> caller: jim, thanks for taking my phone call. >> of course. >> caller: long time listener, first-time caller. >> all right. >> caller: the stock i'm interested in is srtt. >> no. again, this one has already made its move. i think that the easy money has been made. i'm not going to get you in there for the tough money. how about bart in new jersey, bart? >> caller: hey, jim. it's bart in newark. how are you doing? >> all right. how about you? >> caller: good. i'm calling about centurylink. >> i did a lot of work on centurylink when they merged with lvlt. we came out without any surety at all. >> don't buy, don't buy, don't buy. >> manny in florida, manny. >> caller: jim, how are you, sir? booyah to you? >> booyah. what's up? what's going on with you? >> caller: i bought into core civic. i'd like to know your thoughts.
6:44 pm
>> we think that move has been made too. thinking that was just a big trump play. it is a trump stock, but that doesn't mean we should stick with it at this point. david in iowa, david. >> caller: hi, jim, booyah from des moines. >> booyah. >> caller: what do you think of nxpi for its 12% qualcomm takeover gain from here and maybe as a hedge for a market downturn? >> what a great idea. i did a conference call this week for club members of actionalertsplus.com, explaining why we continue to hold this stock even though we're up huge. i believe like you that i think that deal will close and it's worth picking up the 12%. you should catch the video because i went on and said exactly what you are saying. great minds think alike. >> buy, buy, buy. >> let's go to gabe in arizona, gabe. >> caller: booyah, mr. cramer. >> booyah. >> caller: many thanks for speaking english so the small investor can understand your reasoning. >> thank you very much.
6:45 pm
how can i help? >> caller: one question, sir. i have a few energy epp stocks with 10% dividend, which is a dream. >> i think that management is too risky for me. >> sell, sell, sell. >> i like others in that group. my charitable trust owns magellan midstream, mmp. sell this one. buy mmp. that, ladies and gentlemen, is the conclusion of the lightning round! [ buzzer ] >> announcer: the lightning round is sponsored by td ameritrade. hey, chief, how are you doing? [ applause ] >> stay focused. stay focused. >> new year, new you? >> in the dot com, right? >> go up the golden elevator, and they get, you know -- you know how it's like.
6:46 pm
they get, and then they get this, and then they get that. and then you buy it. >> something that struck my own bar, bar san miguel in brooklyn. yeah, out of control avocado costs. we're getting killed on the guac there. >> coming from chargerless, san diego. >> oh, yeah, maybe. okay. >> i think what you would want is this movie was actually directed by stalin. it was really -- you know, that's customer service. >> i can do the whole piece down here. [ creaking noises ] >> where did the pajama traders go? >> oh, a little -- >> right? that's the apprentice. that's me on the right. >> thank you, cara. may everything good happen to you. [ applause ] stwi h!
6:47 pm
6:48 pm
6:49 pm
i don't know if you caught it, but you see this incredible move today in dexcom? the company that makes continuous glucose monitoring systems that help diabetics manage their disease with a lot less hassle? here's a company that had been written off and pretty much left for dead in recent months. after all, it was a fabulous multiyear run. dexcom had come out with a revolutionary technology that lets people with diabetes check their blood sugar levels without needing to constantly prick
6:50 pm
their fingers with a needle. just attach the sensor to your body, and then it updates the system wirelessly every five minutes. we've had them on air. that helped the stock roar up 161% in 2013. a 49% gain in 2015. but last year the company hit some speed bumps and from early september through yesterday's close, dexcom plunged from $96 down to $67. today, though, after a surprise announcement last night from the centers for medicare and medicaid services that they're going to classify dexcom's latest device, the g-5, as durable medical equipment, meaning the government's willing to pay for it, the stock launched into the stratosphere, rallying more than $17, or nearly 26% back up to $85 and change. talk about an incredible move.
6:51 pm
an incredible move that we must talk about on "mad money" because we've had this company on so many times. at this point you got to ask yourself a couple of questions. first and foremost, how could wall street have gotten this story so wrong? just when it seemed like everyone had given up on dexcom, we get this incredible positive medicare reimbursement news that changes the entire narrative. why didn't we see this coming? and, second, given that dexcom roared like crazy today, are we too late? are we too late, or could the stock have potentially more room to run? let's start with the first issue. easy one, frankly. why have people gotten so negative? why did last night's news take so many investors by surprise. things started to go south in september when we learned that medtronic, their main competitor, had gotten approval for its own closed loop insulin delivery system. basically it's got a sensor like dexcom's rigged up to an insulin pump. medtronic bills itself as kind of an artificial pancreas. dexcom dipped 4% on the news although most of the analysts
6:52 pm
suggested that medtronic's device was unlikely to take much market share from dexcom. then on november 1, dexcom reported a quarter that left investors feeling very discouraged. the headline numbers weren't too bad. a small revenue beat coupled with a larger than expected leerngz loss. but the commentary on the conference call got people very worried. right from the beginning, the incredibly transparent ceo kevin sayer started talking about, quote, recent developments in the u.s. competitive landscape, end quote. he said the fda's recent approval of medtronic's device was creating, quote, considerable confusion, end quote and implied that so called artificial pancreas was being overhyped. however, sayer also told us many patients had been delaying their purchase decisions for systems until medtronic's new system became available. on top of that, dexcom indicated they would only hit the mid-to high point of their full year revenue guidance when previously they had been confident about beating the forecast. the reason? management pointed to hardware issues as well as a product
6:53 pm
recall that resulted in some patients needing to turn in their receiver units for new ones which they said wouldn't affect sales in the fourth quarter. competition? delayed sales? confusion? oh, boy, this isn't the dexcom we've loved so much. in response, dexcom stock tanked. it fell nearly 20% in a single session, sinking to $63. the combination of this new competitive threat and the company's uncharacteristically weak guidance was worrisome. and while the weaker forecast wasn't actually a result of competition from medtronic, management didn't do a great job of explaining that on the conference call. since then, though, we've gotten a number of encouraging signs about dexcom that the market just seemed to shrug off. first health canada approved the company's g-5 glucose monitoring system for use in treating diabetes, meaning it's a full-on placement for traditional finger stick tests. that same day, dexcom presented some positive data on the next generation product they're
6:54 pm
developing at a diabetes technology meeting. and while the stock briefly spiked up to the low 70s over the next couple of weeks, by the beginning of december it was back in the 60s where it stayed until today, barring one deep dip into the fiftsz at the end of the year. on december 20th, the fda updated its product page for the monitoring device, giving the product its blessing as a replacement for traditional finger stick tests, just like canada had done the month before. plus it turns out that medtronic is delaying the domestic commercial launch of their so-called art official pancreas. three days ago dexcom rolled out better than expected guidance for their fourth quarter along with additional guidance. while the 2017 numbers weren't quite as high as what the analysts were hoping for, the company forecasted 25 to 30% revenue growth, which is pretty darn impressive. that helped propel the stock from 62 to 67, but it was nothing like today's move from 67 to $85, which brings me to last night's announcement.
6:55 pm
one of the overhangs that had been weighing on dexcom's stock was the question of medicare reimbursement. we knew their device is very effective. we knew it makes life a lot easier for diabetics, but we didn't know if the government would actually be willing to pay for it with medicare and medicaid money. to be fair to all the bears who gave up on this one, the centers for medicare and medicaid services or cms for short, wasn't expected to make a decision on reimbursement for the next year or 18 months. it was a shocker. instead, cms comes out last night and tells us dexcom's g-5 system will now be covered by medicare and medicaid at about a 25% discount to what regular insurance companies pay. pretty much what people were hoping for. but even better, because this is the only continuous glucose monitoring device that the fda has approved, the g-5 might be the only system that medicare and medicaid will pay for at least for now. given this announcement. dexcom can start receiving medicare and medicaid money as early as june 1.
6:56 pm
in short, the content of this announcement wasn't totally out of left field, but the timing sure was. even if you were bullish on dexcom, you probably didn't expect the government to make a decision on medicare and medicaid reimbursement for at least a year. this is a huge pile of money that the company can now get its hands on 12 months sooner than even the bulls anticipated. it looks like the obama administration really believes in this technology and wanted to make sure it got medicare reimbursement before president-elect trump takes over, which again is not something that would have been that easy to anticipate. what does this all mean? every analyst who covers dexcom immediately needs to raise their sales and earnings estimates, which is exactly what started to happen today. hence the monumental run in the stock. now, i hate to chase stocks, particularly stocks that have run like this. but it is safe to say that this story has suddenly gotten a lot bo better. ideally i'd like to wait for a pullback before pulling the trig erg on dexcom. we'll be speaking to the ceo next week. hopefully we can get a better
6:57 pm
read on the story then. let me give you the bottom line about this incredible move. dexcom is a textbook example of why it never pays to get too negative about best of breed companies. if you have conviction about a company and that story has plenty of catalysts and management is terrific and non-promotional as these guys are, then good things can happen often much sooner than you'd ever expect. stick with cramer. we 5
6:58 pm
sl i lespt
6:59 pm
everyone said the bank stocks had to go down no matter what they reported, and that turned out to be wrong. i don't want you to get too greedy. i believe the bank stocks will have some rough days. but remember they're now being valued on earnings, and on earnings, stocks like jpmorgan and bank of america are dirt cheap. i like to say there's always a bull market somewhere. i promise to try to find it just for you right here on "mad money." remember, the market is closed monday. if you're off, spend some time with friends and family. i'm jim cramer. see you tuesday!
7:00 pm
male announcer: this week on undercover boss, the ceo of american seafoods, one of the country's biggest seafood companies, poses as an immigrant on a reality show about people pursuing their american dream. - bjorn petersen. - bjorn, nice to meet you. announcer: he'll trade in his private jet and rock star friends for a fishing hook and fish guts. - it's very stinky. announcer: by working on the front line in the rough seas, this former fisherman will find out if he still has what it takes to make it in the field. - he almost look like girl. - move faster than that. - i'm going as fast as i can.

86 Views

info Stream Only

Uploaded by TV Archive on