First of all, nice to meet you all who are joining us for the first time. Your participation in the CNBC Investing Club means a lot to us. We want to do right by you, just as our wonderful club members explained to us while gardening together this weekend. He couldn’t believe how much he learned and how successful he was from it. I have nothing but gratitude to him. Here’s why: At Goldman Sachs from 1983 to 1987 and at Kramer & Company from 1987 to 2001, I successfully guided the process of making money for some of the world’s wealthiest people. It meant little to most of them. I was also involved in some of the assignments. For lack of a better verb, I busted it out, but only one soul, a very rich and creative soul, thanked me, and no one else. But that’s not how things work at the club now. A gardener friend of mine said he was happy to learn about stocks. It wasn’t because the fees were a fraction of what they were charging before. This is because you can understand why stock prices rise and fall. We talked about our disappointment with Microsoft and whether we should kick it out. I expressed doubts about the company in the age of artificial intelligence and what it could do for its core, clunky Windows product, but I wondered whether Amy Hood, the cloud and software giant’s prodigious CFO, could tolerate that much of a performance drop. I wondered if I had gotten too close to Marc Benioff, the special man who invented the company that developed the products I love so much. We’re talking about Salesforce, which has $40 billion in sales. It is a small position in the club’s portfolio and it is now feeling the pain. I’d like to give Salesforce and struggling Nike one more quarter. Then you must try the “Calas a la Mode” lunch. Nike has a chance simply because its last quarterly conference call gave it a small right to endure endless pain. It’s okay if it goes up or nothing happens. Most of the time we talked about winners. It also included two “proprietary, non-trading” names: Apple and Nvidia. Apple’s quiet upward momentum is a great joy. It closed at a record high of nearly $309 per share on Friday, and is up about 13.5% year-to-date. But who isn’t worried about the upcoming departure of our great CEO, Tim Cook? As the saying goes, the hardware specialist’s incoming CEO John Ternus should be able to enjoy a continued earnings binge. What about Nvidia? Let’s talk about it. Nvidia still brings me great joy. This weekend I got eggs, ham (unfortunately not Taylor ham), and cheese. Upon my order, the cook wrote “Nvidia” on the ticket instead of my name, another proud club member. I was tickled. But we’re talking about, “What have you done for me lately?” I wish I could have explained what should happen during the trade to give this stock a shot again. Indeed, there’s no denying that Nvidia lost some of its luster this quarter. This was a real crash, but the stock price fell significantly. In short, unexpected financial results no longer mattered to this giant company. The skein of success in stocks is over. Market cap is worn out. The title of World Heavyweight Stock Champion will soon move on to another title. It swelled while it lasted. Or do I need to put a question mark at the end of the sentence? I’m not sure. But it got me thinking. How do you manage to be more than a dud while experiencing highs and tremendous surprises?Of course, you could argue that the stock’s rise from $180, to a record closing price of nearly $236 on May 14th (with less than a week to go until last Wednesday evening’s close), was built to last. I can handle that analysis, but we’re talking about the playoffs here and your ability is only as good as your last effort. Other stocks also won. Is it time for us to admit defeat and strip stocks of their “proprietary, non-tradable” title? perhaps. But I think it’s time for the company to start a different direction related to capital allocation. It’s a strategy that has worked very well for Apple over the years. A long time ago, Apple’s Luca Maestri became the first CFO to truly understand the power of raw cash on the balance sheet and what it meant for shareholders. My life and times under his ten-plus year regime were turbulent at times, mostly due to my ignorance and stubbornness about the need to grow by acquisition. I suggested a long, long time ago that Apple should buy Netflix, but I now think that could be considered a blessing in disguise, given that the company’s stock price was $25 billion at the time. In a rigid organization like Apple, that prompt can only be followed for a short period of time. Organic growth is what matters, and Apple had that in spades. But in the Cook era, that wasn’t enough. Tim could have invented a car that ran on water, but that wouldn’t make much sense to some greedy shareholders and critics. I like to say that the good times are behind us, but I first heard this when this $4.5 trillion company was trading at about $500 billion (yes, that’s $1 billion with a “B”), not at a price that would allow it to overtake Nvidia at this pace. Nvidia is still a $5.2 trillion company. Not too shabby. So what would Luca have done with Nvidia? I don’t think he would have tolerated even such a long period of underperformance. He intended to aggressively pursue a dual plan: significantly increasing annual dividends and massive stock buybacks that resulted in the company canceling more than a third of its stock over a 10-year period. I know Warren Buffett often talks about the trips to Dairy Queen, the young people glued to their iPhones, that led him to take a position in Apple stock. It would have always been a curiosity if it weren’t for the $35 billion to $36 billion he’s amassed since 2016. It was something else entirely that made it his greatest position, and what was his first love: spectacular share buybacks coupled with generous dividends. The king of all stocks always professed that his true love for owning stocks centered on how the company itself let him become a bigger part of it by simply buying back its own shares and forever sharing in the profits and rewards from the process. Apple’s products were its source of funding, and stock buybacks and dividends were its sustenance. It’s time for Nvidia to recognize its status as a solid growth company and do more for its shareholders. The company must accept that its graphics processing units (GPUs), central processing units (CPUs), and networking products are money, and that stock buybacks and dividends are money. Jensen Huang’s semiconductor giant began the process by offering huge (some would say huge) share buybacks and a sizeable dividend. But neither of them reach the sky presented by Apple. Nvidia needs to show that it wants to reduce its float (currently 24.2 billion shares) while increasing buybacks to backstop investors, whether it’s CPUs, GPUs, or anything quantum computing can offer as far as I know. With all the things it needs to do to stay ahead of the game, how can Nvidia ensure that it does so? I don’t think just devoting its current cash will be enough. Nvidia needs to start systematically reducing the size of its investments after Jensen frequently wins in the process of anointing the winners. Take Intel, for example. Nvidia bought $5 billion worth of Intel stock at $23.28 per share. Intel’s stock price is currently $119 (not far from its all-time high of $129, which closed on May 11th). I think Intel will go even higher. But if I were running Nvidia’s books, I would say it’s time to cover the costs and play with home money. This means you’ll earn far more than the $5 billion you invested. That investment can easily be applied to share buybacks. Every year, more and more things can be removed. Other investments can play the same role. As each one is completed, the others should also come off. The invested companies do not generate very large profits. They still play on the field. Secondary could be a form of shareholder return that changes the stock price equation, much like it did with Apple. It is believed that a defeat of the law of large numbers is in progress, which will result in many companies providing semiconductor companies with support they did not expect. Unfortunately, Buffett is not available to take advantage of this moment. But he has enough followers that I have to assume that the shareholder base will sadly change from fickle to more breadwinner. I’m not looking for a once-a-year weekend of love. NVIDIA holds the GTC event every year for this purpose. I’m just saying that it might stop the tyranny of an option wall that keeps one group of shareholders holding back the stock. Did you catch all the phone photos I showed from the floor of the New York Stock Exchange?Each element works against the increase in value as the pros crush excessive profits, typified by the high premiums generated by amateurs. They are gluttons seeking punishment. Without this capital return program, I fear we will soon have to question the wisdom of Nvidia’s big position. No, it’s not an expulsion. Just being aware that the punching bag nature of being a shareholder can cause an exit each round. They don’t want to wait for the referee to raise the hand of the winner and new champion. Why do you think the Apple program will do well? It’s simply because Apple isn’t experiencing explosive growth. That ended years ago. All that matters is the consistency of your return on capital. Now I’m back in the garden with my family during planting season. We are holding a club meeting this week. Please join us. Jim Cramer’s Charitable Trust is a long-time seller of CRM, NKE, AAPL, and NVDA. See here for a complete list of stocks. ) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
