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Don't just ride the index, seek to outperform it with FELC, the Fidelity Enhanced Large Cap Core ETF. Unlike passive ETFs, FELC is run by a team of experts to adapt to market conditions and pursue upside potential wherever it's hiding. And
And while you get the potential outperformance of an actively managed fund, you can still buy and sell it on your terms, just like any other ETF. Discover FELC, the Fidelity Enhanced Large Cap Core ETF, part of Fidelity's suite of active ETFs. Learn more at fidelity.com slash FELC.
Before investing in any exchange-traded fund, you should consider its investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus, an offering circular, or, if available, a summary prospectus containing this information. Read it carefully. While active ETFs offer the potential to outperform an index, these products may more significantly trail an index as compared with passive ETFs. Fidelity Brokerage Services, LLC. Member NYSC SIPC.
Learn more at capella.edu.
Hey, I'm Kramer. Welcome to Man Money. Welcome to Kramer. I'm just trying to make you a little money. My job is not just to entertain, but to teach you. So call me at 1-800-743-CBC. Tweet me at Jim Kramer.
Earnings matter again. Okay, that's what happened last night when the United States and China reached an agreement, however temporary, to hold off trade armageddon. The rollback of the exorbitant tariffs to much more reasonable levels caused the stock market to explode. Dow jumping 1.161 points, 1,161. The S&P surging 3.26% and the Nasdaq poll voting 4.35%.
Reaction? Instantaneous. Stocks erupted. Everything had anything to do with the world economy, not just stocks directly related to Chinese trade. Took off with huge gobs of gains made today. It was a spectacular day for the bulls. One of the smartest I can recall.
Very rarely have I seen the stock market actually get surprised by something from the White House in a positive way. We've now seen it three times in barely over a month. One bad, two good. First, April 2nd, Liberation Day, the day we'll live in trade infamy, when President Trump declared a trade war against the entire world, which caused a two-day decline of over 10%. Then he surprised us again by pausing those tariffs by 90 days for most countries, cheering in more than 9% gain on April 9th.
It happened again today with the news that the embargo-like tariffs on China will come down to more reasonable levels, albeit still higher than before Liberation Day. The market rebounded hard, but what was most interesting?
I don't know. To me, we just it wasn't only a bounce in tech stocks tied with China. You'd expect that, right? We've got to jump in all tech and in many other stocks with any economic sensitivity. It was a day when earnings estimates took on new meaning and it could bring about higher prices for some time. Let's parse how this all came to pass and why it was such a surprise to the market.
First, there were always two camps close to the president. One wanted China back to where it was before it was admitted to the World Trade Organization in 2001. Now, it was a very big deal because China fully opened its economy to exports, but also wiped out a ton of our industries. A rollback of that proportion could have done real damage to China, but it would also bring down big chunks of our economy. The second camp, the one that seems spearheaded by Treasury Secretary Besson. Let's call this one the quid.
cooler heads prevailed contingent. They negotiated the pause in the big tariffs and a reduction for now to levels that are still significant, but they are not punitive. That's important because many investors believe that punitive tariffs there mean catastrophe here.
Now, I don't want to make any judgment about whether all of this trade brouhaha was a part of the art of the deal. Yeah, one big negotiation. Or the president simply changed his mind after seeing how much carnage the original plan unleashed on the stock market and on consumers and retailers who feared hoarding and empty shelves. What really matters, at least to the stock market, is that many hedge funds didn't believe Trump would change his mind. Stocks have become heavily shorted.
Betting that Trump would never give in, even if it wrecked our economy. Now, we don't know if Trump allowed for a temporary compromise because the economy did seem to be troubled and Fed Chief Jay Powell wasn't going to respond with rate cuts. That's the cognizant, he says, stuff like that. Or because the weakness was starting to turn to fear, raw, naked worry about what would happen.
Think about it. How many times have you heard that we were on the road to an unavoidable recession because of the China tariffs? That became the cause of the bear that the bears wouldn't let go of, a pot of honey for the grizzlies that was oh so close, as the talks already thought to fail produced nothing all weekend. But the early morning announcement gaffed these bears as surely as an earth sign character walking around in a New Jersey backyard. Boom. Boom.
Now, let's talk about the beneficiaries. The first, the companies directly affected. Here, let's talk about Apple, Broadcom and Nvidia, all of which were about to see a chunk of earnings disappear or become jeopardized by an ever harsh relationship with China. Same with the semiconductor capital equipment. You know, thinking about the lambs and the KLA's that have already seen their earnings cut back by a decline in trade.
Apple's been treated like a pinata ever since it reported because of a belief that it would be unable to shift enough of its Chinese manufacturing to new countries like India. And then its service revenue skipped a beat on that last quarter. Oh, and it has been perceived as a hot potato where you never knew where the White House might stand. Qualcomm has a ton of business that could be impacted by China. By the way, its stock has been smashed beyond all recognition. That'd been a real winner.
These three stocks were easy prey for the bears who captured the mic, including both strategists and hedge fund managers. Now, you might want to include Amazon in that group because it did a ton of business with Temu and Xi. And those are the Chinese companies that thrived on a tariff loophole that allowed their goods to flood our markets. Now, we don't know if they're going to get that break back. It wasn't announced last night, but Amazon stocks sure act like it would.
And there are the techs that benefit from a possible avoidance of recession. Take Meta, which rallied nearly 8 percent. Alphabet up 3.7 percent. Neither has much direct exposure to China. But there would still be it would be collateral damage from a slower economy.
But the most quizzical were all these other groups, financials, industrials, transports, consumer discretionary stocks that might have been crushed by a recession. Classic case, the banks. Now, they're always the first to be annihilated by any decline in economic activity. The three IQ on are Goldman Sachs, Wells Fargo and Capital One. Why? Because my travel trust owns all three. Join the club. Find out about them. All three of these soar with the latter. Capital One most sensitive potential to
false because of its poor credit card clientele. That skyrocketed more than 6%. It has been my favorite in the club, so I'm kind of proud of it. That the latter cohort could rally even as the group that had nothing really to do with China directly, well, that just shocked a whole lot of investors. Could there really be such a reaction of reverberation from this China's stay of execution?
Yes, absolutely. Why? Because we'd all become used to the idea that it didn't matter how good their previous numbers were, the ones they just reported. What mattered were the future numbers, the estimates. And they were coming down hard because analysts believe that the present trade policy would most likely cause a recession. So the estimates, they were going to go lower even year over year. That fear made their most recent quarters completely irrelevant.
You could own virtually nothing except the most defensive stocks, utilities, some of the safer food stocks, better drug stocks. How about this for irony? The president announced this very morning some unilateral drug price cuts, ones that can't really push through, he can't really do on his own, even though initially people thought they could and the stocks just cratered.
Later on, we realized that perhaps they would just be a negotiation. They still got hurt. But then they came back when people realized that big pharma doesn't know how to roll over and it's going to fight tooth and nail. Most safety stocks fail spectacularly, though. Their declines were stock recognition, stock recognition that while the president may not be fixated on stocks, there are always a focus and he doesn't want to annihilate the stock market. Too many people own stocks in this country.
Now, we know that we won't be free of the bears here. There's too much at stake. They don't want to cede the rap that Trump could still cause world trade crash. And you better be short. That's what they say. And take this advantage of this rally to short. But I come back and say that we see how easily stocks are rallied. Isn't it a little dangerous to be that short?
Bottom line, it's better to stay in, stay on, and let it ride than to try to pick the perfect moment to trade in and out and in and out of the stock market. By the way, that's so much of a strategy. It's more of a game of chicken where there are no winners, just losers who think they are smarter than the average bear. I'm going to Jeff in Texas. Jeff. Speaking. Jeff, what's up, buddy? It's Jim.
Hey, how are you, Mr. Kramer? I was just wondering what your views were about Mondelēz. It's a really interesting question because this has been the food stock that's been the best. Okay, the best. Even though it's got a lot of chocolate in it, which doesn't make much sense to me because chocolate's supposed to be something that's really been attacked by the GOP-1s. That said, I think that it's done well. It's got a 3% yield. I'm not against it. And Dirk Vanderput has done a pretty good job there. How about Mike in Illinois? Mike.
Hi, Jim. Welcome back. Thank you, Mike. I have a nice position in Lilly, which I've accumulated over the last two or three years. I'm wondering if you think I should buy, sell or hold. I want you to buy more. I'm glad you mentioned this because at one point today was in six six ninety nine. I wanted so much to tell people to buy it, but that was around six a.m. The reason why I want to buy it is because there was definitive data that came out last night about Novo Nordisk not being anywhere near as good as Eli Lilly when it comes to
waste loss, which is what a lot of people are in the GOP's for, and it was not reflected because things were so crazed because of what the president announced. I think the stock will be up 100 points when people realize, wait a second, it is definitively better than Novo. I would buy Eli Lilly hand over fist. Let's go to Simon in Delaware. Simon. Hey, Jim. Booyah. Booyah, Simon. Of course. What's going on? The stock I want to ask about is HPE.
I have been holding this stock a long time. I'm kind of embarrassed to tell you how long I've been holding it. You know, back to its pre-split days with HPQ, who has enjoyed some success. Right. But HPE has apparently just been stuck. It goes up a little, down a little. It's traded inside a very small band for like 10 years. Right.
Well, you know, it's a very competitive spot, Simon. It's a very competitive area. You're up against Dell, a bunch of other companies. And so therefore, I think that even though it sells at 10 times earnings, it is still a very difficult stock to own. So I'm not going to recommend the stock to you. Today's action shows you how easily stocks can rally.
So I say it's better to stay invested. Remember, I say stay in rather than try to trade in and out and in and out, as so many people advise. On Mad Money tonight, I'm examining the state of the consumer with shopping center Reed Kimco. Don't miss my exclusive with top brass. Then should you be shifting your sights to the global markets as tariffs continue to affect the domestic tape? I'm telling you where I stand fresh off today's rally and my trip to Europe.
And Kramer asked me a question on AI Player EXL, and I'm doing my homework and giving it right to you by talking with the CEO. So stay with Kramer.
Don't miss a second of Mad Money. Follow at Jim Kramer on X. Have a question? Tweet Kramer. Hashtag Mad Mentions. Send Jim an email to madmoneyatcnbc.com or give us a call at 1-800-743-CNBC. Miss something? Head to madmoney.cnbc.com.
Don't just ride the index. Seek to outperform it with FELC, the Fidelity Enhanced Large Cap Core ETF. Unlike passive ETFs, FELC is run by a team of experts to adapt to market conditions and pursue upside potential wherever it's hiding.
And while you get the potential outperformance of an actively managed fund, you can still buy and sell it on your terms, just like any other ETF. Discover FELC, the Fidelity Enhanced Large Cap Core ETF, part of Fidelity's suite of active ETFs. Learn more at fidelity.com slash FELC.
Before investing in any exchange-traded fund, you should consider its investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus, an offering circular, or, if available, a summary prospectus containing this information. Read it carefully. While active ETFs offer the potential to outperform an index, these products may more significantly trail an index as compared with passive ETFs. Fidelity Brokerage Services, LLC. Member NYSC SIPC.
Learn more at capella.edu.
Tomorrow, shipping giant Maersk's North America president on the U.S.-China trade deal. Port activity and the outlook for the global economy. Stay ahead of the market. Squawk Box, tomorrow 6 a.m. Eastern and streaming on CNBC+.
Despite all the hand-wringing we've been hearing about the state of the economy, health of the consumer, earnings season has really told a different story. Take Kimco Realty. Well, one of my favorite spotters, the Shopping Center Real Estate Investment Trust, put an excellent quarter nearly two weeks ago. Not only did they beat the estimates, they raised their full-year forecast for funds from operations per share and same property net operating income growth. Incredible REIT equivalent of the same store sales. Fantastic numbers. Tells us their business is seeing real momentum. Oh, and it doesn't hurt, by the way, you got a 4.6% yield.
Pretty protected, too. So how do they pull it off? Let's check in with Conor Flynn. He's the CEO of Kimco Realty to find out. Mr. Flynn, welcome back to Mad Money. Great to see you. Thanks for having me. OK, so first, Conor, you're incredibly transparent and it's terrific because you explain to people that it's really a supply problem. There's not enough land and it's about tenants and your tenants are good. And yet people complain.
keep selling the stock anyway could you explain to people why the 4.6 yield actually may be a bargain and that you yourself bought a huge amount of stock highly unusual for reed when it got hit well it's all about the fundamentals right so if you think about it from a high level supply and demand
Supply is the big benefit to Kimco Realty. All the commercial real estate sectors, shopping centers are the lowest amount of new supply under construction, 0.3% of existing stock. There's more office being built today than there is shopping centers. And it's been 10 years running. So if you look at that amount of supply that's been not
included in the supply chain, all of a sudden the demand has outpaced supply. And that's why you're seeing pricing power for Kimco Realty and vacancy rates at all-time lows. And so that's why you're seeing new deal spreads of close to 40%. Meaning that when you have an outfit like a Party City go under, it's actually in weird way better?
for you. And that's a perfect example. These bankruptcies that have hit the first quarter, these are all multiple filers, meaning that they're chapter 22s. They've been in bankruptcy multiple times. I like that. And so they have been to the dance. We knew that this was coming, and we're seeing how quickly the absorption is occurring. We've already backfilled
Half of our party cities at nearly 40 percent newly spread. So 40 percent higher than what party city was paying. And what's key for people, they should recognize is that when you have an anchor tenant like my kings in Short Hills, which had a vacancy for a while, but then filled by a gigantic health care provider that I use, there are there's a an anchor. That's a real like so.
So perfect example, most Kimco shopping centers are dominated by a grocery anchor, like a King's or a Whole Foods or a Trader Joe's or a Sprouts or a TJX. And those two combine for really the anchor cross-shopping that is the sweet spot in retail.
And now what you've seen is it's all about services. Services, services, services. So over 80% of our new deal flow is coming from services. So urgent care facility. That's what exactly you know. When you think about what's changing in the retail environment, the omni-channel approach where the
brick and mortar is being enhanced by the e-commerce. But services is all about in-person, all about the e-commerce resistant type use. And that's what's driving vacancy rates to all-time lows. And the numbers were so strong that we felt we had to raise. All-time lows. That's why it was so right. Now, when I look at your terrific deck...
I see something, you know, in Philadelphia. We talk about that. But Coulter Place, Suburban Square, Arbor, which is where my mom signs from, a mixed use project. So it's not just all retail. So this is the future of Kimco Realty is you think about, you know, obviously, it's an all time low vacancy. You're seeing the real strength of demand. But the future upside is all those parking lots that are undeveloped.
So from a high level, shopping centers are 80% parking lots that are just untouched. And that's all upside for us. Our strategy is first string, major metro markets. And parking ratios are required by the municipality. And so think about driverless cars, robo taxis, all the things that are going to actually lower parking ratio requirements. And that's why we've entitled 12,000 apartments to be built on our parking lots of the future. And that's where mixed use comes into play. Retail enhances the apartments.
Apartments enhance the retail. It's a harmonious situation where they can drive traffic to each other. Okay, so Connor, why do you think that there is such a...
let's say, price discovery problem with your company, we get tariff legislation and then we raise that. Many people think I got a short Kimco. I got to get out of Kimco. There is nothing that has got to do with China in your places. You know, I think a little bit might be retail PTSD. You know, there's some people that probably remember the rights, the retail apocalypse, you know, where that was the end of the the the brick and mortar retail world. Right.
the dawn of e-commerce. We've had our black swan events, COVID, when essential retail versus non-essential retail. Kimco is positioned as a defensive play that's driving value to consumers every day because it's convenience and value. It's where you live. It's where you shop. It's where you play. Now, we always do have places that I guess you would say on your watch list. What percentage of your tenants right now would you say are on your watch list? So the watch list tenants are the ones that have
credit issues that might go into bankruptcy. It's the smallest list it's ever been in history. - How about that, huh? - If you think about COVID, what were some of the benefits of COVID? The watch list got reduced significantly. The people that were on sort of like the watch list because their balance sheet wasn't great or because they didn't have a good business model, they weren't able to make it through. Now all of a sudden you think about the dawn of new retail, the services industry, urgent care, pediatric urgent care,
vet clinics, health and wellness, all of that coming into the shopping center, all of those vacancies have been absorbed with much more resilient type tenancy. And that's why we feel really good about the future. I want people to own your stock. And I know that, and I say this because I like the yield and I say that it's backed up by a lot. But the thing that's most important to me is almost every, so many of you said I know they're constantly issuing stock. It is highly unusual to see someone just an
Enough. We're going to take money and buy our stock back. But that's precisely what you did. Well, we have a great balance sheet. You can only do that if you have a great balance sheet. We're an A-minus credit rating from Fitch. We're one of only 11 REITs across all REIT universes. Of which there are many REITs. And so we feel good about the ability to buy back stock when it's dislocated like it was. Post-liberation day, there was a big sell-off. We saw that the business fundamentals were super strong.
Blackstone just came into the sector and privatized ROIC for a very strong cap rate, big valuation. And so to your point, there's this big disconnect between public and private valuations. And sometimes there's windows of opportunities that we feel like we should take advantage of. And buying back stock was exactly that. I want people who think that there are no bargains out there or people who are looking for income to think about Kimco Realty, a company that I know from the family. I mean, this thing has always been right.
And it always, because they're such superb underwriters and knowledge to understand their balance sheet and what can be done, it has been strong throughout all the different, what did you call them, retail? Retail apocalypse. Retail apocalypse. It's Conor Flynn, CEO of Kimco, really, KIM, man, bye, back after the break. Coming up, time to look overseas, Kramer's digging into the European markets, and whether investing across the Atlantic could lead to big gains. Next.
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Our stock market has been on a bit of a roll over the past four or five weeks, especially after today's tremendous rally, and that was in response to the tariff negotiations with China. But keep in mind, the S&P 500 is still basically flat for the year.
This whole move has happened because the Trump administration has gradually rolled back the incredibly severe tariffs that are announced on Liberation Day. That was just over a month ago. Don't get me wrong.
I'm glad it happened. But I just spent a week in Europe, and it is stunning how much better the markets are doing over there. For example, the stocks Europe 600, which is the closest thing they have to the S&P 500, is up more than 7% year-to-date. Meanwhile, the Euro stocks 50, which is a more concentrated index, considered the Dow, is up just over 10% year-to-date. But in America, the actual Dow is still down slightly for the year. Meow.
The European industry started roaring in late January and February as our market flattened out and then rolled over as the White House took a hard line on trade.
Of course, the Liberation Day tariff announcements caused a true global sell-off. And these major European stock indices moved into the red for a few days in early April. On April 9th, President Trump announced a 90-day pause for most of the so-called reciprocal tariffs after the European bourses had closed for the day. And it caused a gigantic rally. And for that one single night, our markets and their markets were essentially at parity.
down mid-single digits for the year. But since then, European stocks have just rallied much harder and more consistently than the U.S. counterparts, reestablishing their lead. House of pleasure. Listen, I hope that we continue to get positive developments on trade that allow our stocks to keep rallying. But still, there's a lot of uncertainty here in America. And like I keep telling you, businesses don't like uncertainty. Meanwhile, business seems to be booming in Europe. It's like a complete inversion of the past 15 years.
The Germans are in the lead again with the Deutsche Bourse AG German stock market, the AK of the DAX. It's up a whopping 18 percent for the year.
Investors are more optimistic about the German economy than they've been in a very long time, in large part because the German government has waived their deficit rules to roll out some big defense and infrastructure programs. So it is no surprise that the best performing stock in the DAX is Rheinmetall AG. That's Germany's largest arms manufacturer with a stock that's up almost 160 percent year to date. Also in the top two top are two banks,
Commerce Bank, AG, and Deutsche Bank up 64% and 48% respectively, as well as building materials company Heidelberg Materials, AG, in third place, 55% gain. And Siemens Energy, AG, in fourth place with a 50% gain. Holy cow. Just behind the DAX is amazingly the Spanish IBEX 35 index. That's up nearly 18% for the year. It's bad enough that the Germans are beating us, but Spain? 15 years ago, this was practically a failed state.
Like Germany, Spain has pledged to boost its defense spending, so leading the way in the IBEX 35 is Indra Sistemas. That's an industrial technology company with a large defense business, up more than 76% for the year. After that, it's all about the banks, including longtime Kramer-fave Banco Santander, which is the second-best performing index, up almost 52% for the year. And by the way, Santander's American deposit receipts, S-A-N, for you home gamers, are up
almost 50% since we last spoke to Executive Chair Anna Butin back in October. Through an embrace of technology and a knowledge of the consumer worldwide, Butin has built a powerhouse that's the envy of Europe. They just did a really smart transaction in Poland last week. I also need to call out the performance of the FTSE MIB index.
The primary stock index for Italy, which is up more than 16% for the year. Here, too, right at the top of the list of best performers is an aerospace company, Leonardo, which is up more than 75% year-to-date. After that, it's Iveco Group Envia. It's a maker of heavy-duty vehicles like trucks and buses, specialized vehicles for defense mining and construction industries, as well as industrial power trains and propulsion systems.
That's up 67%. What a conglomerate that is. Telecom Italia also made the top five. It's in the fourth place, up 47%. Apart from that, it's more banks. Remember, the banks were almost going under in Italy 15 years ago. Germany, Italy, and Spain in the same boat with a bull market and arms manufacturers. This setup sounds a little like two 1930s for you. Well, luckily, the Japanese market not doing that well.
After the German, Spanish and Italian indices, there's a big gap to the next groups with France CAC 40 index, UK's FTSE 100 index and the Dutch AEX index all up for roughly 4 to 6 percent for the year. But within each of these countries, we see similar types of outperformance. In France, the top performer is the Bank Societe Generale. That's up almost 75 percent for the year. Aerospace and defense company Fiat.
LA, SA in second place, up over 72%. I'm trying here, okay? And Britain, the top performance, defense-related name, Babcock International. That I find so easy. Up over 65%.
Britain up over 65 percent while another defense play BAE Systems there for the taking in fifth place up 45 percent. Second place, by the way, is a quirky one, Fresnillo, which is about 61 percent. That's precious metals mining company based in Mexico. So it's all about the high price of gold. In the Netherlands, a couple of financials are leading the way. One of the biggest Dutch banks, ABN Amro.
It is up 33 percent on insurance and an asset group and in group is in second place with more than 30 percent gain. I was surprised that I was in Belgium and in the Netherlands last week. I would have thought that those markets doing better because it's just nothing but cranes everywhere you see. So what's the overall pointer? The U.S. has had a great run over the past five weeks. And if we get more headlines like we had today, we're going to be less hostile trade rhetoric. You know, I think our stocks keep moving higher.
But I don't want you to forget that Europe is an option. And this year in particular, it's looking like a very good option, especially when you're talking about specific sectors like aerospace and defense, many other types of industrials and the financials because the European banks are on fire right now. In terms of how to play Europe, OK, you could simply you could look up these stocks or you can pick up some ETFs to track the kind of performance.
like the Vanguard FTSE Europe ETF or VGK, that's the symbol, which is doing quite well, up 17%. Then there's the iShares Core MSCI Europe ETF, that's the IEUR, that's up almost 18%. But many times the largest European companies also have American depository receipts.
The trade here, if you have conviction about a single company in Europe, you can often find a way to get ADRs of that company through your brokerage account. But you might have to do some digging to find that. And please be careful with limit orders, please, because many of these ADRs have thin trading volume. That's why I'm impartial to, not for many reasons, I'm impartial to Santander as a symbol, S-A-N. But here's the bottom line.
I love this comeback for U.S. stocks. I hope it continues. But if we find ourselves in trouble, yet something is still a real possibility, please don't forget that Europe's also an option. In fact, so far this year, it's been the best option. Let's take some calls. Let's go to Thomas in New York. Thomas.
Hi, Jim. Jim, do I have your blessing to start a position in Tesla for my eight-year-old son for a long time? Absolutely. Absolutely. And I'd like Tesla, you know, broke down after that report of the bank quarter. Adam Jonas, my favorite analyst in this space, said, listen, it's time to start thinking about this as a technology company. I went out hard with his. I don't mind being derivative with his idea. Boy, we've caught a lot and we're not done. It's going to go higher. Let's go to Jim in Florida. Jim. Jim.
Oh, maybe it's... Who do we have here? Jim from Florida. Oh, Jim, how you been? What's going on? Pretty good. First of all, I'd like to thank you and your staff for all of your years of helping me during my retirement. Oh, thank you. Thank you. My question...
My question is on Chevron. With the stock down almost 14% in the last year and a nice dividend, might this be a good time for me to add to my position? I think the answer is yes. Get a 4.8% yield. They return a lot of money to shareholders. I think they're doing terrifically. The problem, of course, is you have to like oil to own Chevron. If you do like oil, I think it's a terrific place to be. And thank you for the kind words. The comeback in our stock market has been impressive.
But it comes under pressure again. You know what? You might want to look toward Europe as a great option because it's been a real winner. Hey, there's much more made money ahead, including my check-in with the CEO of AI company EXL. Then I'm cutting through the Wall Street commentary and giving you my take on decision-making in this tariff-focused tape. And, of course, all your calls rapid-fire in tonight's edition of The Lightning Round. So stay with Kramer. Kramer.
You know how smart I think our viewers are. At the beginning of the month, we got this call from Alex in Oregon who asked about a company called EXL. It's a business process outsourcing play with an AI kicker. I told Alex I like the stock. It's basically quite Drupal over the past five years, but also issued an open invitation for EXL to come on the show in order to explain how the unique business has been supercharged by the arrival of the AI era. The company heard these comments, accepted the invitation, so let's check in with Rohit Kapoor.
Now, he is the co-founder, chairman and CEO of EXL. Mr. Gabor, welcome to Mad Money. Thank you, Jim. Thank you for having me. Well, you know, when I had Alex Colby on that, I said, well, it's obviously done well. But then I looked into it. You have quite a company and you've developed it over many years, but it's really been turbocharged. I want to give you the floor, first of all, to let people know how great a company over the last two and a half decades you've built.
Thank you, Jim. So we started the company 26 years ago, and today we are a data and AI-led company that's transforming businesses, helping them grow their revenues and be cost competitive.
AI has been a terrific boon for us. It's something which is powering ahead a lot of efficiency and productivity, and we are right in the midst of it, helping our clients adopt AI into their operations. All right, so tell people, because some people are getting a little skeptical of AI, what were you doing before and what you're doing after AI? How many people you had to do it with before, and how much you're faster and more accurate now?
So, well, we started out as a business process outsourcing company and we basically ran operations. And then we figured out you need to embed intelligence into the operations. So we started to delve a lot more into data and analytics and started to integrate in analytics along with the operations. And then AI came along. And so over the last couple of years, we've been helping our clients
build use cases, adopt AI, and put it into the workflow and make it work for them. Okay, so the natural question is why, if we've heard about, say, a ServiceNow, Salesforce, have we not heard about EXL?
Yes, so because we are in the execution business. So what that means is we make AI real for our clients. You know, today when clients use AI, the failure rate is as high as 70%, which means 70% of the use cases that clients try to build using AI fail. And they fail because either the data is not good or the architecture is not right or the execution simply has not done well.
We think there are three ingredients which are really, really important if you want to be successful embedding AI. And that's number one, you need to understand the domain and the business context because that is the framework under which you can ground the AI model.
Number two, you have to have mastery over data. If you don't have good data, you really can't use AI for anything. And the third piece is AI requires iteration. So it needs to be kind of experimented upon in small cycles. And you need to fine tune it so that it is working. It's something that gives you the right business outcome.
and there is adoption that takes place. So just kind of putting these three things together, that's critical for AI success. Well, I know when I looked through it, you talked about how in health care, the billing, the mistakes are just, it's incredible how much.
The insurance business, with these repeated situations, subrogation, for instance, where you have this, I guess, this body of work, and people keep reinventing it. It's too expensive. Let you invent it. Yes. So here's the irony of it. When you talk about insurance, either you talk about underwriting or claims. Right. On the underwriting side, let's assume you're a small business. You want insurance policy for general liability. Right.
The timeline that it takes for getting that policy quote, just the quote, is three weeks. And the reason it's three weeks is because there's a lot of back and forth on the data and the underwriter is unable to make a decision unless and until everything is provided to them so that they can take an effective decision. With AI, you can actually collapse that time cycle from three weeks to one day. And that's powerful.
Talk about it on the claim side, where so many claims need to be paid out and there is an estimation that there's approximately 5% fraud, waste and abuse when claims are paid out. And that's the big reason why insurance carriers take time in terms of processing a claim and making a payment out. And I think again, you can compress that very, very significantly and the end customer is going to be very happy, the insurance carrier is going to be happy
And, you know, you'd make life just so much easier and comfortable for everyone. And we should point out that two of your most important partners are Databricks, a company we've had on that is magnificent when it comes to data, and NVIDIA, which you work closely with.
Yes. Both of them are special partnerships for us. Nvidia has this ecosystem where it not only has the great chip, but it also has the software on top of that that creates a platform. Thank heavens that you said it besides me. I've been driving myself batty that why people don't understand it's a software and hardware company. Yeah. So it's actually that ecosystem that is very, very powerful and very difficult to replicate.
And then Databricks is a great partnership for us. We've really elevated our relationship with Databricks over the last couple of years. And we think in terms of managing unstructured and structured data, that's a key ingredient that you need to have in place. So at the same time, your company's very fairly valued. I mean, people can come in now. There's companies that are selling 70, 80 times earnings that are doing similar things to yours.
But they may be a little bit more hype-oriented. You know what I mean? Yeah. So, look, I think what we've been able to do is to show consistent growth. Right. If you take a look at it for the last four years. How many quarters have you given consistent growth? Oh, for
For 19 consecutive quarters, we've been able to incrementally increase our earnings and show the growth. So that's been a phenomenal, successful story for us. And not only that, the opportunity set for us right now is fantastic. We have a very strong pipeline. We think that there is a tremendous TAM available for us. And that's only growing and exploding.
When AI first came onto the scene, there was a little bit of haziness. Is this going to cannibalize revenue? Is this going to grow revenue? Which way is it going to go? Nobody really knew. But I think now the dust seems to be settling down. And it's pretty clear that if you use AI correctly, there's a huge opportunity. Well, you make it very clear. I want everyone to go to the website. There's an hour-long presentation just from the Investors Day.
I looked at one of the verticals. There's many hours. But you will very quickly understand what Rohit Kapoor has built here. He's the co-founder, chairman, CEO of EXL. Thank you also, Alex Morgan. I did not know the company. It is an incredibly strong company. Thank you, sir. Thank you. That money's back in for free. Coming up, Kramer takes your calls. And the sky's the limit. It's a fast-fire lightning round. Next. Next.
It is time! It's time for the lightning round. That's right. And then the lightning round is over. Are you ready? Let's get down to the lightning round. We might start with Lou in Pennsylvania. Lou.
Hi, Jim. This energy company had missed expected earnings for four quarters in a row until their recent report on May 6th, which met expectations prior to this. E.T. had not been phoning home. Still positive? Oh, yes, I am. The pipes are a great business. They really are. Let's go to Bobby in Florida. Bobby.
Hey, Jim, I wanted to circle back on a company you did a mini deep dive on almost a year ago on your show. Wanted to get your latest thoughts on Harrow Inc. H-R-O-W. Look, it's going to make money. I care. It's a good business. I don't want to go away from it because if it makes money, then we'll say, hey, wait a second. Why did we get out right before the earnings breakout? So I'm OK with it. Let's go to Amos in California. Amos.
Of course. All right.
3%. So I decided to buy 800 shares of Pfizer, paying 7%. I was wondering what your take. You know, look, I think Pfizer, I think you can bottom here. I do believe, I still believe in the C-Gen acquisition. I know I seem like, I bet I'm alone along with Dr. Borla, but I think that there's a lot of good stuff that they have. So I would say keep it here. Let's go to Nick in Connecticut. Nick. Jim, how are you? I am good. How are you?
Good, thank you. I was interested in your opinion about a specialty insurance company that I've been doing some research on that I never hear too much discussed. And the name is Kin Sale Capital Group. Very good group. Very good. Very good stock. Especially insurance. Good business. Good business, especially right now. I would own the stock. Let's go to Rick in Mississippi. Rick.
Jim, it's a travesty. It's a stain on the fabric of America. What's that? How is it that a man who for 20 years has done so much for so many Americans does not have the Presidential Medal of Freedom? Well, I'll tell you. Actually, I have the Lisa Devla Medal of Freedom because she's over in Italy and I'm here. And I'm telling you, that's worth a lot more. House of Pleasure.
Well, God bless you, man. Thank you for what you do. Of course. Thank you. I like that. Thank you. Jim, please share your thoughts on Manulife Financial. It's good. It's got a good yield. It's John Hancock. I mean, look, all the insurers are really terrific right now, and they have been good for some time. No one's come in underneath them. They're all making fortunes, so I'm not going to go against any one of them. Let's go to Michael in Texas. Michael.
Booyah, Kramer! Hi, that's my daughter. She loves your show. She knows the math. All right. Yes. All right. For years, this stock has given me the hot growth of tech with the juicy dividend of a reed. But the last six months have been pretty rough. Do I buy more, sell, or hold Iron Mountain? No, better places to be. Better places to be. You know, like we have Kim Cole on tonight. Give you a better yield if you've got a better place to go. Let's go to Deep in Florida. Deep.
Hey, Jim. Good evening. It's so nice to talk to you again. How are you doing? Good to talk to you. How's it going? And it's so nice to have you back. We really missed you last week. Oh, thank you. I got to recharge after a very long period, so I feel great. What's going on?
So I'm considering investing in ADT. They've been growing their profitability. So should I pull the trigger and secure my portfolio with ADT? You know, I haven't looked at ADT since I considered it to be a major short for a long time, and it looks like it's coming back. So I can't give you an answer. I have to do work on that one. That had been such a loser. It's frightening. But here it is coming up. Got to find out what's going on. And I do not know. Let's go to Rob in Alabama. Rob.
Hey, Jim, thanks for taking my call. My question for you is, given DVN's current valuation, should I be loading up the truck on it? No, you can't. I mean, Devin has been such a poor performer. I can't have you do that. It's really been a nightmare, frankly. Maybe it's starting to bottom, but oh my, has it been bad. And that, ladies and gentlemen, is the conclusion of the Lightning Round! The Lightning Round is sponsored by Charles Schwab.
Coming up after today's rebound, Kramer's giving you his take on why there may be too much negativity coming from the billionaires and what you should make of this market. Next. Maybe it's my job to keep you in stocks. Last week, while I was away on a barge traveling through Belgium and Holland to study art, I might just spend a few minutes catching up on CBC dot com just to see what's happening.
What I saw is what's become typical of the billionaires who regularly come on our network. Unmitigated bearishness of the tone that would scare most people out of the market. Sell, sell, sell, sell, sell, sell. Do so in a hurry. This time it was from Paul Tudor Jones, a legendary figure, a man I respect greatly for his acumen and his fabulous works of charity. I've had the privilege of helping raise money for the disadvantaged through the Robin Hood Foundation the charity started. I always feel good when I help out because I know everything goes to charity.
But Paul does have a habit of being negative on our network, and this time was no different. Quote, for me, it's pretty clear, he told Andrew on Squawk Box, you have Trump who is locked in on tariffs. You have the Fed who is locked in on not cutting rates. That's not good for the stock market. We'll probably go down to new lows even when Trump dials back China to 50 percent, end quote. He went on to call the tariff exchange's largest tax increase in history. Pertz.
Even if it's only for 90 days, the reciprocal tariffs, the bad ones, so to speak, dropped to 10 percent, way down from 125. Paul was way too negative on Trump being locked in on tariffs. It was easy to say, hey, wait, that's just a state of execution. They'll come back at much higher levels. But surely that could happen, but it's not likely. Second, and perhaps most important, if you took his advice, you would have missed one of the biggest days of the year. Historically, there are only about seven days of huge gains in any given year.
Hence why I say it's my job to keep you in. This stuff's starting to bother me. I went back to all of Paul's appearances in the last five years, and they're all incredibly persuasive about how terrible things are over and over again. His talk is about inflation and recession. You have to be a complete stooge if you hold on to stocks, if you're listening to him. Now, much of what he said probably should have happened.
We should have had runaway inflation. We still might one day. We should have had a recession given how the Fed tightened so aggressively in 2022 and 2023. We didn't, though. We should have sold everything because of the chaos that was supposed to ensue. It didn't happen. Theoretically, Jones was absolutely right to be concerned. However, he was, in a word, wrong.
And he was wrong in the same way as the vast majority of billionaires who come on our air. What's wrong with this? Look, he has every right to express his opinion, of course. I can't ask that he be less persuasive. He's too important a figure to ignore. I admire his candor.
Maybe, though, it'll help if I point out how very smart billionaires are almost always crying wolf in the same way. It's awkward to point this out, but you need to take these guys with a bit of a grain of salt. They almost never like anything, and they seem hell-bent to scare you out of stocks. I can point to multiple moments when we have seen this happen.
In fact, other than billionaire owner of the Panthers, Dave Tepper of Appaloosa, I can't recall a billionaire coming on with ideas that have made you money and being real bullish. Some come on to talk their book endlessly, but most are hopelessly negative. Never a word of optimism or encouragement, even as they must know that there are millions of people watching who hang on their every word. And you know what? If I had a billion bucks, I'd hate Stockster.
do. Stocks are inherently risky. Without much money, they have zero reason to take even an ounce of risk with their capital. Their advice is good if you're also a billionaire, but not that helpful for others. All I can say is make up your own mind. Don't believe someone just because he or she is a billionaire.
It means nothing other than the fact that they have a lot of money. These people are rich enough that they can afford to be incredibly risk averse. But that makes their commentary somewhat suspect for the vast majority of investors, including perhaps you, as you struggle to make money in a market that is going from Dow 1000 to Dow 42,000, in my experience, downtown. That's the same one, by the way, that they can't stop bashing at every turn.
I like to say there's always a bull market somewhere. I promise I'll find it just for you right here on Mad Money. I'm Jim Cramer, and I'll see you tomorrow.
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