Mad Money 04/09/26 | Audio Only

My mission is simple: to make you money. I'm here to level the playing field for all investors. There's always a bull market somewhere, and I promise to help you find it. Mad Money starts now.

Hey, I'm Cramer. Welcome to Mad Money. Welcome to Cramerica. Other people, my friends, I'm just trying to make a little money here. My job is not just to entertain, but to teach you. So call me at 1-800-743-CBC. Tweet me at Jim Cramer.

Today's action should have been centered on stocks that have been impacted by the war in Iran. We have a fragile truce. We don't know if the Strait will be open for traffic or if Israel will keep bombing Beirut. Oil's rallying. Interest rates were steady. The president may at any moment decide that Iran's not playing ball. These are incredibly consequential issues that the market just doesn't seem to have any time for. The averages tell you that. Today the Dow gained 276 points. The S&P advanced 0.62%. Nasdaq climbed 0.83%. That's the seventh straight up day for the S&P, which seemed to reflect that the truce will hold. No more bombing, just acceptance by both sides. But somehow the Gulf's not the narrative of this market. Instead, the averages tell us an alternative tale, nothing to do with the war at all. They tell a story of an empire torn asunder, ripped to pieces by a handful of companies. I'm talking about the enterprise software empire that's being toppled by hardware stocks and AI. This war in tech, more than the actual war in Iran, has captivated Wall Street, but it's not talked about enough or explained enough on TV, or frankly even just set out for you on Main Street. So, let me do that.

Let me set the stage. Once upon a time, there was no such thing as the software industry. Sure, we had hardware, and there were some junior code companies, but they didn't matter. We traded Texas Instruments, Motorola, Intel, Semis. We had a bunch of other iconic tech names. We called them BUNCH, short for Burroughs, Univac, NCR, Control Data. I owned 4% of that one time, and Honeywell. Oh, and let's not forget the big one, IBM, which had a vast storage space with plenty of software. It's just we didn't really call it software. In 1986, the world changed. That's when Microsoft came public with the help of Goldman Sachs. I don't know. In my previous life, I helped bring the company into Goldman, but I didn't get any credit for it because I poached. The state of Washington wasn't in my territory. They wouldn't even pay for my airfare or my medical care as I blew out my eardrum flying with a cold. Our research department had a crackerjack analyst in the case, and the small group got a real lift along with Microsoft, which instantly became one of the greatest stocks ever minted.

Everyone owned it, and even better, no one really understood it. That was a big thing about Microsoft, not understanding it. We had an inkling of what they did. We knew that they were inside the personal computer and the bigger companies too. We were excited about the growth potential, but many of the people who owned it only knew one thing: the stock went up. Very important. Remember, this was the 80s. PCs were still clunky, not really a consumer product yet. Microsoft never quit though. Others joined the fray. They were all embraced. And like Microsoft, they tended to rally about 30% on the first day, and then they kept right on going. There was an endless appetite for these software stocks. It was like an operatic send where we just kept saying bravo and asking for more. Sure enough, over the years they gave us plenty, and we tried our best to understand each one, but we couldn't. We on what we call the buy side, clients had to hire people who could figure these things out and separate the wheat from the chaff. The research houses had to do the same thing. Software seemed so ethereal, so difficult. But who cared? It went up.

Next thing you know, the internet took off, and the software companies dominated that, too. Now at the same time, software strode the world like a colossus. We had hardware companies that collected and stored discs the way we used to store music on records. We had Intel, which made the hardware guts for the PC, along with a big cohort of component makers. We had Dell, we had HP. We had a little teeny AMD. But everything, all the money was made in software. Frankly, software ate hardware for lunch. Over time, software became so valuable that the elite companies were able to charge not just by the client but by the person. It was a bonanza of riches for the software-as-a-service companies, or SaaS, and you felt like a damn fool if you didn't go to Stanford and study computer science. I turned down Stanford, which is why I'm standing up here at 6 p.m. and talking to you about those who cashed in.

While those software companies were being minted, another group of companies run by a new generation of entrepreneurs developed hybrid models. A little bit of hardware, some software, some social, some retail. We called them Facebook, Amazon, Netflix, and Google. FANG. 13 years ago, we then added Apple. Throwback stayed the game. We never got around to adding Nvidia though, as the keeper of FANG I could have. It's just that the F became the M for Meta, and the G changed the alphabet, so we lost the acronym potential. These companies were thought to be a little bit of everything. And when Nvidia, a semiconductor company, came along with a machine that was fast enough to do the things we could only dream about, well, Nvidia passed Microsoft and became the biggest company on earth practically overnight. Nvidia's machines were so powerful that a whole new class of companies was born. These AI companies figured out how to create new products and did things with all that electric speed that Nvidia gave you. It's a little how Microsoft took over the world using Intel's hardware in the 80s and 90s. Get the allusion. Maybe we should have realized that these new machines could trounce the old machines. They could eat the software that ate the hardware. But other than Ben Reitzes over at Melius Research, you don't really hear the allusion very much. It's almost taboo, especially when it comes to, ironically, Microsoft.

But today, a day when everyone should have been focused on the trade of truce, oil, and Beirut, we saw the hardware stocks put the wood right to software, all software, even the ones that are doing fine. At one point it was so ugly I couldn't even look, had to take the glass. Thank you. If you look at the IGV, this giant software ETF, you see exactly what's going on underneath. Consider the 10 largest components of this ETF. Are you ready? Palantir down 7%. Microsoft down 3%, which was down much more at one point. Oracle down 3.7%. Salesforce down nearly 3%. Palo Alto Networks down 4%. CrowdStrike down 7%. AppLovin down 3%. Intuit down almost 7%, even though it's tax season. Adobe down nearly 4%. And ServiceNow down nearly 8%. And again, all those were much worse in the middle of the day. This ETF is primarily the way that big institutions bet on or bet against software. It's also how they hedge their tech positions. It's incredible because some of these companies aren't even traditional software plays. Palo Alto and CrowdStrike, they're cybersecurity. Intuit does taxes and financial services, something you often need a human for. They shouldn't even be in the index. They're being dragged down by this index though. Everybody knows it. No one knows what to do about it. And now hardware of all things is triumphant. Intel, run by the redoubtable Lip-Bu Tan, is back. AMD's killing it. Seagate, SanDisk, Micron, Western Digital, they're back from the dead. Nvidia's king. The companies that make the machines to manufacture more chips, Applied Materials, Lam Research, KLA, ASML, they're killing it. So is CoreWeave, Vertiv, Corning, Marvell, Unity, Vertiv, and a small group of other winners every day.

Now, there are plenty of fellow travelers in each camp. If you're in the software camp, you're being treated as if you're ready for the embalmer. If you're in the hardware and AI camp, you're headed for the pantheon of greatness, soon to be joined, of course, by those two kings of compute, OpenAI and Anthropic, along with hardware users Amazon, Meta, Alphabet, nay, Google. Here's the bottom line. Maybe tomorrow we'll turn to the worldwide narrative, whether it's war or peace in the Middle East. But for now, it's just another day when hardware slew software like Cain slew Abel, and all I can do is say get used to it. You may think these stocks don't deserve it, but as Clint explains to Gene in that unbelievable scene in Unforgiven, 'deserves' got nothing to do with it. I want to start the calls with Betsy in California. Betsy.

You know, Betsy, I'm listening to you. I'm listening to you, Betsy. You're smarter than I am. You know what? Well, I think the bounceback was real, but after listening to you, I think the bounceback is very for real. I think go with your gut on this one. You know it well. You've done the homework. Buy it. Okay, I want to go to Bob, also in California. Bob.

Ah, Bob, I'm glad you're on. Thank you. Thank you so much. How can I help you?

I'm glad you asked me. I was talking about it today. It's down 40%. We use it for my wife's medical because it's just got a good medical affinity group. I think a lot of people use it. They don't charge enough. I shouldn't say that. Now they're going to raise our prices, but I think they should be making more money off their different groups. But the company is really suffering right here. I'm sorry, the stock is suffering. The company's not. Big dispute over the Google feed and whether Google's treating them right. All nonsense. Reddit's a good company. Today was just another day where hardware beat up on software. Although at one point it was so ugly, I can't believe it. At this point, all I can say is you got to get used to this. I don't know where the bottom is. Could Levi's become the next winner of the competitive apparel space? I'm digging into the denim maker's latest quarter to find out. I don't know. Betsy from California seems to know a lot more about this stuff than I do. Ben, shares of Vita Coco have been going nuts over the past year. So, does this one have more room to run? I'm sharing where I come down on this exciting story. And private player Arou is aiming to revolutionize the way companies conduct research through AI. Very different, very different way to do it. I'm going to sit down with the company's co-founders, learn about what they're up to. So stay with Cramer.

A couple of nights ago, we got another terrific quarter from Levi Strauss and Company, the denim kingpin, and its stock soared. This has been a pretty tough time for the apparel category. I mean, really tough. But there are still some individual winners out there like Ralph Lauren, Tapestry, parent company of Coach. And now maybe Levi seems ready to join the club. The company's put together a string of excellent quarters under the leadership of Michelle Gass, who took over as CEO at the beginning of 2024. The stock's now up more than 52% over the last 12 months, but a huge chunk of that gain came yesterday when Levi's deservedly shot up more than 10% in response to its latest results. Even here, by the way, it's a couple points away from its 52-week high set back in early October. Maybe that presents a good opportunity because Levi truly seems to be on the right track here. Now, keep in mind this company was struggling before Gass took over. 2023 was brutal then, with flat sales and earnings per share plunging 27% year-over-year. Once Gass came in at the beginning of 2024 though, she immediately got to work jettisoning some underperforming businesses. In her first month as CEO, Levi's directly shut down the underperforming Denizen brand. A couple months later, they closed a small footwear business in Europe. And last year, the company announced the sale of Dockers to Authentic Brands Group for $311 million in a deal that closed just over a month ago. Meanwhile, Gass has been playing offense now, targeting denim subcategories like women's tops and premium as well as sources of growth. Women's is big for them now. On the premium side, the company made a series of partnerships with iconic brands like Nike and the luxury Japanese fashion brand called Sukai. So far, these efforts have gone very well. Over time, the new strategy has been paying off. In 2024, Levi's put up 3% revenue growth, nearly 14% earnings growth. 2025, they delivered 7% organic revenue growth, 8% earnings growth, which is more impressive when you remember that this company was caught in the crosshairs of those early Trump tariffs. Now, I've had the chance to speak with Michelle Gass several times over the past year, and every time it feels like I'm asking her how she keeps putting up such robust numbers. A lot of it comes down to solid execution and growth from new ventures I just mentioned. Of course, the numbers aren't always perfect. Three months ago, Levi reported a modest top and bottom line beat, mixed full-year forecast, especially on the earnings front. The stock initially sold off, but I told you just to stick with it because the problems seemed mostly one-off, and they were. Which brings me to the quarter Levi's reported on Tuesday night. Once again, the results look very good. Revenue was up 14% year-over-year, up 9% organically when Wall Street was only looking for 4.5% organic growth. The strength was broad-based, with the largest Americas region up 9%, or 7% on an organic basis, and every other region and segment up double digits. Levi's direct-to-consumer sales jumped 16%, thanks in large part to its digital business, with e-commerce up 21%. Wholesale solid too, up 12%. Now, Levi's margins came down a bit year-over-year, but again, that's the tariffs. We're about to annualize those. Plus, the gross margin and operating margin both came in better than expected. That translated into a 5-cent earnings beat off a 37-cent basis, up more than 10% year-over-year. Now, unlike three months ago when the company reported a robust quarter with guidance that was more of a mixed bag, this time Levi's gave us a solid quarter for the current quarter, and it also raised their full-year forecast across the board. That's what we want to see. For the current quarter, Levi expects inline organic revenue growth and inline earnings. For full year though, they bumped up their organic revenue growth target to a 4.5 to 5.5% range and raised their earnings forecast by 2 cents. Now, crucially, these numbers are too low. And that's not my opinion. That's something management stated explicitly. See, in Levi's original forecast, the company assumed it would be hit with a 30% tariff on goods from China, 20% tariff on goods from everywhere else. Those tariff assumptions are still baked into the numbers. Even though the Supreme Court recently struck down most of Trump's tariffs, now they're looking at a 10% import duty. If you use that number, the real number, Levi gets a 7% earnings boost this year. Beyond the numbers, I like the story. I just like the story of the quarter, frankly. Levi's bet heavily on the direct-to-consumer channel, especially the online business, and that bet is paying off. And that is a great bet. On the conference call, Gass made it clear that the company's efforts to build the Levi's brand are working, especially the Super Bowl ad a couple months ago. Its partnerships, including the one with Nike, continue to do well. And Levi's is enjoying success all across its range of products in men's and women's tops and bottoms. And even with these new, you've seen them on the street, the baggy styles, and I'm told kids love them. Even if I really don't understand why. The hardest part of living through the 90s as an adult was keeping a straight face when you saw young people wearing those comically baggy jeans. But now then people love them. Still, everything seems to be clicking for Levi's, which is finally why the company got credit for a good quarter for the first time in what feels like ages. After taking a couple years to get the right portfolio, invest in new areas, and generally focus Levi's on its best opportunities, Michelle Gass has put this company in a great place, people, and that's why the stock's worth it. I'm not saying Levi's will suddenly turn into another apparel category stock like Ralph Lauren or Tapestry, but I will say this: both of those stocks trade at price-to-earnings multiples in the low to mid-20s. Levi sells for just over 15 times the midpoint of this year's fairly conservative earnings forecast while also giving you a 2.5% yield for good measure. If you don't understand what that multiple means and why a cheaper one, a lower one is better, that's one of the reasons why I wrote the book. It's really important that you understand price multiples. So the bottom line: if Levi can keep putting up strong numbers, which I think it can, then this stock could have lots of upside ahead of it, even after it rallied more than 10% yesterday and tacked on another 4% today. Mad Money is back after the break.

Let me tell you something I really like about my job. See, every once in a while I come across a stock rallying so hard I feel compelled to take a closer look and figure out what the heck's going on. Take the Vita Coco Company. It's a beverage play with a health and wellness angle. It's been steadily chugging higher since it came public less than 5 years ago. The timing of that IPO is the reason why I missed this one. Vita Coco debuted in October of 2021, right as the flood of COVID-era deals was coming to an end. Back then, we were seeing dozens of new listings a month, and nearly all of them came tumbling down in 2022. Vita Coco itself didn't do much for the first year or so. The stock came public at 15. It hit $18 early on, but by late 2022, it had fallen to seven bucks and change. Seemed like one more piece of IPO flotsam. Since bottoming at $7 and change in November of 2022 though, this stock has rallied roughly 560% in a little over 3 years. That's after it pulled back a dozen points over the past few weeks. I think this could be a nice buy opportunity. Honestly, wait. You hear what I have to say about this. I don't want to get ahead of ourselves. I want to walk you through the story to explain why the stock's become such an expensive winner. But you know what? This is the kind of thing. This is how you build wealth, people. You own the index fund and you own a couple stocks like this. This is not exactly a new company. Vita Coco was founded back in 2003 when two founders, Mike Kirban and Ira Liran, struck up a conversation with a pair of Brazilian women in New York City who told them they missed coconut water from their home country. After digging into it, they set out to make coconut water mainstream in the United States. Hey, nice backstory. Vita Coco has grown significantly in the two decades since then, fueled by the rising interest in health and wellness products. Candidly, some of our younger team members here at Mad Money told me that Vita Coco was only a drink that you bought when you had a hangover. But then again, a hangover cure is a pretty good pitch. In fact, the company's CEO recently said that's how many college-age consumers first found the product. For the record, I was more of a hair-of-the-dog fellow. It always worked. Vita Coco has also been marketed as a workout drink lately. It's a smoothie component and a mixer for cocktails. Today the product portfolio includes the original Vita Coco branded coconut water, as well as a sustainable enhanced water product called Ever & Ever, as well as a protein-infused water called PWR Lift. The main brand, Vita Coco, has a dominant position in the coconut water space in most places where it operates, and the category itself is growing incredibly rapidly. In the US, where they launched in 2004, Vita Coco has a 42% market share. The category's growing at a 22% clip. In the UK, where Vita Coco launched in 2013, it has an 80% market share, and the category is growing by 32%. In Germany, where Vita Coco launched in 2022, they have 39% market share, and the category is growing at a 125% clip. Just as important, younger people seem to love this stuff. What a great set of figures. There are some other angles to the story that, while commendable, are not what I'd be focused on as a stock picker. Sustainable, environmentally friendly, supports lots of family farms. Nothing wrong with that. Makes for both good marketing and good business. But what matters are the numbers. And the numbers have been downright fantastic. From 2021, when Vita Coco came public, to last year, net sales have risen at a compound annual growth rate of 13%. Adjusted earnings before interest, taxes, depreciation, amortization have been growing at a 28% compound annual clip. 28%. Vita Coco has also been profitable since coming public, which is nice to see, isn't it? And its earnings per share have grown at a 25% pace, from 48 cents per share to $1.19. On top of that, Vita Coco has a pristine balance sheet with nearly $200 million of cash and zero debt as of the end of last year. This is the kind of stock I look for all my life. When the company reported mid-February, it technically had a mixed result with better-than-expected net sales and adjusted EBITDA, and also a 3-cent earnings per share miss off a 12-cent basis. But the quarter was still a positive catalyst thanks to Vita Coco's impressive full-year forecast. They're talking 12 to 15% revenue growth and 24 to 30% EBITDA growth, both better than expected. And guess what? Now you're getting that terrific full-year forecast completely for free. Vita Coco stock was trading around 56 when it reported. It got as high as 61 and change in March, but it's since fallen back all the way to $48 and change. I didn't see anything wrong with Coco specifically that might have caused that kind of pullback, and I looked for it. In fact, the only major development over the past couple of weeks was a positive one. Vita Coco was just added to the S&P SmallCap 600 late last month. But still, with this retreat, you know what? The stock's down over 20% from its high and even down 8% year-to-date. I also like that kind of stock. I look for these. Really, what the pullback reflects is the simple fact that the stock is a relatively high price-to-earnings multiple. I talked to you about those a lot. It's trading at just under 32 times this year's earnings estimate. I won't deny it. That's pretty high.

rich for a beverage company. But here's what I will say. First, throughout the entire time that Vita Coco has been public, its shares traded mostly in the 25 to 40 times earnings range. And if you'd let that valuation keep you out of the stock, well, you know what you would have missed. Second, the company's expected to put up 30% earnings growth this year. And there's nothing wrong with paying 32 times earnings for a company that can grow at a 30% clip. Growth-oriented money managers will typically be willing to pay a price-to-earnings multiple that's one to two times the growth rate. So 32 times earnings is much closer to the floor than the ceiling for this stock. Plus, when you look at next year, Vita Coco should earn $1.80 per share, meaning it sells for about 27 times next year's numbers. That's perfectly reasonable given its incredibly high growth rate. Putting it all together, I like what I see from Vita Coco after finally taking the chance to get into it. I'm sorry I didn't do it earlier. This is a uniquely strong story within the troubled food and beverage space, one that's very much on trend with younger consumers, which is why this company's taking share all over the world. Here's the bottom line. You rarely get a chance to buy a powerful long-term winner after a quick 20% pullback, especially when that pullback appears to have very little to nothing to do with the fundamentals. But that's exactly what's happened to Vita Coco. When a terrific company like this comes around, I think you should take it. Let's take some calls. Let's start with Dave in Massachusetts. Dave.

Dave, you know, that's terrific. It's been a tough couple of days for me and when I hear that, I'm so glad. So, thank you very much. Let me go to work.

It's such a great company. It's such a great company. It still is. Michael Miebach's doing a great job. I know those stocks have fallen out of favor, but I really like it. But go ahead. I'm sorry. I know that wasn't the one you wanted to talk about.

Well, Dave, remember it just had that fire, the six-alarm fire at its largest distribution center of toilet paper. Let's, you know, Mike Hsu did not necessarily set out for that to happen. 5 and a quarter percent. Let's go over this. 5 and a quarter percent yield. Buying Kenvue, it's going to be additive to the situation. I am going to stick my neck out and say even though it's at 13 times earnings, I think you should buy more, Dave. I really do. I think you should average down. I know people don't like to hear that, but I have great faith in Mike Hsu. And I think at a 5 and a quarter percent yield, I want to own Kimberly-Clark. Okay, look. This Vita Coco's recent pullback gives you a great opportunity to get into this company at a cheaper level, I think, than you really should normally have. Now, there is much more Mad Money ahead. Aaru was only founded a couple of years ago, but it's already being valued at over $1 billion thanks to its AI product. So, could this company represent the next wave of AI disruptors? And can it help us make money with the research? I've got the co-founders on next to find out. Then shares of Amazon haven't been able to get any traction this year at all. But could Andy Jassy's shareholder letter provide a spark for the stock? I'm sharing where I come down, but you see where the stock came down today. And of course, all your calls rapid fire in tonight's edition of the lightning round. So stay with us.

Tonight, I want to remind you why artificial intelligence is truly exciting. Not just a way for business to cut costs. Consider the case of Aaru. This is a startup founded a couple of years ago by a group of teenagers that already has a billion-dollar-plus valuation. Now the pitch is simple but ambitious. Aaru wants to be the most accurate in the world at simulating human behavior. Not through consumer surveys, that's really important. Not through focus groups, that's even more important, or polls, but through behavioral science, data analysis, and agentic AI. They basically create thousands of AI agents to predict how people will behave. And they already have big contracts with major firms that you and I all know: Accenture, McDonald's, EY. Right now we're seeing heavy disruption across a host of industries and this startup can help the companies in question figure out what people really want with a fresh outlook. So let's take a closer look with Cameron Frink, Aaru's co-founder and CEO, and Ned Co, he's the co-founder and president, to learn more. Gentlemen, welcome to Mad Money and thank you for coming.

Excellent. All right, now we got to do a Room 101 because this is your first time on Mad Money and you know I'm very excited about what you do, having spent some time with you because you're not just the usual intent to purchase, which we like very much. You're really predicting in a way that so far I have found to be astoundingly accurate. So I don't know how, maybe you start, then you give it up to... I know Cameron, I have full disclosure, I know Cameron Frink's father who is right from Constellation Brands. But Cameron, maybe you should start and give us a little bit and then we'll go from there.

Yeah. So now tell me, is this data that you are... how are you getting this data? Is it only from clients or do you have other ways to be able to pick things up?

Okay. Well, let's deal with something that I have had very great frustration with. I've tried to get CEOs to say what is the impact of the GLP-1s. Invariably their answer is there is none. Now we know that if so many people are taking them, there is none is not an acceptable answer. So why don't you tell me, could you just kind of put the lie to the people, say look, it doesn't have anything to do with anything, because it's obviously something that is a game-changer.

What you're seeing... would that be pill?