Skip to main content

tv   Mad Money  NBC  November 10, 2016 3:00am-4:00am CST

3:00 am
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. i'm just trying to make you some money. my job is not just to entertain but to teach and educate you. so call me at 1-800-743-cnbc or tweet me @jimcramer. it seems nuts. how can you have a mini bear market and then a resumption of a bull market within a 24-hour period? yet that's almost exactly what happened when you consider that last night at 12:45 a.m., the s&p futures were indicated down limit when it became clear that trump would win. and a back of the envelope calculation by me came to
3:01 am
market would open. a decline that was unrealized and then tossed aside when the day dawned and grew light with the dow ultimately gaining 257 points today. s&p climbing 1.1%. and the nasdaq finishing the same, up 1.1%. the market's now up close to 4% for the week, which means if we can hold at these levels, this will be the best week of 2016. i know it's hard to believe that someone who is regarded as the enemy of the stock market last night can be embraced as an old friend by mid-morning. but i want to explain, just put it in plain english so that you can understand what's happening here. to begin, though, you have to get into the heads of the people who actually bought stock, people who committed capital today. that's what's often the key to figuring out a rally. that's how you'll know whether
3:02 am
insane, but then of course turned out to be anything but. so let me list the types of buyers, the people who came in with real money, why they were motivated to do so, and how they moved the market. the first buyers, the people who have been waiting for this gosh darned election to end already. these are investors who recognized that the nastiest election in ages simply had to finish playing out before they could commit their capital. there were just too many questions. too much rancor. too much plain old confusion and before pulling the trigger without knowing the results. i want you to think about these people as agnostic buyers. they were going to buy stock no matter who won. they simply wanted to be sure the market wasn't going to crash after the results came in. it pretty much did crash for traders who sit around in their pajamas at night and trade the futures like idiots. the people who sold everything last night, the people who said
3:03 am
of worm spit, a phrase fdr's first vice president used to describe that distinctly subservient, suboptimal job. i'll railed against these sell everything folks for months, but obviously it doesn't matter. the p.j. guys, they don't listen to anything anyway. what are those guys doing with their dr. denton feet pajamas? the second group of buyers, those who wanted to see a smooth transition. they didn't care who won so long as the victor was magnanimous and the loser was gracious, transition of peaceful transfer of power to continue. the smooth transitional cohort got an instant one-two dose of gratification first with trump's victory speech at 2:30 a.m., which must have really driven those p.j. short sellers crazy, and then the second with hillary's concession a little after 11:00. these buyers really did everything -- they bid everything up. did you watch it during hillary's speech? they bid everything up first when trump wasn't threatening to put hillary in jail.
3:04 am
to send her back to yale, where she went to law school. the third set of buyers? those who see in donald trump a businessman who will cut taxes and borrow a ton of money to fix our nation's infrastructure. these buyers know trump is comfortable with borrowing a lot of money. maybe even more than he can pay back, if he has to. so why not do the same with the treasury given the 30-year rates are so cheap? the bond market traded today as if trump is going to issue a $500 billion long-term bond to fund bridges and tunnels, not unlike dwight d. eisenhower. that. the stocks i recommended year, martin marietta materials and vulcan materials, were among today's leaders. plus when rich people get a tax cut, let me tell you something. rich people getting a tax cut, this is what goes through their head. >> hallelujah! >> and they tend to invest some of that money in stocks. >> buy, buy, buy. >> and rich people represent a pretty big constituency in the market. face it, rich people love it when their taxes are cut, and
3:05 am
so they love stocks. pretty simple. fourth group of buyers, the people who got this election completely and utterly wrong. no, not the pollsters, who after this election and brexit should have whatever licenses they have revoked. bunch of clowns if you ask me. chowder heads even. no, i'm talking about the short sellers who, after fbi director comey first damned hillary with the weiner e-mails and then exonerated her days later, felt she was the biggest shoo-in since richard nixon's triumph in 1972. now, if you're idly chit chatting about the pollsters and you took comfort in them, if you liked hillary, more power to you. but if you're a hedge fund manager and you saw those pollster numbers, you would have been really inclined to bet on a hillary clinton white house with perhaps a democratic senate majority. that would have been the death knell for pharma and banking stocks. a lot of people were having nightmares about what bernie sanders and elizabeth warren
3:06 am
the senate. so these money managers made gigantic short bets against both groups. now, at first if you were betting against whole sectors of this market, you looked like you'd be saved by the decline in the overnight futures. i could see the guys in their p.j.s at 11:30, 12:00, saying, we'll make a fortune tomorrow. but once the smoke cleared and the sun came up, those guys took their lickens. the short sellers had a major horror on their hands. they were looking good on their bank shorts initially because intere were bid up. woo, trump. however, when we got a magnanimous handoff and a sense trump meant business when he talked about borrowing money to build out america's infrastructure, you witnessed a stunning rise in interest rates, which is nirvana for the banks because they pay you little on your deposits but can invest them at very high rates of return with very low risk. remember, they don't raise your deposit rates as much as they, well, they can make on them. meanwhile, pharma bounced. not only because the republicans aren't going to rip into the
3:07 am
may let these companies repatriate their foreign capital and start merging with each other. proposition 61, out. so short sellers had to come in and buy all their shorts, particularly in pharma. more on that later and of course the banks. both groups had what i call rip your lungs out rallies, which brings me to the fifth set of buyers. those who like the idea that something can get done with corporate taxes to repatriate all that money overseas. more than a trillion and a half dollars, a lot in tech and drug stocks too. that would mean more buybacks, it was never going to happen with a democrat in the white house and a congress controlled by the gop. sixth group, those who believe that both the predatory nature of regulations and our foreign trade partners might have finally met their match. plenty of our ceos want free trade, but others taking their cue from the likes of dan dimicco, former ceo of steel giant nucor, believe that we need a level playing field with our trade partners before we can do better. when it comes to regulation,
3:08 am
disrupt the status quo. he's anti-establishment. and nothing resonates with investors like stopping regulation that hurts our jobs and our businesses. and here i'm including everything from, according to the people who voted for him, the affordable care act and nafta. a seventh group of buyers just found tons of stocks they like today. we've been harping on those defense contractors. monster moves. others want to invest in fossil fuels and feel like a trump epa would be less threatening. maybe there is no epa. well, no. he'll probably keep an epa. anyway, the pipeline companies in particular got a green light here. so did the coal toting railroads. finally there are people who are willing to bet that americans will be more inclined to go out and spend now that this election is over rather than sitting at home ordering that domino's no-cheese pizza with banana peppers while playing grand theft auto and watching, i don't know, "luke cage" on netflix. maybe people will fix up their homes again, ending the long slide on home depot. the refurbishment trade could be
3:09 am
there were enough of these to color the tape positively. to be sure the market's actions were erratic minute to minute. the simple fact is there were a heck of a lot more people who wanted in after this election than wanted out. and a gigantic number of hedge funds who were on the wrong side of the trade and had to reverse their stance. so the bottom line, the coalition of the willing buyers cobbled together to produce an improbable rally. en whole darned election improbable? what a fitting way for it to end. john in georgia, john. >> caller: yes. my question is, do you believe that general dynamics is a good stock to own in the aerospace defense sector, especially under a trump administration? >> i think general dynamics is one of the best run companies in the country. this stock did hit a 52-week high today. it's up $8, but you know what? buy southern and wait for a
3:10 am
how about larry in massachusetts, larry. how you been, partner? >> caller: hey, jim, thanks for this morning's action alerts call. >> oh, man, we were sweating on that one. it was a full hour. glad you could join us. >> caller: it was absolutely valuable during the whipsaw. look, i've got a soft financial question for a retirement account. ares capital corporation. you know it. floating rates. wide bunch of industries. yields a steady 10%. despite a downward rerating since i bought it in 2013 and with the fed beginning to rise and the overhang of congress, eliminated pretty much. do you like them as much as a slower blackstone? >> i think we get a little freed up equity market. black stone does a little bitter. run by a pretty smart guy. saw him interviewed by my boss last week. so let's do that. let's make that switch. thank you for the kind words and for joining the conference call, which is on a replay. it was really wild because we just sit there and went over the stocks and we're really going at
3:11 am
kind of like fantasy except it was reality. the 24-hour turnaround that caused the dow to swing more than 1,000 points may seem crazy. but when you get inside the heads of the buyers and the sellers, the improbable rally off an improbable election comes to focus. on "mad" tonight, the new face of washington has drastically changed the outlook for one specific set of stocks. i'll give you the existing landscape. plus, how long will this post-election rally last, and the warning signs to watch. well, we've got them just ahead. and remember when we didn't just talk about the election? those times are returning. tonight i'm speaking with chipotle about its legacy and whether it can repair its reputation. hey, avocado got expensive. i know that from bar san miguel. anyway, stay with cramer. >> announcer: don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer, #madtweets.
3:12 am or give us a call at 1-800-743-cnbc. miss something? head to yeah,. hashtag "stuffy nose." hashtag "no sleep." i got it. hashtag "mouthbreather." well, just put on a breathe right strip and ... pow! it instantly opens your nose up to 38% more than cold medicine alone. so you can breathe ... and sleep. shut your mouth and say goodnight mouthbreathers. breathe right. "i think we can finally get a bigger place."
3:13 am
"credit karma. give yourself some credit." because i'm a woman... do you think i'm gonna crack under pressure or conquer the field? defy expectations any day with always infinity. made with flexfoam. absorbs 10x its weight. rewrite the rules. always. we're going to prove just how wet and sticky your current gel antiperspirant is. now we're going to show you how degree dry spray is different. degree dry spray. degree. it won't let you down. [burke] at farmers, we've seen almost everything, so we know how to cover almost anything. even a rodent ride-along. [dad] alright, buddy, don't forget anything! [kid] i won't, dad...
3:14 am
ng, but there is some movement on the eastside overpass. getting word of another collision. [burke] it happened. december 14th, 2015. and we covered it. talk to farmers. we know a thing or two because we've seen a thing or two.
3:15 am
after donald trump's stunning victory last night, coupled with the republican sweep of both houses of congress, we're suddenly looking at a very different stock market. this is a new environment, and we need to re-rate -- that's the technical term -- a whole host of different groups. but the biggest impact of this shocking election is probably in the health care group. remember, until the returns started coming in last night, hillary clinton was considered to be the odds-on favorite to win the presidency with a decent likelihood of the democrats taking the senate. for over a year, the prospect of a clinton victory had been weighing down the health care cohort and in particular the drug stocks ever since hillary sent out that infamous tweet about cracking down on pharmaceutical price gouging. that was in september of 2015. been a long time. from that moment on, the whole health care edifice was living under a cloud with wall street worried about congressional inquiries, executive actions or even actual price controls. thanks to last night's results, though, those worries have all
3:16 am
the republicans are the party of limited regulation and free markets. they're not going to crack down on drug pricing because they believe that will stifle innovation. you've heard that a million times. hence the massive near 5% rally in the drg today. that's the nyse arca pharmaceutical index. granted, the republicans will try to repeal obamacare, which could hurt many health care plays, but the democrates in the senate will just filibuster. more on that for more shows. a gop-controlled senate also means we don't need to fear aggressively interventionist democratic committee chairmen. here i'm speaking like bernie sand running the budget committee or the committee on health, education, labor and pensions, both relevant to health care. another surprise political development last night? in california, the voters defeated proposition 61, which would have prevented the state from paying a higher price for drugs than the department of veterans affairs, and the v.a. gets the lowest prices of any government agency. that's another win for the drug makers. plus after getting beaten down for ages, many of these health care companies have dirt cheap valuations.
3:17 am
competitors, like what's happening with the wholesale drug distributors. we want no part of that. for the segments of the health care sector that don't have price wars, i think we need to get a lot more positive because these stocks have a lot more room to run. in fact, many of these names are so cheap, i wouldn't recommend even if hillary won the election. that's how much this group has been punished already. but under president trump, the outlook for the sector, a lot brighter. of course there's still some headwinds out there. cvs sold a yesterday after reporting a mixed quarter with truly dismal guidance for next year. management says 2017 could be a challenging year. cvs might lose more than 40 million prescriptions as pharmacy benefit managers like express scripts lock out their pharmacies. ouch. honestly, much of the weakness seems cvs-specific. the business they're losing will probably go to walgreens and we told action alerts club members that charitable trust holding wba was the real winner here. the people running cvs, they
3:18 am
wouldn't have announced a massive $15 billion buyback. i would not dump cvs down here. let it come a little higher. other negatives that jump out -- valeant, pitiful helpless giant of a drug, believe me. reporting another disappointing quarter, dramatically cutting its full-year guidance for 2016. refused to give a forecast for 2017 except to say the numbers are going lower. hence why valeant lost 21% of its value yesterday. this company has got an ugly balance sheet, and i still consider the stock downright toxic. >> don't buy, don't, don't, >> however, there's a lot to like in the rest of the health care space as long as you're careful to avoid the competitive land mines. on monday before the election, lindsey bell from s&p capital iq came out with a terrific piece titled "taking the contrarian view on health care," where she made some important points. despite the political rhetoric, bell noted that many subsectors are still doing just fine. the valuations in the group had gotten very inexpensive. at the same time, the dividend yields have been on the rise. in fact, despite the weakness in the health care stocks going
3:19 am
industry delivered better than expected numbers this earnings season. so if the health care stocks have become too cheap to ignore, where should you put your money to work? first let me just say that you need to avoid the price war situations, and that includes the drug distributors like amerisourcebergen, cardinal, mckesson. they were all up today, big. so use that strength to scale out, not dump. scale out of these. some price competition -- novo nordisk, eli lilly, mylan. novo nordisk is really the poster child here. they're facing both price competition on insulin and public shame for past price increases on the same darn products. if you own these, reposition. what works, then? for starters, i think merck is one of your best bets. here's a company that's gotten a lot of good news lately, including for their big
3:20 am
comes to next-generation cancer drugs, particularly after the public setbacks in the bristol-myers competing oncology formulation opdivo. merck rocketed up 6% today on the election results but even after this move, it's only 16.5 times next year's earnings estimates. solid 2.7% dividend yield. that is too cheap. >> buy, buy, buy. >> how about pfizer, pfe? here's a stock that's facing terribly negative sentiment in recent months, but i think the company remains a powerhouse with huge free cash flow. granted, pfizer soared 7% today, but the stock is still five points off its highs. it's trading at just 12.3 times next year's earnings estimates. i regard that as very cheap, especially again considering the 3.7% yield. third, i've been a fan of celgene investors circle right back to the biotech today, causing it to spike up close to 11%. it's now not my cup of tea up so high. but even at these levels, celgene is down more than 20 points from its peak in july of 2015, and some of these declines were about politics, not the fundamentals of the actual
3:21 am
investors got used to celgene beating the numbers every time it reported. but in late 2015, early 2016, the company only managed to meet the numbers. still when they reported again a few weeks ago, they were back to their old ways, blowing away the estimates. in the end, this is a company with 27% revenue growth. yet it's selling for just 17.1 times next year's numbers. that is absurdly cheap, people, even after today's run. it feels like something good is happening there. i haven't been able to pin it down. fourth, allergan had been a ta a with teva and mylan, and it missed its earnings estimates because of some pledges not to raise some old drug prices. i was unhappy. now, i don't expect price increases. the ceo has said they're not going to do them, but it has gotten ridiculous that allergan is the fastest growing major pharmaceutical stock with the lowest priced earnings multiple. that's not supposed to happen.
3:22 am
but give me growth any day of the week. allergan has growth in spades. i trust the ceo to deliver a ton of new drugs in 2017, and i hope he comes here very soon. finally, i think it's worth noting that walgreens boots alliance sold off yesterday on the commentary from cvs. but one of the main problems with cvs is they're losing money to walgreens. plus we know the earnings were excellent. now, today walgreens regained all the ground it lost yesterday. but with trump taking the white house, i think the prospects get even brighter. why? it's more likely the company's rite aid acquisition will pass muster with the regulators once president obama is out of office. so i've been telling you we can figure out how to make money regardless of who wins the white house. with last night's surprise trump victory, things are looking a lot better for the health care cohort even after their rally today. there's still plenty of subsectors within health care that have their own problems. but if you know what you're looking for, i think you identify long-term winners. i'm talking about merck, celgene pfizer, allergan, walgreens. these stocks all worked hard today, and while of course i prefer a pullback, you know that's me. frankly, as we are near the
3:23 am
if you'll get a big one. plenty more "mad" ahead including the future of chipotle, which i know you do care about. is a turn coming for the battered burrito maker? i got the cfo. plus what impact will the election have on the american oil and gas industry? tonight i've got one of the best and brightest executives in the space to tell us about it. but first, seven questions floating around wall street that could bring this post-election rally to an end. not ignominious but still an end. stay with cramer. why am i so devastatingly handsome, i'm in a fragrance..., and my sweethearts gone sayonara. this scarf, all that's left to remember. what! she washed this like a month ago! how's a guy supposed to move on!
3:24 am
wi 80% of recurrent ischemic strokes could be prevented. and i'm doing all i can to help prevent another one. a bayer aspirin regimen is one of those steps in helping prevent another stroke. be sure to talk to your doctor before you begin an aspirin regimen. we're going to prove just how wet and sticky your current gel antiperspirant is. now we're going to show you how degree dry spray is different. degree dry spray. degree. it won't let you down. (coughs) cough doesn't sound so good. take mucinex dm. i'll text you in 4 hours when your cough returns. one pill lasts 12 hours, so... looks like i'm good all night! some cough medicines only last 4 hours. but just one mucinex
3:25 am
far be it from me to throw cold water on any delicious rally, relief or otherwise. but a week from now, we will probably not be talking about a magnanimous donald trump and a gracious hillary clinton around here. we may not even remember that this week's rally, so far 3.5%,
3:26 am
i'm not saying they'll be pointing fingers anymore or trash talking every minute. i'm saying we'll be stuck in a world of some unknowns. those unknowns will be a source of anxiety and therefore selling. when the euphoria dies down, here's what we'll be thinking about. first how independent will the federal reserve be under president trump? will janet yellen finish her term? will trump break with protocol and denounce them for keeping rates recklessly low? that's a bad headline for the bulls. two, we think that trump will green light mergers, right, because they're really good for business. but what if he says they're all anti-competitive and he'll appoint people to block them like he wants the time warner/at&t tie-up blocked? maybe he puts a stop to the big health care mergers like humana, aetna, and cigna anthem, which are already being contested by justice. m&a has been a major prop of this market. we don't want it to go away. three, what if trump is true to his word and manages to convince congress to help him kill nafta? sure, we get fewer jobs going to
3:27 am
back. instead we get higher prices and inflation, not positive for stocks. you may not like the jobs they take away. i don't. but you certainly might like the cheap prices of goods that nafta makes possible and don't want to see them go away. four, who is going to be the treasury secretary? what if he picks someone from out of left field, i mean a real rebel? so much for the big bank stock rally. five, what if trump starts a trade war? it's one thing to bust nafta and demand fair trading. we've been on the losing end of our trade deals forever. in the typical trade deal, for example, we let the chinese trading partners make stuff and pollute the hell out of the environment which then wafts its way over here. then they ship the product over here under cost to keep their jobs and take ours away. that's been the procedure. but what if the chinese decide to stop buying boeing airplanes? what if the communist party stops allowing starbucks or yum china or nike or under armour to open stores or sell goods? they could do that. it's the communist party. same goes for capital projects that might involve a honeywell
3:28 am
maybe they say no to our diapers, baby formulas, shampoo, toothpaste or take away slots from our airlines or slap tariffs on our cars. if that happens, the earnings estimates will be slashed for many of the stocks that rallied today. six, what if the move in interest rates keeps accelerating? mortgage rates go up too fast, housing does get hurt. those housing stocks already were jarred today. in the meantime, the bond market equivalent stocks, the big consumer packaged goods companies with high yields and the real estate investment trusts and the utilities, well, their stocks will be annihilated. finally, what happens if we start drilling for more oil at the same time the dollar soars because of our higher interest rates? an american-made glut in oil has typically meant lower stock prices. a stronger dollar clips earnings estimates for the big international enterprises. i'm not saying be careful for what you wish for. this rally was terrific. my bottom line, i'm simply acknowledging that we'll soon be factoring in some of these more
3:29 am
relief rallies don't last when faced with a new set of facts unless the facts are bullish. otherwise, they just tend to fade away. how about mike in my old home state of pennsylvania, mike. >> caller: hi, jim. >> mike. >> caller: jim, because of proposition 61 and constant pressure to lower prescription drug prices, should i sell or hold most of my pharmaceutical stocks including bristol-myers >> no, no. you don't have to -- part of the new regime that we got today is a regime that i think will look the other way at price increases. that was then, and this is now. new page. obviously they can investigate, but if the republicans own the house and they own the senate and they own the white house, it's just not going to be a focus. i think they're going to think there's other things they got to look at. i think you're kind of home free. how about vince in illinois, vince. >> caller: hey, jim. young trader here in chicago, illinois.
3:30 am
repeal of obamacare and no longer medicaid expansion, what do you think about wcg, wellcare health plans, which specialize in managed medicaid plans, and unh, united health care? >> i don't think you need to be in these. i think there's so much in the health care group that is now suddenly working, why are we courting this kind of thing? why can't we go and buy allergan, which to me is the company that was considered to be the worst actor yesterday, and today may be the best actor. today the market basked in the glory of the smooth transition of a democratic government. just like every other time. but when the honeymoon is over and washington gets back to work, things could change quickly. please don't be foolish. nobody ever got hurt taking a profit. still more "mad money" ahead including the outlook on chipotle. are the turnaround efforts working? i'll give you an update on the stock in my exclusive with the company. then does the outlook for american oil and gas change in a
3:31 am
my exclusive with an industry executive who has nailed it, gotten it right. plus, a finally the election is over special edition of the lightning round! so stick with cramer. ally did ss of dollars on my car insurance with geico. i should take a closer look at geico... geico has a long history of great savings and great service. over seventy-five years. wait. seventy-five years? that is great. speaking of great, check out these hot riffs. uh, yeah i have an early day tomorrow so... wait. almost there. goodnight, bruce. gotta tune the "a." (humming) take a closer look at geico. great savings.
3:32 am
when coughing keeps your family awake. breathe easier with vicks vaporub. soothing cough relief that starts working instantly. ?? dry spray? ?? that's fun. ?? it's already dry! no wait time. this is great. it's very soft. can i keep it? (laughter) all the care of dove... now in a dry antiperspirant spray. awarded best of beauty by allure. cheez-it grooves are the perfect union of a cheez-it and a chip. umm... i guess... you'd make a pretty bride in that wedding gown. oh, it's a lab coat so... hey everyone, joe's getting married! bam bam ba bam... oh, i'm not... we take time for our cheese to mature... our crispy cheez-it grooves. you know your heart loves megared omega-3s... but did you know your eyes, your brain, and your joints really love them too? introducing megared advanced 4in1... just one softgel delivers mega support.
3:33 am
pantene expert gives you the most beautiful hair ever, with our strongest pro-v formula ever. strong is beautiful. last night i argued the dramatic slowdown in the restaurant business in recent months was caused by people hunkering down at home to fret
3:34 am
that's only one piece of the stay-at-home thesis and there are plenty of other headwinds. cheap groceries make home cooking less expensive. you can get all kinds of entertainment without leaving the house, and there's way too much competition in the restaurant space. throw in an additional problem on top of these, and it gets even harder. consider the case of chipotle, the once beloved chain with a stock that went into freefall a little over a year ago thanks to a series of widely publicized health scares. when chipotle last reported on october 25, the company earned just 27 cents a share. than expected, falling nearly 15% year-over-year. even worse, chipotle's same-store sales declined by 21.9%. that sent the stock tumbling from $405 to $360. however, given that the food safety issues that first occurred last october, chipotle is going to start facing some much easier comparisons going forward. as i have said many times, maybe a dozen times, it typically takes about 18 months for a
3:35 am
this kind of health scare. if that's the precedent and it holds, things should start to pick up in the next five months. plus if i'm right that worries about the election have been preventing from eating out, it's possible the whole industry to get a boost going forward. has chipotle fallen to the point where we can start thinking about a bottom? let's check in with jack hartung, the chief financial officer of chipotle. mr. hartung, welcome back to "mad money." >> thanks for having me. >> jack, we have been saying that there's just been this kind of national ill will, malaise jimmy carter where people didn't want to go out. they were hunkering down. any chance you think now this election is over, it could be a era of, let's say, better feeling? >> i hope so, jim. i know there's been softness generally. we faced our challenges throughout the year. but generally in the restaurant industry, there's been a softness. i think there's been a lot of distraction with the election, a lot of negativity with the election, a lot of just concern about the election. hopefully with that behind us, hopefully we can all go about our daily lives and, you know,
3:36 am
>> chipotle has always been pretty independent of washington. you've always treated your employees in a different way. you're not a minimum wage shop. does it impact you? you know, two houses, both the senate and the house being republican and the president. is there any just i mean regulation, kinds of things we hear about in the regular news, matter at all to you guys? >> probably not, jim. anything that affects us, let's say it's on minimum or regulation, it's going to affect every restaurant ohe a great job with hiring the right people, training them to deliver an excellent experience, and delight our guests when they come in, if things like minimum wage or other things that allow costs to creep in, we'll have the opportunity with our economic model, especially as we restore it after recovering from the events of last year, we'll have the ability to either absorb those into our model or to pass on some of the higher costs to our customers. i think we're in the same boat as everyone else. i don't think there's anything in particular that would affect us more than any other
3:37 am
>> when i was looking at your last quarter, you put out the notes. i was trying to figure out why did you make it so hard for yourself? you put out projections for 2017, 195 to 210 restaurants, same-store sales growth in the high single digits. why make it so difficult? i mean it's been a tough time. it's really hard to forecast. you're spending all this money being sure you're number one in food safety. you have to retrain people. why make it even tougher by putting out projections that just make it so it's actually, you know, an additional strain on a great company? >> yeah, you know, those are some stretch goals, jim. two things that we heard from our investors. we kept in close contact with our investors throughout this past year. in fact, we just came from a couple weeks of meeting with all of our largest investors. two things we heard over and over again is they didn't really have visibility into the trends, either the sales trends or the margin trends. the other thing they asked is what is the earnings power? what is the margin and the earnings power based on this sales level? most people expect we'll recover
3:38 am
more, you know, when, over what time frame. but we got this question about how can you give us better visibility? and what is the earnings potential in both margin and then in eps, you know, terms, at these current sales levels. so we put together an internal plan, and we decided that we felt confident enough that we can put a stake in the ground in terms of what we think we can do from a sales standpoint. basically the sales projection we put for next year, whic continuation of the recovery. and the recovery is happening at about a 1% per month range. we wish it was faster. but if we keep it on that range, we think we can hit that sales pattern, and we think, you know, we haven't really focused on driving efficiencies in the restaurant this year. we've been focused on recovering and then delighting customers. the last thing we wanted to do was try to overmanage our food costs, overmanage our labor costs such that we would deliver a less than great experience. now it's time for us to start to regain some of those efficiencies in those line
3:39 am
we think we can do a better job in terms of negotiating our contracts and how we buy things like gloves and paper and things like that that don't affect the customer experience. we think with all that together, with our company rallied around driving those initiatives, we think we can deliver on the 20% margin and the $10 eps. they're not going to be easy targets but we owed it to our shareholders to put something out there in terms of what we can deliver. >> one thing i'm concerned about is i love -- look, we've been eating chipotle the whole way. >> thank you. glad to hear it. >> i always love the fact that you guys are focused on trying to get the best tasting food and having it fresh. but now you got some rowdy shareholders. you've had to hire a banker. i mean these are the distractions that i don't want to see my chipotle have. are you able to get past them? are these rowdy shareholders okay, or do they want you to refranchise or do some financial
3:40 am
>> again, we've been in close contact with all of our shareholders, including we've had productive dialogue with the pershing group as well. everybody is on the same page in terms of wanting to restore chipotle to our previous greatness. what that means is recovering customers, recovering sales, and then recovering our industry-leading economic model. that's true with the investors that have been with us for a long time, some newcomers who have come on and bought our stock at these low prices, including pershing as well. pershing has talked about driving long-term shareholder value, talks about recovering the business model. from what they've said so far, they believe that chipotle is a special brand, and we're going through a tough time right now. and, you know, they want, just like everyone else, to see us recover our sales, recover our business. if we do that, we're going to get back to our previous stock price and add shareholder value from there. all of our shareholders are
3:41 am
recovery has happened, and i'm happy to hear you say it's more likely to take 18 months. but, you know, all of us wish, including us, wish that this was further along. but all of us are on the same page in terms of let's get the recovery under way, and if we do, that the stock will take care of itself. >> we had greg creed on, i usually don't like to talk about taco bell in the same breath. it's a different industry. but they're taking out some of the preservatives. they're trying to get more fresh, natural, organic. jack in the box, you know, has done a little bit better. do you have to worry about competitors you had left in the dust because of this difficult time? >> no. in fact, we love the fact that other restaurant companies are looking to sustain -- to buy more sustainably raised ingredients, more natural ingredients and remove some of the artificial ingredients out of their food. we feel like we've been a pioneer in that. we think the more customers are aware of what's in their food, the more they're aware of how
3:42 am
how they're cooked, the more discerning they're going to be. the most discerning customers, the more they learn, we think they're going to come to chipotle. we applaud the fact more and more customers are trying to follow our lead. >> do i have to worry at all the buyback has tapered off a bit here? >> the way i would think about the buyback, jim, is we used our balance sheet when the stock really inflected and pushed down after the events of last year. we used our strong balance sheet and brought about a billion dollars worth of stock from our balance sheet. now we're using operating cash flow. state from our margins and earnings standpoint, we're still able to fund all of our openings with internal capital and then have excess capital to buy our stock back. so we're buying more based on operating capital right now. we'll be able to, as we restore the mod and restore our margins, we'll have even greater excess free cash flow and be able to buy at an accelerated rate as well. we'll continue to buy back stock, but it's going to be more based on excess operating cash flow. >> excellent. i want to thank you. you guys never hid.
3:43 am
to talk about it. you've been very straightforward with our viewers, and you know we think chipotle mexican grill will come back. thank you so much, jack hartung, cfo of chipotle. good to see you, sir. >> thank you, jim. >> it is bottoming. but remember the time frame. we've traced it out many, many times. it is not ready to take off yet in my opinion. but, boy, it's good. "mad money" is back after the break. from the first moment you met ch and all you wanted to do was surround them in comfort and protection that's why only pampers swaddlers is the #1 choice of hospitals to wrap your baby in blanket-like softness and premium protection mom: ?oh hi baby? so all they feel is love
3:44 am
(achoo!) you can pick up the flu from surfaces for up to 48 hours. it's like having a sick family member in your home. but lysol kills 99.9% of germs including 8 cold and flu viruses. to help protect your home
3:45 am
3:46 am
>> it is time! it is time for the lightning round! that's where i take your calls rapid fire.
3:47 am
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." let's start with sam in north carolina, sam. >> caller: booyah, jim! >> booyah. >> caller: what about exr? when do i get in? >> no, no. rates are going higher. that's that whole point about what happened today with the ten-year bond. so, no. we're going to stay away from that stock until we get a bit of higher yield by having the stock go lower. madge, in maryland, madge. >> caller: hey, jim. love your show. >> thank you. >> as baby boomers age, there's a growing need for health care in real estate includied living facilities. i wanted to know what your advice is for investing in health care -- >> right now i'm a little down on medical buildings. there's some weakness in the sector. we're going to stay away. just don't need that risk to pick up a little bit of extra vig. let's go to john in california, john. >> caller: hey, booyah, jim. we love you here in northern california. your san francisco show was great. >> i can't wait to get back out. i'm trying to get my second producer to check off on my next
3:48 am
>> caller: there you go. my question, jim, my ceo of the company i'm going to ask about was pretty supportive of hillary, and she lost. berkshire-b, warren buffett, what do you think the outcome is going to be with some of these people that didn't support trump? >> absolutely nothing. in the end, i don't know how magnanimous he'll be, but i know warren buffett knows how to make money. he makes money in any kind of situation and he's also a great american. let's go to nick in california, nick. >> caller: hey, jim. >> booyah. >> caller: costamare, buy or sell? >> oh, no, man. that's a container ship play. we don't like the container ships. that, ladies and gentlemen, is the conclusion of the lightning round! [ buzzer ] >> announcer: the lightning round is sponsored by td ameritrade. whoa, this is awful, try it. oh no, that looks gross what is that? you gotta try it, it's terrible.
3:49 am
no thank you, i have a very sensitive palate. just try it! guys, i think we should hurry up. if you taste something bad, you want someone else to try it. it's what you do. i can't get the taste out of my mouth! if you want to save fifteen percent or more on car insurance, you switch to geico. it's what you do. shhh! dog, dog, dog. (coughs) cough doesn't sound so good. take mucinex dm. i'll text you in 4 hours when your cough returns. one pill lasts 12 hours, so... looks like i'm good all night! some cough medicines only last 4 hours. but just one mucinex lasts 12 hours. let's end this. going to the skate park today? maybe... you can make it gr-r-reat! ??
3:50 am
they're gr-r-reat! ve been on i'm bushed! my feel alyea me too. excuse me...coming through! ride the gel wave of comfort with dr. scholls massaging gel insoles. they're proven to give you comfort. which helps you feel more energized ...all day long. i want what he has. for months i've been telling you that even with the price of crude fluctuating in the 40s, i like oil companies that are selling their own stock in order to spark acquisitions in some of the most lucrative places to drill in america.
3:51 am
joins that club. it's a small $2.4 billion independent exploration company with operations in the permian, delaware basin there, the utica shale in ohio, and in colorado too. the company is one of the lowest cost producers in the country, all right? in late october we learned it was buying 15,000 acres in the eagleford shale from sanchez energy. needed the money, those guys. $181 million in cash. in order to pay for the deal, the company priced a secondary offering at $37.50 the next day. carrizo reported a solid quarter. after today's rally, shares are nearly back up to where they were. i think this is the right strategy. can carrizo continue to rally? let's take a closer look with chip johnson, the president and ceo of carrizo oil and gas. mr. johnson, welcome back to "mad money." >> glad to be here. thank you, jim. >> chip, just got to ask the obvious question first because a lot of people who feel who's in the white house does matter for
3:52 am
a very long time. i think what matters to your business is how smart you guys are, your ingenuity, your low cost, and your findings. i don't know whether it matters who's present. would you agree? >> your 90% right. it never hurts to have rules and regulations go away that just slow us down. you know, i think the republicans are always going to be a little more business friendly than the democrats, so that could work out to our advantage. maybe some of these pipelines will get built that will reduce railff >> and it does seem like that the pipelines are very necessary. i saw some of the pipeline stocks up. i don't think people realize that we still have oil and gas in the wrong places versus where we need to send it. >> that's exactly right. you've got oil in north dakota, and it's a long way to refineries. it's a long way to get it there by rail. >> let's talk about the strategy that you did because this is what i've been urging companies to do, and you do it. i know you didn't need my help to tell you. you bought some really great
3:53 am
was a lot higher, and then you issued stocks. kept it so that your balance sheet is pretty pristine, and you can do another. how are you feeling about that trade now that you've been into it for a while? >> we're very happy with it. we bought acreage that adjoined our leases, so it makes it easy for us to drill longer wells across the lease lines. it made some of our acreage that was undrillable now drillable. we feel like we bought the acreage based on one layer of eagleford drilling and there might be two or three. we've been working on deals like this for a year and finally got one to go. >> chip, i think that people think that oil companies are all created equal. when you look at your deck, at your slides, it's really clear you have much lower finding costs. so when you take a sanchez property, are you able to put those same service costs to work there to make it so that you can get oil out of the ground much cheaper than everybody else? >> i hope we can.
3:54 am
we have the lowest break-even cost in north america of every company, at least in 2015. hopefully we can apply that. sanchez did a good job keeping their drilling costs down, but these properties were scattered for them, and they are core for us, and they're right next to our properties. so we can bring the operating costs down too by just scaling up their assets. >> a lot of companies were just kind of growing for the sake of growing with whatever the price is, $40, $39, i thought it was at one of your conferences you're not going to leave money on the table. that you'll grow when it's right. you think that oil can go higher because you've got a really good debt situation. that's when you'll choose to grow. that's still your strategy, right? >> that's still it. by doing this equity deal to pay for this acquisition, it was accretive, and it also delevered us somewhat. so now our year end debt will be probably somewhere around three, which should put us better than the median in our group. we've announced we're going to
3:55 am
we don't have to yet. the wells we're drilling right now would make almost a 50% rate of return at these prices. we feel like by the end of '17, the world's supply and demand is going to be in equilibrium. at that point, oil prices are going to start up. we know right now service costs are very low. we'd like to tap into that, drill and frack now while we're at the lowest service cost we may ever see, and then produce into that rising oil price next year. >> when i read through your notes, i did feel you had the chip. you seem to indicate it's possible that you hedged too much of your upside for next year because you really do believe in 2017 as a comeback year. >> that's exactly right. we've hedged strongly in the first half of '17, but we've tapered that off in the second half of '17. we don't want to have oil prices ramp up too fast and leave us locked in at lower prices while service costs are also going up. >> i want to circle back because it is election day. you mentioned there are some regulations that have stood in
3:56 am
carrizo, pretty straightforward company. what were some of the things that were being placed in your way or you feared that now maybe have a chance of not occurring? >> you know, actually for carrizo, there's not much. we're basically in states where we don't have much federal acreage and not a lot of federal oversight. we mostly work with the states. it was nice to see in colorado, though, that the raise the bar initiative passed that makes it harder to put ballot initiatives on the ballot every year to try to restrict drilling. statewide interest in having that be on the ballot before it can happen. that will help us up there. >> i'm going to congratulate you. never ruined your balance sheet, never pumped when you didn't have to. chip johnson, president and ceo of carrizo oil and gas. great to see you, sir. >> thanks, jim. >> chip's serious, knows how to run an oil company. i like that. stick with cramer. credit score?"e you chr
3:57 am
"hey!" "hey!" "ahhhh." "charades?" "yeah, let me check my score too." "try credit karma. it's free." "check out credit karma today." "credit karma. give yourself some credit." i had frequent heartburn, doctor recommended prilosec otc 7 years ago, 5 years ago, last week. just 1 pill each morning. 24 hours and zero heartburn, it's been the number 1 doctor recommended brand for 10 straight years, and it's still recommended today.
3:58 am
3:59 am
4:00 am
i like to say there's always a bull market somewhere. i promise to try and find it just for you right here on "mad money." m jim cramer. . >> overnight, thousands of demonstrators take to the streets in cities acrossme nation's 45th president. >> bitter rivals come together as they come face-to-face at the white house today, all to plan the transition of power. >> setting the agenda, trump will meet with a speaker as the enemies try to turn the page of working together. plus the trump decision has some working the separate the


info Stream Only

Uploaded by TV Archive on