Jim Cramer on if its too late to invest in Tesla

Summary

In this episode of 'Mad Money,' Jim Cramer reflects on missed investment opportunities and explores the concept of 'cult stocks,' where company fundamentals and stock performance can diverge. He discusses stocks like Tesla, Netflix, and Palantir, emphasizing how unconventional factors such as political ties, cultural impact, and rapid growth can drive extraordinary stock performance. Cramer encourages investors to look beyond traditional valuation methods and embrace dynamic market forces, urging a focus on companies that defy orthodoxy as a key strategy for success in 2025.

Takeaways

• 😀 Sometimes, stock opportunities seem obvious only in hindsight, but recognizing them early can make all the difference in investment success.
• 😀 The concept of 'cold stocks' refers to those that trade independently of company fundamentals, driven by loyal shareholder bases, as seen with Tesla.
• 😀 While fundamentals often matter, they don’t always explain stock movements, especially with 'cult' stocks like Tesla, Netflix, and Palantir.
• 😀 Tesla’s rise post-election was largely driven by Elon Musk’s political ties and technological advancements, rather than just company fundamentals.
• 😀 Despite early skepticism, Netflix proved its worth with its global content strategy and ad-supported subscription model, which is now gaining traction.
• 😀 The streaming wars, particularly Netflix’s innovation, are reshaping entertainment, with global hits like *Squid Game* proving its cultural influence.
• 😀 The ‘Rule of 40’ is a key metric for enterprise software companies like Palantir. If their revenue growth and EBITDA margin add up to over 40, they’re seen as strong contenders.
• 😀 Palantir's success came from ignoring traditional Wall Street models, leveraging its unique business model and securing passionate investor support.
• 😀 Conventional valuation methods sometimes fail to capture the true potential of certain stocks, especially when they break market norms.
• 😀 In 2025, the focus should shift to identifying stocks that defy orthodoxy, with an eye on unconventional opportunities and dynamic sectors like tech and entertainment.
• 😀 Investors must be aware of sectors ripe with opportunity, as well as potential weaknesses that could disrupt the current bull market in the coming years.

Q & A

Why does Jim Cramer emphasize the importance of finding the right bull market?

Jim Cramer stresses the importance of identifying the right bull market because, according to him, there's always a profitable market somewhere. He believes in helping investors navigate through market opportunities to avoid missing potentially rewarding stocks.

What mistake do investors often make when analyzing stocks, according to Jim Cramer?

Jim Cramer explains that one common mistake investors make is overvaluing the importance of fundamentals in every situation. He argues that sometimes, like with cult stocks, what’s happening with the company itself may not align with stock price movements, leading to missed opportunities.

How did Elon Musk’s political connection influence Tesla’s stock performance after the 2020 election?

After the election, Tesla’s stock surged because Elon Musk's close relationship with President-elect Donald Trump boosted investor confidence. Musk's involvement in the presidential administration and his influence on government policy, combined with growing optimism about electric vehicles, led to a massive rally in Tesla’s stock.

What factors made Netflix a successful stock despite initial doubts from Wall Street?

Netflix was initially doubted due to its high price-to-earnings ratio and its ad-supported subscription tier. However, Jim Cramer notes that Netflix’s innovative content, global reach, and ability to generate viral hits, such as 'Squid Game,' helped it succeed, and the ad-tier subscription model proved more successful than analysts predicted.

What is the 'Rule of 40' and how did it apply to Palantir’s performance?

The 'Rule of 40' is a metric used for evaluating enterprise software companies by adding revenue growth rate to EBITDA margin. If the sum exceeds 40, the company is considered to be performing well. Palantir passed this test despite initially losing money, and its strong revenue growth led to a significant increase in stock value.

How do retail investors impact stocks like Palantir according to Jim Cramer?

Retail investors, according to Jim Cramer, play a crucial role in stocks like Palantir by driving demand based on their belief in the company and its CEO, even when Wall Street analysts have doubts. These investors often make early moves, buying up shares at the opening or closing of the market, which can influence stock price movements.

Why is Jim Cramer critical of conventional valuation methods in certain stock situations?

Cramer is critical of conventional valuation methods because, in some cases, they fail to account for the dynamics of 'cult stocks,' which are often driven by factors beyond traditional financial metrics, like loyal shareholder bases or the influence of high-profile CEOs, such as Elon Musk.

What role does sentiment and public perception play in stock movements, particularly for companies like Tesla?

Sentiment and public perception are key factors in the performance of stocks like Tesla. Investors’ belief in Tesla’s future, driven by the company's technological advancements and Musk's public influence, often leads them to pay a premium for the stock, regardless of traditional valuation metrics.

What is Jim Cramer's outlook for 2025 in terms of stock opportunities?

Jim Cramer is focused on finding stocks that defy traditional market orthodoxy in 2025. He aims to identify companies with unconventional business models that could deliver strong returns, even if some of them ultimately turn out to be wrong investments.

How does Jim Cramer view the relationship between political influence and stock performance?

Jim Cramer views political influence as a significant driver of stock performance, particularly when CEOs have close ties to political figures. He cites Tesla as an example, where Musk’s relationship with President Trump helped boost Tesla’s stock, demonstrating how political connections can play a role in investor sentiment and stock growth.