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My mission is simple. Make money for you . -America. I'm Bill Friends. I'm , but also to explain the point. So , call me at 1800743 CBC or tweet at Jim Cramer. I've said it before. I'll say it again. You need companies that make things and operate at a profit, and then return some of that profit to you, the shareholders, with shares that sell at a reasonable valuation.
You may think that's too narrow a criterion, but on days like today, you can save yourself a lot of disappointment, and I mean that kind of disappointment, by sticking to what works. Today we saw the dangers of violating these new rules: the Dow rose 250 points, the S&P barely fell 0.06%, which is a kind of balance, and the NASDAQ, where a bunch of unprofitable companies with expensive stocks are, fell 1.22%.
First, we have the fiasco of the year today — Netflix, which reported a shockingly bad quarter with a net loss of 200,000 subscribers, while analysts were expecting a gain of 2.5 million. We will discuss this many times. Take this into account. Netflix itself made mistakes. They couldn't monetize 100 million users who are essentially borrowing the service from friends or relatives.
They ignored the competition. They are concerned about technology. Huge production costs, market saturation. But ultimately, Netflix is a stock valued based on subscriber numbers, not revenue. While they were bringing in new people, Wall Street was happy to ignore the real price of the stock. Once the attraction mechanism failed, Netflix became just another stock that didn't fit into the new market mantra.
We have no idea how much to pay for a company with no growth that is now being sold at an unreasonable price. Worse still, we may have to classify it as a company that benefited from the pandemic. Oh my God. Is this another Peloton? Just don't say it's DocuSign. Maybe it's Zoom? Yes, that's how stocks with huge capitalization lose 35% of their value in a day.
Well , more about that later. However, let's immediately compare this to the stock we bought for our portfolio today in response to the events with Netflix—Walt Disney. Since Disney has its own streaming service, it was perceived as a pathetic companion to Netflix. So the stock fell 5.5%, to a 52-week low, by the way .
We know that Disney spends a lot of money on content, but we also know that the stock isn't too expensive because the current streaming costs are temporary. However , unlike Netflix with its occasional hits, Disney has a huge, profitable theme park complex and a stable of cult franchises that can be developed forever.
Netflix is just a building. Disney is a theme park, a brand park with incredible intellectual property that can be used for any attraction. As for Netflix, let's put it this way : I refuse to take the Squidward Tentacles roller coaster . I know ESPN is considered a dying breed, but I would call the ESPN Plus streaming service a must-have, especially if you play fantasy football like I do.
In short, Disney should not be put in the same category as Netflix. The stock has actually returned to the level it was at before the launch of Disney Plus. So, you get a streaming service almost for free. Perhaps it was appropriate to punish Disney for spending $71 billion to buy Fox, which was a significant overpayment.
But that's in the past. This is not the fault of the current leadership. I know CEO Bob Chapek was in a tough spot, but I'm giving him a chance. I am sure that from now on he will create added value. And at these prices, I'm telling you, I think Disney will work. That's why I bought some more for the Charle Trust.
By the way, do you know what my plan is? I continue to buy during the dip. Sometimes stocks of good companies fall. I will buy. And there are also companies like Proctor and Gamble. Today, the consumer goods titan reported numbers that were instantly criticized for an explosive increase in raw material costs of more than 2.5 billion in a single quarter.
Oh, of course. This is worrying. Undoubtedly. But because Proctor has some of the best brands in the world, they were able to easily pass on this price increase to customers. Proctor is a classic action for the present moment. They make goods at a profit, being one of the leaders in capital return with stocks that are quite reasonably valued, given their “dividend aristocrat” status.
The fact that Proctor shares sold out in the first half hour of trading shows once again that many traders simply don't understand what works and what doesn't in these new conditions. I should tattoo this on their foreheads. They assume that a company with a significant increase in raw material costs is a company with low margins and less ability to return capital, which suddenly becomes too expensive.
Procter simply doesn't fit into this scheme. They can pass on their costs to the consumer. So, no problem. That's why the shares rose by 2.7%. The same goes for Johnson&Johnson. Yesterday morning, the company reported a quarter that was almost in line with expectations, with the exception of its previously troubled medtech division, which performed excellently .
J&J told us that once COVID is over, people will go back to having elective surgeries and sales of their medical devices will increase. That's exactly what happened. J&J's medical technology sales have actually skyrocketed. It was growth that exceeded my expectations fourfold. However, the shares almost immediately began to fall.
By the time the CFO appeared on Squawk Box, the stock had fallen six dollars. But what is J& J? This is the best blue chip with the strongest balance sheet in America, which impresses with dividends and share buybacks. This is a company that is splitting into three businesses to expose value, with the medtech division suddenly taking off.
J&J was an incredible buy during that pullback because you already knew that the once weak stock was now in great shape . Of course, the stock eventually rose 12 points from those lows. God, you can make a lot of money in a day from stupid people. And, of course, like Proctor, J&J is a true dividend aristocrat.
They are dependent on returning money to their shareholders. I'll give you another example, because you know that the universe is much bigger than people think. Morgan Stanley. Here is a company that serves wealthy individuals and businesses. Its shares are selling at 12 times earnings, meaning they are inexpensive.
It is buying back its own shares. It pays over 3% return. What more could you want? Morgan Stanley is the bank that probably performed the best, along with perhaps Bank of America. These were two leaders. They have a great CEO , James Gorman. And yet I see stock prices shrinking even as the Fed raises rates—something that instantly makes their business more profitable.
Morgan Stanley shares have fallen nearly 8% for the year. That's almost $20 below the high. This doesn't make any sense. We bought some last week for our fund. I plan to buy more. OK. There is one stock, only one in the entire universe that I follow, that doesn't fit this logic—and that's Tesla. She is really expensive.
She doesn't give cash back. But it reported another stellar quarter again tonight, and its strength, along with that of its brilliant and persistent CEO Elon Musk, cannot be denied. I say " bravo," Elon, you are the greatest wealth generator in the world. You are, as they say, sui generis, so go and get on Twitter, okay?
The bottom line is that as someone who prefers to stay in the market, I encourage you to consider companies that fit this model. This is a bull model, okay, while avoiding almost everything else, except maybe Tesla, because they will just make your life unbearable. It's not a complicated recipe, but it works while we're going through an aggressive Fed tightening cycle.
I'd like to go to Dan from Connecticut, please. Dan, Hi Jim, how are you? I'm fine, Dan . And you? Oh, I'm living a dream. I live a dream. What do you think of Royal Caribbean as COVID fears subside and summer is just around the corner? Well, I have to say, I'm still a fan of Norwegian Cruise Lines.
Frank Del Rio does a great job, and at $22, I think it's a bargain in the bunch. Let's move on to Mark from Iowa. Mark. From the founding family. Good health and "buiya". Jim, thank you. "Buiya" in response. When the stock price falls , dividends can follow. Dividends could also decline. I would like to hear your opinion on the reliability of the dividends of one particularly unfortunate club stock.
It does n't look like it will return to its previous highs anytime soon. Is it still worth holding AEO for its safe dividends of over 4%? Okay, American Eagle, we had ...look, we had...I don't want to say it was a good choice. That was not true. Okay. I think Matthew Boss spoke the other day, he's a retail guru from JP Morgan, and he said that he thought things would be fine.
The balance is good. The promotion is too cheap. Sorry. And that's why we bought some today. Now, I repeat again, we haven't done a very good job with AEO, but I don't want to give it up. I think that's fair . How about Harriet from Florida? Harriet. Hello, Jim. Jim, I'd like to know your forecast for Salesforce.
Can it regain some of its, you know, former shine, or is the current price—is that where it should be? Well, I'll tell you. Sorry . This is a difficult question because we've loved it since it was $8. We have owned it in trust for eternity. We shortened it a little. It fell again. It's tempting, but we want to see the quarterly report.
So, does this sound like full support? No. We have owned this for a long time . We continue to move forward . How do you like that? We like Benioff. We like co- CEO Brett Taylor. And we're just ready to continue on this path, because we're doing it with eight dollars. That's when we first got laid and we loved it.
OK. Please find companies that meet these characteristics. Good. It's simply a plan that works while we go through an aggressive cycle of Fed policy tightening. Boring, mundane work. We made money tonight. We mentioned Netflix. Today he was not at all calm. I'll look into what today's sharp drop could mean for the streaming service's future.
Then all eyes are on inflation. But where is it going? I'll analyze the graphs to find out. And Halliburton was dragged down today after its earnings report. But could this be just due to market fluctuations in the oilfield services industry? Or are there problems with the company itself? I will express my opinion.
. Do you have any questions? Write to Kramer with the tag # . This is Shepard Smith. Thank you for watching CNBC on YouTube.
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