文字起こし　American Electric Power CEO, Papa John’s CEO & XPO Logistics CEO. 05/09/22

ジムクレイマーのMAD MONEYの文字起こしになります。米国株を英語学習を通じて投資したい方に向けて作りました。皆さんの反応を見て改善点や英語解説などい追加して行けたらと思います。とても有益な番組なのにジムの英語が難しくて悩んたのをきっかけにこのノートを作成しました。 聞き取れない部分もあるのでご了承ください。是非Podcastを聴きながら合わせてこのnoteをみれば、様々なアメリカ英語を聞くことでリスニング力を鍛えることが出来ると同時に、タイムリーな米国株投資情報を得ることができます。イイネ！と思った方は投げ銭いただけると嬉しいです

Hey on Cramer Welcome to Mad Money. Welcome to Kramer Erykah Badu on my friends. I'm just trying to save you some money. My job is not just to entertain but to educate teach you about markets like this. So call me one 807 43 CNBC or tweet me at Jim Cramer. When all else fails, all else fails. I say we're seeing a wholesale reevaluation which stocks are still worth owning. And the list seems to get shorter every day, including this one. Dow plunges 654 point s&p plummet smear 3.2%. And then as that what can I say? nosedive 4.29%, let's get into this. Let's figure out what the heck's going on turnover by losing money. Even the beloved Royals today have to understand this. Even the beloved Royals today say You know what?

1:39
Anything is vulnerable here. This was the last bastion of safety. Now, this is going to sound very counterintuitive. But you know what I'm going to tell you why you might want to be contrarian here, see when they take out the last of the leaders and shoot them in this case the oil gas stocks, that usually means we're much closer to them than the top. This sell off people started in November is that the people in the morning meeting at 1020. Today for the investment club that people don't even know it started in November, when I'm wanting you to dump the conceptual stocks, the intangible stocks and circle the wagons around coverage with real products real earnings, real dividends and real cheap valuations that return capital out with the growth at all costs in with growth at a reasonable price. And that is the denouement of what's happening right now bought cancerous growth at a reasonable price. It's hard. Look at longtime Kramer fav Nvidia. Now here's the best we chipmaker the scoring earnings at a 70% plus clip, and his stock now trades at 30 times. That's classic cheap. While Nvidia is cheap relative to its peers. But how about this? I believe its peers keep falling. So what I love this company, I wish I can tell you all about how it's great term Long Term versus we sold stock a lot higher, how much do I want to buy it back. But I hear too many underperforming money managers making the same argument I just gave you my emoji of the dark days of 2000. During the.com collapse, people with big fortunes in the late 90s got crushed, yet many of them kept doubling down until investors demanded their money back I'm very proud that I did a piece the third week of March for the old street.com and I worked at Westwood, you gotta you have to start selling these. And I feel that way if you have the soul. So let me get we're gonna go over some names that you can still sell. Which brings me to what's really going on behind the scenes. Right now we're seeing a lot of what I call for selling by distressed hedge funds by mutual funds and by individuals. And that is often a great buying opportunity. Not instantly, but it works. For example, we bought two very resilient s&p 500 days for the job of just today small positions, because we explained it in our investing clipboards it just gotten too cheap to door, we'll take some pain. Let me put this in the right context. At the moment, we've got several different groups of sellers, you need to know who they are. The first will these are the remaining people who want to hide and these deposits are three year treasuries. I know long term bonds don't reward you enough. But the three year it's almost 3.2%. That's risk free. That's a bargain. You get your money back soon make it much safer than owning a stock with a 3% yield that simply go much lower. I can't find fault with that group of sellers. They've lost so much money. Oh, who can blame them for wanting to park the money and medium term treasuries? I'll take that piece of paper a day of the week. These people are most certainly not coming back, though. They're licking their wounds. And those wounds are too fresh. They're like the people who lost them 2000 Goodbye. But the second group of sellers is different. They're being forced to sell by margin clerks by their investors. I'm talking about hedge funds that got redemption letters from their investors the end of April. They're now desperately selling stocks in order to return the money. This group also includes money managers borrowed money using richly valued growth stocks as collateral, as the ones I told you about right that wants to get went out in November. As those stocks go down, they need to put more and more capital, they just don't have it, which forces them to sell anything that isn't nailed down. Because it's not likely they can easily find new investors. Nobody wants to put the money in a poorly performing fund go read Confessions of a street addict. When I had all my problems is where there was just mass redemptions, I had to come back. You can but you got to do it shrinking. We've seen these kinds of force sales also in the financial crisis and again in 2011 There's a brutal analogies. I think this moments beginning to look a lot like 2001 When our stock market got crushed by the European financial crisis and it went down 19.9% The highly leveraged hedge funds became roadkill back then but you could have cleaned them up if you you couldn't you could have cleaned them up but if you bought what they were selling, but we don't know what they're selling through a group of sellers, mutual funds and hedge funds, it should be can't find a reason to buy a lot of stocks because they've lost so much money. I went over the top 10 losers from the Russell 1000 this weekend. I wouldn't touch any of them even down tremendously, because they should never been where they were to begin with nearly 80% of the Russell 1000s down for the year 43% of the components dumped 20% or more. Don't even get me started on the heinous actions CMC Postback index you should look at this stuff as 147 components 136 of them are down. That's extraordinary. Then just today, we saw horrendous losses in the NASDAQ 100 Listen to this bottom. 10 rows countered Mikado libre down 16% okDo 30% Splunk down 12% CrowdStrike slumps twelvers Airbnb typical down 12% The Palantir down 21% Or after the close good RX AppStore. I told you to avoid these companies good RX is down 36% of trust them 42% And they made the numbers of a soft forecast. That's just a small percentage that corners out you're DraftKings down another 16% On top of last week's dive. And then good luck, very reminiscent of the.com collapse when stocks would fall from high levels who realized there was no floor. You can't speculate these newly public companies people many of them came public with the goal of selling more stock down the road in order to raise capital over the market so low we'll never get the chance. One of the few former high fliers that was able to raise money before the window closed. Carvana is a disaster. They sold 15 point 6 million shares at $80. That was three weeks ago. Now it's 38. The CEO and his father bought roughly a third of the deal and they're being crushed. When you add up all the money Carvana raised the company should be able to survive. Even in the face of newly difficult used car markets used cars are plummeting. Still, this was a $300 stock in November when the rules changed at 300 goes to 38 bonds getting crushed credit worries are back. I'm not trying to be matter of fact about Carvanha itself was more or less for sell this week and insiders sold shares in Rivia. The electric play that peaked at the 170s list of ever that dropped to 30. The Insiders just sold a buck 22 million shares at $26.90. Special weekend close you got it on Sunday morning. I'd never seen that. That includes four by the way was dumped 8 million shares to raise money for electric initiatives. Good call today we've been lost 20% on site went down to 22 and change. This is one of the premier electric vehicles vehicle stocks with 10 of orders from amazon for pretty much whatever they could make. But nowadays, nobody cares about theoretical orders ribbing delivered just 1227 vehicles the first quarter, not enough to do the job for selling but companies or by the shareholders doesn't come to an easy end. But I think you've got to view this as a blessing not a curse. If you have cash. These four sellers put pressure on the whole market so you can take advantage of them to get some terrific bargains. No my old mentor David Tepper, really one of the best hedge fund managers ever always talks to me about how you can get to your preferred levels much faster thanks to these sellers, because they are creating great values. He reminded me of that just today which leads me to the last group of four sellers individuals hopefully not you who bought highly speculative assets that have plummeted beyond all recognition so they had no choice to sell. They spent the money that the government gave them on their stocks got crushed he threw in the towel These people are your real enemy if you want to buy these high concept stocks I said he had to sell back in November without buybacks or mergers and I don't see any these beaten down stocks or continue roadkill with any sign of even a state trooper pulling the carcass off the highway by the way the same speculators are now vicious sellers of all things crypto so that's white in there with the rest of them Kryptos become kryptonite and the cup is the border on margin are being destroyed now you can't touch them either. So why even bother stick around on not advocating staying in the market so much as I want you to take some losses and swap into better stocks who can spring back because the losses are just collateral damage. Good balance sheets are the ones I say you know they can make things send you back money. I think that that you're going to get a chance to buy them right now if you sell some bad to fund the good bottom line. I say put some cash work now on the tangible growth at a reasonable price stocks like we did today for the Investing Club. As for the former high fliers, if you still own them, I recommend selling them on a snapback and upgrading your portfolio into something that works in this difficult moment. I am sure that's how you and I will come out okay, so we can live to play again. in better times. That's all we can ask for all's well that ends Eric in Tennessee Eric.

9:26
Hi Jim. Thanks for taking my call.

9:28
Oh sure. I pets going on.

9:31
Not much air calling from Clinton, Tennessee just outside beautiful Knoxville.

9:34
Beautiful in there. I love it.

9:37
Thank you my beautiful My question for you is regarding the stock United rentals ticker URI. I currently own a position and was considering adding to it with a P E of a little over 13 a price to sales of two and a price to book at 3.4. It looks fairly attractive. However, the stock has been in a sideways trading pattern since early December and it's getting closer to hitting its 52 week low. Should I buy hold or sell Europeans,

10:00
I still think it's too high. Man. I spent a lot of time analyzing XPO logistics for a guest later today. And there I can tell you with a no uncertain terms, that's a much cheaper stock than URI. And I know that Brad Jacobs and CEO knows both companies. Well, I prefer to see you in that and this one. Let's go to Vincent, New York, Vincent.

10:19
Hey, Jim like to talk about Costco. The stock peaked at $612 per share two questions what needs to be done or happened for the board of directors to split the stock? Today, Costco was down to $498.83 per share with an annual dividend rate of $3.60 per share. On the other hand, Home Depot close today at $297.03 with an annual dividend rate of $7.60 per share, right should I move my money out of Costco and buy Home Depot

10:54
I haven't liked Home Depot very much I like Lowe's too. But you know, Costco has been one of the biggest winners we've ever had for a charitable trust and I've got to tell you, I'm not backing away from it. I actually talked with Jeff Mark today about how it's come down so much might want to buy it they had the power to a special dividend they're not as much and shouldn't have started as a split as they are just making a lot of money for you. That's a great company I'd be buyer of it but in stages because these very high dollar stocks are being hit very hard by people who are panic and we don't want to take the panic errs out of their prices. We want to wait till they're done and then we buy alright so here what we're gonna do I'm gonna say it again just like I said November, December, January, February, March, April Now may I want you to put cash to work in tangible growth at a reasonable price stocks. We emphasize this over and over again as for the former high fliers, I recommend selling them on a snapback move and swapping to something more appropriate for you for this market. Remember anytime you want appropriate How about AP I know boring utility but what a year, then after hitting a 52 week low can investors start nibbling on Papa John's a very reasonably priced asset? And I'm learning more from the company's top risk. Oh, yes. And of course XPO logistics I mentioned that instead of URI as a new focus as the world continues to emerge from COVID-19. I'm hearing about the company's plans from a proven modern money making CEO. I'm urging you to stay with Kramer.

12:16
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13:17
In a brutal market, and I mean I'm being nice by coin brutal, where everyone's bracing for a Fed mandated recession or whatever the heck is going on. You know what works. Consistent businesses, good dividends like utilities, I always tell you this, Take Kramer fav American Electric Power, which I just back every single time someone calls on lightning round. This is the Columbus based company that is the nation's number one electricity transmission system. And it's a big power generation assets, including lots of wind and solar. AP jumped nearly 1%. Today it's up 12% year during a period where the s&p is now down when the 16% As I said at the top of the show. Plus mark like Japan reported a nice earnings beat two weeks ago. And while the stock initially bounced the news it says pull back on the rest of the market to the power. I think you're getting that fantastic quarter for free where they raise guidance. Does it hurt that the stock supports that 3.1% dividend yield? I think you're getting a pretty nice buying opportunity here. Please don't take it from me. Let's check up and dig Aikens. He's the longtime chairman, CEO of Berkshire power, he had better sense of where his company's headed Australia's Welcome back to man money.

14:12
Hey, great to be with you again, Jim.

14:14
Well make your site for Suraj you've done everything that you said you would do and more and what I want to reintroduce the younger people, because they might not realize it. But uh, here's an old fashioned transmission company that is building the largest windmill facility in the country. And I think you should just tell that story because a lot of people say, Oh, I don't want to do those guys. They have coal. If anything, you're the leader of wind in this country.

14:37
Yeah, I think a huge part of it is the transition that's occurring toward a clean energy economy in this nation. And we're moving from fossil generation to renewables. And certainly when you add that kind of renewables, it's the largest single site facility in North America. And that completes our North Central project. That's what we call it, and it's providing over three be billion of savings to customers in that area for the next 30 years. So it's a great, great opportunity. And when you put these resources together in that fashion, it works out great for customers. I

15:11
think people need to know Nick son, Sundance, Maverick and Travers together can be they can be pretty amazed for a lot of homes. Right? This is not a small project.

15:22
Oh, that's right. It deals supply 440,000 homes. I mean, it's a it's a huge project. So for that to occur, and that matter of fact, that's about 1500 megawatts of generation, we still have another we're doing over 16,000 megawatts by 2030. So it's just a small part of what's yet to come.

15:43
And it's definitely needed. There was an article this weekend, I read that there are a lot of different power companies that are going to be short power, including Texas, you're in Texas, but that's not the case for you, you build a reliable network, did it no one is ever questioning is going to be overpowered by demand.

15:59
Yeah, I think the issue is we really need to think about the capacity that's needed to provide demand for customers when they need it. Right. And that's one of the things we have to balance out is bringing in the renewables, but also ensuring that we have that 24/7 supply to make sure that we're addressing customers needs in the heat of the summer or the cold of winter. So that process will continue for us. And certainly with Ukraine situation. And what's happened with energy policy as it relates to that, we really need to be mindful of that transition.

16:28
I'm glad you said that, because there's an element that seemed thoughtful at the time when Germany was doing to try to become far more organic in their in their in non-carbon. But it ended up being more dependent on carbon than anyone in the world and they could be in a depression. If Gazprom shuts down for them, we can never allow ourselves to be in that kind of situation.

16:50
Yeah, that's right. Yeah. So that's why we have a balanced portfolio that includes everything. Because when you have these kinds of situations, it's important for us to continue that movement to a clean energy economy, but at the same time, address that transition in a way that mitigates the impacts to our customers. And actually nations are seeing that as they have to deal with the geopolitical issues related to Russia, there's no question that this whole world is going to have to respond.

17:18
But it to me at the same time rather amazingly, you build a network that can handle the incredible remote from work demand that you know, this idea that you know, or go to Central Office turned out to need a lot of power.

17:30
Oh, absolutely. And we're seeing considerable growth, we continue to see it. Matter of fact, there are industrials moved up almost 6% This last quarter. And it really is when you look at the economic development platform that exists you're seeing on shoring occur, you're seeing more resilient supplies, we actually have the Intel facility is located in our territory as well, from a chip manufacturing standpoint. So you see these kinds of movements occurring that benefits these parts of the country that provide a lot of manufacturing support through the infrastructure that we provide.

18:05
Well, I was talking to Gina gilgen, executives before. And she said, we got to talk about how somehow Ohio became sexy, that the companies that a lot of these companies from the Silicon Valley area, definitely want to get to footprint lower. And the way to lower the footprint is to go into APS territory, that's actually happening, isn't it?

18:24
Yeah, we see that consistently. Matter of fact, it's throughout our territories, primarily in Ohio, and Texas, but other parts of our territory as well, because it is energy intensive. And it also has the infrastructure to be able to support those kinds of facilities. So it's really bode well for our territory.

18:42
Now, you're still not back, there's some levels, that we are still below I mean, chemicals doing very well. But primary metals are still below pandemic level, even though that was not going to change you think,

18:54
yeah, that'll change. I mean, actually, primary metals continue to pick up this last quarter, considerably, along with chemical manufacturing, and, and others. So in data centers, and the commercial side, data centers moved up considerably. So you're seeing that kind of development across the board. So that'll continue to occur?

19:12
Well, that's very important, obviously, because what we need is more capacity in order to be able to defeat the inflationary aspects of, of having everything be overrun. And again, I thought that one of them were cheering things I read on the A P. Cole, was it, America is starting to build a little more capacity. So maybe we won't get stuck with inflation forever.

19:29
Oh, that's right. commercial activity is actually ahead of pre pandemic levels. And industrial was only like 1% less than pre pandemic levels. But you look at the economic development pipeline is continuing to come back and then residential is still above like point 8%. But do you think about that kind of level is that people continue to work from home? Well, in certain aspects,

19:54
you're doing a terrific job and the reason why your stock goes up is because you just keep delivering, delivering really proud that we've pulled so many people this is the one to beat because you've been the best Nick you actually have it at tick egg is President Chairman CEO of Merck March, AP. Thank you, Nick for coming on the show as always, that's your thing. Jim, thanks a lot there ways to make money that don't require you to be able to invest in EVs that may or may not work or biotech they may or may not work. This is what we like met bunnies back after the break.

20:24
Coming up is this stock ready to make your dough rise? Papa John's joins Cramer to talk earnings mad money with extra cheese next.

20:43
Bob, when we got the piece of cheese for some of the best stocks in this market these days are now over. Now that people feel safe going out to eat again, they're less likely to order delivery, which means the pizza makers are up against tough year over year comparisons. At the same time. They're dealing with skyrocketing food costs and a labor shortage. But with the pizza stocks down dramatically from their highs from last year. And what plays a bad news already baked in that so I'm trying to figure it about so many different college different companies, which is why I'm so glad to have Papa John's on last Thursday morning. These guys reported a solid quarter not a blow up and he means but much more better than I thought it was gonna be at the same time Papa John's raises two new growth forecasts. They're planning to add six to 8% more stores per year for years to come. If you didn't if you didn't have demand you wouldn't do that. You don't expand unless you polish yet the stocks been hammered along with the rest of the market falling to 14 month low today. So could this be a buying opportunity? Let's dig deeper with Rob Lynch, the President CEO of Papa John's International, get a better read the situation Mr. Lynch, welcome back to Mad Money.

21:42
Again, great to be here.

21:44
Well, I'm glad you're on rod because you know you by your own admission, you're comfortable said, Look, this is the toughest the most difficult operating environment I've ever seen. And yet, you really honestly did miss a beat Rob. I mean, how's that possible?

21:59
Our business is hitting on all cylinders. We've got great comp sales over our biggest quarter in q1 last year, we up 26%. This year, we delivered positive returns 10 straight quarters of industry performance and it's really all testament to the great work our teams are doing. As I mentioned, these, this operating environment is a challenge from a staffing standpoint, from a cost standpoint, from a supply chain standpoint. But our teams have persevered. And we've been able to deliver some great results.

22:27
You have also been as forthcoming as I've seen many CEOs you said on the call that April's already it was a challenging month that things are not getting necessarily better.

22:39
Well, actually April was was was a challenging month, but our staffing situation has gotten progressively better. We're starting to get drivers to come in and take the orders. You know we've had, regardless of what the cops are, our demand is still huge. And you know, it's been a challenge servicing those, those orders. And, you know, we've partnered with the aggregators, we've got great integrated partnerships with DoorDash and Grubhub. And Uber Eats. And that's really helped us mitigate some of the challenges of being short staffed, but we're starting to see staffing improve. We believe that there is light at the end of the tunnel on the commodities front, we do see a cost structure later in the year that is that can help our margins. So we are bullish on the rest of the year, why we got it both for 2022 to have positive comps. And for the long term. We've got a great pipeline of of development where we think we can continue to grow domestically and internationally. Because the unit economics at our restaurants are great right now

23:41
that you want to add all these restaurants in China. Does China really have the kind of appetite for what you want to have planned there?

23:49
Absolutely. We already have 250 restaurants in China. We've been there for quite some time. But we're very underdeveloped relative to our peers, who have you know, many more restaurants, fountain vest, our new partner there is a great franchisee they're well capitalized, they've got a lot of operating experience in that market. And so we're excited to grow with them. And I make note that that 13 150 unit deal is just for South China, we actually believe we can put many more restaurants in in North China. So it's actually going to be a bigger opportunity for us than even that

24:24
what I try to tell people is listen, they're not going to be locked down forever there and you want to get the guy who's gonna expand the most and just Papa John's, there was one month that took my breath away to your CFO was so good said that the there's going to be a 12 to 14% rise in the food basket. Come on 1.4 to 1.6 would have been a huge rise. I mean, this is an extraordinary thing to make it so you can still feed a family of four with a $7 pizza. That is a remarkable achievement.

24:53
Yeah, you know, we haven't seen this level of food inflation in about 40 years, just to contextualize the the array Rate of change that we're seeing. That being said, we've we've really balanced productivity and pricing to be able to mitigate some of that inflation and try to keep our margins relatively where we anticipated they would be. But we're taking a long term view here, you know, we are continuing to bring new customers in. And we want to keep those customers that we've fought so hard over the last two and a half years the game. So we're not taking as much pricing potentially is, is we need to to cover the whole cost. Because we want to make sure that when we come through these challenging times, and we return to a more normalized rate of cost, we'll have those customers, they're with us. And then it'll actually be margin a creative and we'll have kept those customers.

25:40
Let's follow up on that. I think there are a lot of people who are selling your stock, because somehow they feel like people are locked up, they order pizza, and now that people are going out again, they're not ordering pizza, your numbers do not show that they simply do not show that repudiation, you're not a pandemic play.

25:59
Jim, what I can tell you is throughout the pandemic, we gained share by bringing in new customers that we took from other segments in the industry issued frequency did not go up this idea that people were ordering pizza to a much larger extent than they had in the past. Just not the case. We just brought in a lot of customers from other segments. So we feel great about our ability to keep those customers last two weeks ago, we launched epic pepperoni stuffed crust. And that week prior to the launch, we had exclusive opportunity for our loyalty members to come in and order it. We added 150,000 new loyalty members in that one week. So people are still buying pizza, people are still coming to Papa John's win. That's why we've been bullish, and we're guiding positive for the rest of the year. When I

26:49
read your law, you have like 20, almost 25 million members now your loyalty group? Yeah, that's five, well, the origin.

26:59
Absolutely. And we have all of that data, which we are now leveraging to be much more surgical and how we are able to deliver value to our customers. And then in an environment of inflation, where we're seeing, you know, significant consumer sentiment declines. That ability to target our customers and make sure that we're surgically targeting them with discounts versus broad scale discounts, really helps us sustain that p&l.

27:24
And I do want to make one last point, we have some of your new pizza tours going on with my wife. And we were saying innovation doesn't happen. And Pete says, Wait a second, I know you don't get the UNO deep dish that you love when you're going up. But you guys are you guys are inventive, and you're innovative. And these pizzas take off, don't they?

27:43
It's a testament to the creativity of our culture here at Papa John's, you know, that last three years, our teams have found ways to to evolve in an ever changing dynamic environment. And our you know, innovation on the food side is a representation of that this, this epic pepperoni, stuffed crust is probably the best product we've ever launched. You know, I hope you have some there in the studio. And when you when you take a bite into that crust, I don't know if you grew up eating pepperoni rolls like some of us did. But it's like a whole additional thing to experience when you're eating that pizza

28:17
by your tutor, the word not having 100 ingredients. So we don't know about your pizzas. That's what I love about it. It's still the same old, same old, right?

28:24
Well, our innovation has always been grounded in three core principles, right? The customers have to want it, it can't mess up our operations at the restaurant and it can't mess up our supply chain. And you know, we have stayed true to that. And we have focused on that through some really challenging times. And Epic pepperoni is a testament to our ability to leverage everything that's already in the restaurant and make it even more special.

28:47
It matters Bulldog Rob Lynch, President CEO of Papa John's, to me you are not a pandemic play. You're a growth play. You are taking share. You've entered out innovated the rest of your group. And I want to congratulate you on all the big terms that you've made. Great job, sir. Fantastic work. Thank you, Jim.

29:02
Thank you so much.

29:04
Guys. If you think we're going into recession, don't you want someone who makes a dinner for family for for seven bucks. If that's the way you want to go? This works for that. To me, I like both. It's got that too may have monies back into.

29:19
Coming up, Cramer gets logistical with a stock that could take your portfolio through that last mile to profits. Keep on truckin next

29:39
this is what's happening to this market. You're about to hear about a story that is so absurdly cheap and doesn't matter. How much can great earnings matter when your stock is going out of style in the Wall Street Fashion Show. Talking about a terrific company XPO logistics we didn't want to since it came public. The freight transportation company gets in the process of breaking itself up because management feels it's not getting enough credit for the stock mark. We just had GE So they're they're a tremendous logistics business on last week's fantastic. March XPO plans to sell its intermodal operations and its European business, then break the remaining company into two separate entities a truck brokerage outlet and a North American less than truckload transportation. We typically love these breakup stocks. It was fantastic. Right now the markets terrified of a weakening framework, so the stock has been clogged. Tonight though expert reporter Mike Gibson quarter was better than expected results for every major line item. On top of that management raised their full year forecast going by the new guidance, the stock now sells for just nine times earnings, you've got a major catalyst the rise in the form of this impending breakup. Is that enough to get the market excited about a freight stock when the Fed is hitting the brakes on the economy. Let's take a closer look with Brad Jacobs. He's the chairman CEO of SPL, which is a true moneymaker. Find out more about the quarter of what comes next. Mr. Jacobs, welcome back to Mad Money.

30:52
Great to see you, Jim. Brad, I

30:54
have to tell you is rather shattering to see your company sell for nine times earnings with a breakup coming, a massive discount to the market and of course, to your peers. So can you try to explain I know you're taking this action? You don't need to do it. But obviously you think it's time?

31:13
Well, first of all, it's great to be back on the show. I love coming here. You're absolutely right. The first quarter we smashed it, we had beats on revenue. We had beats on EBIT, da EPS free cash flow, were the highest revenue ever in the company, we had the highest first quarter EBIT da, were the highest first quarter EPS, we delivered the balance sheet from 2.7 to 2.0. We're happy to keep delivering, and we raised it guess guidance year by 26%. So really, really great quarter, and the spin will accomplish two things, it will make us make two companies. And they'll both be more focused and fit for purpose. And investors will be able to value them correctly. And as you said in the introduction, I don't think we'll be trading at six times EBIT da and nine times earnings for a very long period of time.

32:05
Are you proud when you first put the company together? I love Europe, the logistics Best in Show. Obviously, the LTL market less than truckload is just you dominated and that turned out to be vital for E commerce. But guess what Wall Street didn't get that this was a great value crater, and they just had to silo your different businesses.

32:26
I don't know, I'm not complaining. For the last decade, we're the seventh best performing stock to the fortune 500. So I'm not complaining. It's pretty good. However, I do think that we're not going to trade at six times EBIT da and nine times earnings for a long period of time, it's certainly not after the spin after the spin my opinion, you're going to have a much larger universe of investors who want to invest in only an LTL acid based company that's levered to the industrial economy, or they want to invest in a tech enabled brokerage services business that's growing at three times, but the markets going at and today you don't have a natural universe of investors who want to invest in an LTL company and a truck brokerage company and a European transportation company. So I think we'll solve that.

33:13
Now. When I look at this this business that you're spinning, which is got the truck brokerage, I mean, Ubers got this business, they have Uber freight, this seems to be a far superior company. And the sense is being used right now by real companies to be able to figure out how to move freight around. It's actually the antidote to higher freight costs, isn't it?

33:32
Well, that's what we do. We are growing because of an outsourcing trend from shippers who raised the white flag during COVID. And said you handled and it's not just us, it's our competitors, too, are taking share through the outsourcing trend. But we're taking share much, much faster than the market we've been outperforming the market quarter after quarter year after year. If you look at the first quarter, we just had Volume Up 23% and truck brokerage revenue up 38%. This is the sixth consecutive quarter, we had volume growth more than 20%. So so we have first mover advantage for technology in episodes. Mario hurricane, I started the whole concept of a digital freight marketplace when I hired Mario in 2011. And that evolved into x to connect the next to connect is when we interact with our customers electronically digitally in the first quarter 74% Nearly three quarters of our loads were either sourced or covered electronically. And here in April in May that's gone even higher.

34:36
Well, let me ask you back because you figure this a lot of this out. Are we still gonna get here about supply chain issues over and over again? Are people going to realize that there are outputs that have figured out you just have to go?

34:49
Well, it depends where you are in supply chain know for us, disruptions are actually a good thing because our services valued that more but from the economy as a whole Oh, it's gonna take a while Jim before the supply chain disruptions are normalized. I just saw a Pat Gelsinger from the CEO of Intel last week saying that he thinks the chip, the shortage is going to go on to 2024. So you got a labor shortage. It's a little less severe than it's been recently, we've seen job applications go up. But it's still tough to get to get jobs to get workers. And you've got part shortages, and you've got material shortages, you got a chip shortage. So these things are gonna take a while to work out. It's not going to happen overnight. But you

35:30
have you're expanding your fleet by buying more tractors, you're doubling production, at your in house trailer manufacturing facility, and you're doing everything you can to try to solve this.

35:40
We are doubling down and growing capacity. In the first phase, the first six years that we owned LTL, Dundas LTL business starting in 2013, we really weren't trying to grow the top line, we weren't trying to take market share, we're trying to sweat the assets and run the business for significant cash. And that we did, we generated over $3 billion of net cash in phase one of LTL. Now in phase two, we're buying tractors, we're producing more trailers in Arkansas, we're adding doors, reading more capacity for cross stock facilities, we're doubling the capacity of our driver's schools. So we're really going to grow the top line over the next several years, we're investing in long term growth that business at the same time going to grow margins.

36:25
One last question, do you think it'd be bought they're listening to Oh, my God going into recession? This guy's coming on, and he's talking about expanding, but isn't the truth that you were you're making so much money doing this, in the economy's a little bit stronger than people realize they need XPO logistics to grow,

36:44
you know, recession, recession, we have a return on capital in our business that's in the 38% range for the whole company and our LTL business, but we're investing more even invest more, our return on capital is even higher, so it's fine to invest in that business, regardless of what's going on in the economy.

37:02
Well, I remember when you bought it in Europe went during the height of the European debt crisis into Trump's be a genius move. So it's not like your timing can ever be questioned Brad Jacob Sherman, CEO of XPO, logistics a continual moneymaker, who's kept every single promise since he started coming on the show a decade ago, Brad, thank you. Great to see in person.

37:20
Thank you. I like that moneymaker. Jim That's a good sign.

37:23
Well, you deserve a bit you deserve it. Anyway. This is the kind of situation we're looking for. A self help situation just like the GSO where money will be made man monies back after the break.

37:38
No need from meteorologist today's forecast calls for thunder and lightning. The lightning round is next.

37:57
Dive and is over the light and then the lightning round is over. Are you ready? Ski deck. Chuck in Indiana Chuck.

38:09
Yeah, Jim. Longtime. Excellent. I'd like your opinion on a stock that has its spinning off one of its unit into a spec and its unit I like it's called like in pharmaceutical LG. And

38:20
you know that thing can run but it can't hide. It's 28 times earnings. We really don't need stuff like that. We've got a lot of great pharmaceuticals that are down much lower than that couldn't j&j Go to Stuart in

38:32
three days. What's up the oil patch. With this energy crisis, I'm looking at Gold lar gol a

38:43
bar and ratio with one that we recently profiled that I think's excellent called accelerate energy symbol E LNG terminal services. It's really good. One of the few public companies that I would actually recommend pop companies that just came public. Let's go to Randall North Carolina Randall

38:59
blue. Yeah. Jim Harrison appreciate you want to thank you for what you do for the retail investors.

39:05
Yes, thank you go in that mentioned calm and go in with all those other nice people who sell such these things. What's Up TV shows,

39:13
like your financial analysis, contrasting the best of class and numerous genres. My question concerns stock Santander.

39:21
Santander of a guy began butene is absolutely terrific. The quarter was not that great. And the problem is the credit worries over Europe. Italy's debt is now 150% of its GDP, even at the height of the 2011 crisis was only 120%. So we got to be very careful about Europe. And that's why that's going down because the rest of their businesses are doing well. Dennis Benson me, Dennis. Hey, Jim. Thanks for taking my call. Of course. Even in the darkest of time, well, you know what, I come to play as I have every day since 79. It's what I do. Let's go to work. But my question for you is about York Community Bank Corp, symbol nycb. Eel in worries that you were Recently, I mean, it's just too high, you shouldn't be able to get that kind of yield. I'm gonna have to say I'm gonna pull on my horns or something like that because even though I know that's an okay bank it that yield is way too big. It gives me the willies. How about that? Let's go to sue in Florida Sue? Oh, yeah, yeah, yeah, he which one? equites man. Oh, that's a good company. That is a very good company. And they have the funding and they do all sorts of they do natural gas transmission, which is a business I absolutely love. You don't have enough natural gas pipes. I'm going to throw in that sample again from last week. That's so good. How about Andy in Kansas, Andy?

40:44
Hey, Jim, thank you, longtime listener. I've got a stock that's backed in a little bit contrarian to what I think the rest of the sector is. And I'm somewhat hesitant to talk to you about it, but it's an American Taiwanese semiconductor. Okay, so look on motion technology.

41:02
Well, they got a bid from Max linear I think that you know, I'm not an arbitrage here. I have to say congratulations. That was very, very good and that ledge of a lightning round.

41:15
The lightning round is sponsored by TD Ameritrade.

41:26
I got a bone to pick with a lot of people. We got to stop blaming the Fed for waiting too long to fight inflation listening. So many things happened. It changed once decades old patterns got thrown out the whole country was upended how that was the Federal Reserve supposed to seal this coming their fat but the fabric vision. Listen, I hated having to come out against Jay Powell when during the press meeting last week, he limit himself to 50 basis point rate hikes wrong. That was wrong to do. First, it was no need to tie your own hands. The second heel mostly you have to break his own advice pledge if you really truly wants to tamp down inflation. He has to move now to shock the system. And by now I mean as soon as humanly possible. Brass Ring over the Papa John's conference call in preparation for today's show, I was struck by the absurdity of what happened just in the first quarter of this year alone. Because of Omicron. Two or more people sheltering in place once again at the very beginning of the year. The incredibly contagious variant of this nature of this variant led the major labor shortage that shattered gross margins, at least for the companies that didn't see it coming but which was most of them. With very few drivers left third party players taking up throw up cost a fortune. Then February comes in totally things like going back to normal so you go full speed ahead. But in March China locks down rushes invades Ukraine can cause a massive shortage both fossil fuels and grains. Suddenly cheap manufacturing supply chains gets stretched prices. Once again, go get bit up gasoline goes our food source. Keep in mind who was already very expensive to begin with, because of weather issues COVID labor shortage higher frequency I could go on and on. On top of all this, you can layer on a layer of the permanent nature of the work from home economy happening this as hundreds of 1000s of companies are now willing to let work decide failing to show up in person when they want to know under every plan made in 2020 and 2021 has pulled me worthless for 2022. But we're only criticizing the Feds plan. When this budget changes at once is not going to lead to less inflation. People keep beating the Fed for its easy money policies. But I think that fundamentally misjudged the situation, this shortage or a supply side problem. They were inevitable. Meanwhile, you could argue that our economy would have collapsed without all the stimulus. Did money stay too cheap too long. Sure. Even Jay knows that. But how could he have known it Omicron would be less dangerous than its predecessors when he kind of didn't put the brakes on November. The Chinese government is treating it like it's more dangerous. They actually fall into a recession thanks to their lockdown policy and they're supposed to be set visionaries. I don't know why more people don't get it. If the Fed had been tight, tight fisted earlier in the pandemic, a recession would have happened definitely. Worst case scenario, we get a bout of inflation like we have now. The good news is that the American consumer is in the best shape I can remember meaning we can handle recession, Merkin companies are in terrific shape to their balance sheets are fantastic. At least the real ones that actually turn a profit prices can and will be rolled back by the cost coast of the world. But pound needs to tighten fast. Lets more companies feel the need to raise prices. The way Clorox just said when they were on our show this week. They didn't put through the third price hike in July. I just went the blame game too and it gets nowhere. It's not constructive. Inflation will not burn itself out and so there must be paid. But let the pain comes from making it too expensive to buy expensive things. That's our best hope. Pennies that quickly before all the savings get eaten up. Commerce slows to the level that will breed serious layoffs. I've always admired a pals gradual data driven approach. But there are moments where time is of the essence and this is one of them. It's like having a tooth pulled. You want to get the pain rub with as fast as possible. I'd much rather the Fed raised interest rates by 100 basis points tomorrow than he is with too slow or 50 basis hikes over the next couple A month these inflation has never gone away by itself it needs to be killed off and killed now like to say there's always a bull market somewhere and pumps are fine just be right here Mad Money I'm Jim Cramer See you tomorrow the news whichever spin starts now