Because as we go higher and higher, the dow closing at record highs again today. The risk grows, and you need to foe not just the rewards but possibly what could go wrong after this historic run. Dow putting on another up day. Let he give you three familiar examples, amazon, facebook and microsoft. To demonstrate this risk reward, aum three ha all three have that. And they offer a window on ways you can value the stocks. Well go from cheapest to most expensive, first we have the 44 billion that is microsoft. Much better than the previous of that disappointed so many investors. Microsoft is transforming itself from a Software Company to one of the Worlds Largest cloud providers. Now, if you look at it statically, growing at about 7 . Sales at 19 times earnings. Thats right. Even after todays epic 5. 3 move, its nowhere near the Balance Sheet that microsoft has with 100 billion in cash, unbelievable. They pay a 6 quarterly dividend. Thats better than the 2. 1 average yield you get from the s p 500. Why is this to inexpensive . Simple. If its about history. For a long time, it was a also ran. Its previous ceo, Steve Ballmer made a series of bad bets. The last was to get into the cell phone business, with a purchase of nokias phone business, one of the most bone headed acquisitions in history. It precipitated a 7. 8 billion write off years late other. It would have been better to set that on fire. But, as i always say, what matters is the future, not the past. And i think microsofts growth rate is accelerating rapidly because of this cloud that is paying off. Of now, as i said, the previous quarter was a widelypanned disappointme disappointment. I got to believe that microsofts really making Real Progress to the point where i think its selling at 16 times its likely earnings in the year 2018. Thats how you value these Growth Stocks. You dont look at them right now, you look at them in the out years. Microsoft is still, even today an outstanding stock for anyone who wants a fairly decent risk reward ratio. In an era when there are precious few rates to get income, microsoft after this incredible quarter i think represents a strong opportunity. How about facebook . The social media king ping sloesed at 122. These are amazing market caps. The stocks on fire. In part because we learned that Facebook Messenger has 1 billion users, having gathered 200 million users since the year began. Thats a pretty monumental thing in light of the prediggs that people are abandoning facebook for snapchat. You have to compare to its monster 31 growth rate. With that rate, its astoundingly cheap. Because Growth Stocks tend to trade at one to two times their growth rates. This was at the bottom end of the range. Its cheap, relatively. More important, i think, facebooks growth rate is accelerating here. Right now it looks like the stock is trading at 20 times again. Puts it on the same footing as the average stock on the s p 500 on the outyear numbers. I think facebook could earn a lot more than the current wall street estimates. This thing may turn out to be 17 times 2018 numbers. Now Facebook Like microsoft has no dividend. And its in a fastermoving the space where someone could come out of nowhere with a better mousetrap. I mean, who ever heard of pokemon go until a week ago . Or who would have thought that apple has no growth. That said, i believe facebook is relatively inexpensive, suitable for those individuals willing to take on some risk in order to get a lot more reward than youll ever get from a stock like microsoft. Now heres the real quandary. Amazon. Heres a company that doesnt really trade on earnings at all. Or you clearly never touch the stock. Because if you actually rtried o compute it in the way that you did with microsoft or facebook, its just not easy, paubecause trades at 117 times next years earnings estimates. So why is it so difficult to nail down . Because amazon doesnt play by the rules. There are points in time where it doesnt really care about what it earns, because its interested in rapid growth above all ilelse. It will sacrifice. If it sees a way to grow rapidly in india, for example. It might be willing to take some hit to its bottom line to stop the bentonville giant. You dont want this company to pay a dividend. Because that would mean its ceo, jeff besos couldnt come up with a bottom line. Its amazing. Its aprs anticipated to have billion in sales. Amazon, you really have to believe that it will do the same thing to every other retail category that its already done to books and electronics and even apparel. You have to believe amazon will destroy the mall if it thinks it can advance far past its Closing Price of 745. Amazon might very well be able to do that. The rest of the Retail Stocks are sure trading as if thats whats going to happen. For me, that means if youre a Young Investor and you take a lot of risk, as this stock is risky by nature, given its hard to nail down valuation, amazon is definitely worth it. Witness the amazon button its offering in your house that you can push, instantly order dozens of household items. Witness the sameday selling that can make it more convenient than walking across to the store. Theres nothing in this companys dna that makes it think it cant disrupt retail. So heres the bottom line. You need to assess your risk and reward after this gigantic increase in the averages. Microsoft is close to ideal for anyone who needs income and is not looking for a home run. Facebook may turn out to be a lot cheaper than it looks. Could be ideal for a growth seeker. And amazon . Leap of faith. If you believe, by all means, do some buying. But recognize that a lot more things have to go right for this thing to keep climbing. Even as history suggests, thats exactly whats going to happen. Lets take calls. Lets go to ken in south carolina. Caller booyah, jim. How are you today . Im doing great. How about you . Caller im good. Ep, would you hold it or go into a technology or possibly a tobacco . Tobacco, if you want yield, youre not going to get the kind of risk you get with bp. People dont think that the problems are behind them. I think the big environmental problems are. Im just not recommending a lot of fossil fuels here. Tech, i mean, i would be in a microsoft, i would be in pretty much any of the big tech stocks that we talk about all the time, more than bp, because at least you get some growth that way. Coty in new york. Coty. Caller hello, mr. Cramer, pleasure to speak to you, sir. Thank you. Whats up . Caller first id like to thank you. Ive a longterm investor. Its been indispensable for my financial growth and instruction. Thank you. Caller may question is i am fairly light on retail, i want to know the about walgreens stock or whether you prefer cvs. Walgreens is buying rite aid. I think judging where its trading, a couple bucks below where its supposed to be bought, i think that deals going to fall apart. I dont care anymore. If that paulsfalls apart, i thi wa walgreens will buy its own stock back. On mad tonight, pets arent just for comfort, mans best friend can help warm your wallet, too. Then, with the market on quite the tear, im going to tell you why its not all good news. Youre not going to want to miss that. Oil just came down. Im cutting the core of the issue with a ceo. So stick with cramer. Dont miss a second of mad money. Follow jimcramer on twitter. Have a question . Tweet jim, at mad tweets. End an email at mad mcnbc. Com. Its time to discover that in a lexus suv. Theres no such thing as adverse conditions. Come to the lexus golden opportunity sales event this is the pursuit of perfection. S as the market continues rm rerent russry to work its way eyer, i want to circle back to pets post of its spent on cats and dogs, its the humanization of bets. I wanted to beat the heck out of our puggle who raced across t highway. Weve gotten to the point where some pet foods cost as much as human food. We only ehighlighted idxx, the animal dying fog particular. I want to cover all the other ways you can play this theme. Pet food is a big cat goegory. Blue buffalo is all about premium pet food. The stuff at that you can forgive yourself for. At the make treats for dogs and cats, blue Life Protection formu formula, blue wilderness. We think it tastes good, not that we would fknow. A couple weeks later the stock peaked, trending at 15. 50. Its been on a rebound, bouncing up to nearly 26. Given the momentum, its not hard to imagine them making new highs. Heres the thing about blue buffalo. Its been less about the fundamentals than the correction valuation. Given at that its accelerating, i at this its reasonable to think that it deserves to trade at an e higher price. Next theres fresh pet, its so highend at that it has to be refrigerator eighted. It went into a tailspin. And it didnt help when we heard mold was found in some products. I had to stop my kid from making a sandwich of the stuff. How about the numbers . Fresh pet has faster groechlt its decelerating. Its not something i can get excited about. Lets start with jm smucker. It makes meow mix, a host of others. Now smuckers is giving you a 17 gain. Its up 5. 5 since last month. Hen hen henry shine. It accounts for 27 of the k companys sales. Especially its given a platform for animal products. I got one pour name. C echle centa. Toys, pet carriers. Where do i come down on these . We need to choose between blue buffalo. I told you to avoid them. It turned out to be a good call, because they went into free fall. It was about growth. And people didnt want it. Right now, i like blue buffalo. Trading at 30 times next years earnings estimating. How about the more diversified, like jm smucker . This one this ones fritriblgy. At the moment, id recommend smuck smucker. I would buy the rest when it comes down 5 to 8 to get a better basis. As for central garden and pet you invest if blue buffalo or smucker or henry shine. A fabulous place to invest on any scare, whether it be from the fed or overseas or from the p madness of the upcoming president ial election. Dont make a move until you hear my take. And a Company Completes 8 million deliveries a year to homes, maybe yours. Ive got the ceo. Could be an interesting story. Stay with cramer. Ive got some good news and some bad news. Let me give you the bad news first. The markets gotten quite expensive. Of a this huge run, the s p 500 now sells at 20 times earnings. Not like the 29 times valuation we had the week before the great crash of 87, but its not cheap, like the 15 times weve been in the last few years. There are only two ways out of this, either the stock market comes down to make it cheaper. Or the companies in the s p 500 start earning more than we expect because things are better than we expect. Hallelujah and i believe the latters happening. I believe the s p will be cheaper. And valuations will be less expensive, allowing us to get out of this. What makes me so sanguine . Lets deal with companies that have reported in the last 2 h4 hours. Lets start with microsoft. Last night, microsoft delivered a quarter with 1 huchb growth in its cloud big but saw better than expected numbers. The company took pains to talk about how good the personal computer business is. Said it was selling better than expected levels in the developed world. Now i believe that the ceo of microsoft is back on track. After stumbling the previous quarter. Thats why this huge stock soared. Whats more relevant is you cant see this kind of stock unless you have an economic tailwind going for you, both here and worldwide. In other words, we may be breaking out of the prison of anemic revenue and corporate profit lines that have made the valuations of Companies Look steeper than they are, its all good news. Second instance . Illinois tours. Heres one of your basic industrial companies. It has a lot of cyclical parts to it. It can grow without a strong economy, so it wont blow up on a quick slow down. The maker of industrial fluids among other products reported sharply better than expected. Now you simply dont get that kind of beat and raise quarter that Illinois Tool Works deliver, one that proi pelled its stock up to 3 higher. Its not booming. Globally, because only 46 of the companys business is domestic. Centas. It rents out uniforms 900,000 businesses. You dont order more uniforms when youre shrinking your workforce. Now centas earned 1. 08 per share. It guided up its revenue forecast substantially. Thats a fantastic sign of expansion. It has to mean things are getting better, and not just for centas, which rallied 9 on the news. Heres the bottom line. Microsoft, Illinois Tool Works and sen tass, all higher on better than expected numbers that signaled morrow bue robust growth. Thats how on betting will beat the nose bleed as we enter an economic expansion. If we didnt get the economic expansion, i would tell you to sell, sell, sell, sell. Simply, because like Dustin Hoffman admonished lawrence olivier, its not safe. Be careful. With these numbers, maybe its safer than we think. Dennis in texas. Caller yes, a big sad booyah from texas. Whats going on . Caller my family thanks you throughout the years. My big question is mfa financial. I bought it for about 7. 5 some years ago. I have twice my shares back at this point. In the past, of course that nice dividend north of 10, but in the past, you said its kind of hard to figure out in kind of a black box, and you like more traditional, can you dwell on that a little bit for me. They do mortgage residential. We dont know what they open. We know during the great crash a lot of these companies did quite poorly. That company does not offer a lot of transparency about the assets it has. That said, youve reinvested in the dividend and done well. I just Like Companies a little less opaque. Jt. Caller i have an investment in ford. Its been stagnating. Do you have any idea why . I want you to hold it. I think a lot of people think the Auto Industry is challenged. Theyre worried about selfdriving cars, uber, people not getting licenses when they turn the age when you can drive anymore. Ford has a good yield. Ford has a very good book of business. Lalten americas still i have bad. I think youre fine. I would hold on to ford. Don in new york. Caller hello, jim cramer, thank you, thank you a million for helping me build what i call my beloved portfolio. There you go. Guy likes his stocks. Caller thank you, thank you. My question is about a Food Service Equipment manufacturer out of florida. I call it the company. And they mailed my catalogs of all their equipment. Okay. Caller and its beautiful. And its called manta wok. I wanted to put it aside and give us that pure food service company. That is a winner. And i would do some buying. Theres no use denying the markets are expensive. They may end up being cheaper. Much more mad money ahead. With so many unknowns in the oil and gas sector, im drilling down for answers. And could Xpo Logistics start the shifting in your portfolio again . Our very special edition of the lightning round. So stick with cramer given that the price of oil seems to have found some stability, say, in the mid40s, which is exactly what you would expect given that you have a lot of supply coming on, what do we make of the Oil Service Stocks . How about a company like corps labs. Cob. They use their technology for rocks and reservoirs, helping clients figure out where to drill. It peaked in 2014. Stock is now down more than 40 . But it is starting to bounce back. The company itself bought them. And the stock has rallied nearly 50 , 50, putting up nearly 14 . They have slightlyhigher than expected revenues. Lets take a closer look with the chairman, president and ceo of corps labs to find out more about the quarter. Welcome back to mad money. Hey, thanks, jim. Our 13th time on mad money. We know thats a good number. Youre sticking by this idea that there is a vshaped recovery happening in oil. It seems like every time we get to 50, david, we then go back down. How do we penetrate that 50 level with more Companies Hiring you to find more oil . One of the things that happens is we have a lot of small producers, end pipts producers. Thats a good target to get through. Once we break through, were probably heading up to the 60 range. So as the demand continues to increase, which we see, and we still see supply falling in the u. S. , yearoveryear, were down now over 1 Million Barrels. Were losing month on month, about 100,000 barrels of production, and by the end of the year, wei could be down another 500,000 to 600,000 barrels down from the peak of 9. 6 Million Barrels in april of 2015 to around 8 Million Barrels a day by the end of this year. That tightens the crude market, and that should push crude ahead of that 50 market that is such a resistance level. Okay. I want to try to balance that against the fact that more people are hiring you. Business is a little better than the previous quarter. Halliburton said theyd seen the bottom. At what point do we have this selffulfilling prophecy that more people hire corps lab, more people find oil and were stuck at this level for longer than you think . The laws of physics are i am mutable. And the decline curve never sleeps. So the overwhelming decline curve is about 10 , maybe more yearoveryear to overcome that were probably going to need to double the rig kouchts for about a year and a half, use corps lab technology. That should get us back to the stabilization of Oil Production in the united states. So its going to take that kind of an effort to stabilize production in the u. S. And to do that around the globe. It probably will take even a longer period of time. Lets talk about around the globe. It might be great for people to understand, youve got a best example, in reservoir description. What youre doing deep water for exxon. Its amazing. Yes, correct, if you look at the liza ii prospect that was drilled it isle 800 million and 1. 4 billion barrels recoverable. One of the largest discoveries in many, many years. Opposite that, on the coast of africa, we are also working offshore senegal on a parallel geologic structure that is also probably going to be a giant oil field in the making. So those two projects probably will start supplying crude to the market some five to seven years out. And in five to seven years, were going to need every drop of oil from those two, giant oil fields in waiting. The south africa, south america, one in guiana. What price are those profitable at . Are they profitable right here . Yes, costs have come down for drilling and developing these wells and then for the infrastructure, top side to produce that, some billions of dollars have been taken out. You look at bp, the mad dog ii project in the gulf of mexico, theyve taken billions of dollars of cost out of that project. That makes these projects somewhere between 50 and 60 oil very economical, and gives them a nice return to their shareholders. How about onshore. Youve got an example of trying to get a little more from mobi . L we thought this was possible. Remember the recovery factor from u. S. Shale is about 9 . By injecting co2 and loosening up more natural oil and gas, we can get that recovery factor to 13 , 14 , 15 . It helps in the of scoop and the stack in oklahoma. Last question. You did say, listen, increasing demand, what gives you a feel even with cars that are using less oil every year, even with the world not growing that much. What gives you such confidence that the demand sides going to get stronger and pick up . You know, jim, were mainly quoting eia numbers there. However, if you look at the eia numbers here in the u. S. , last week our gasoline usage per day went up to over 10 Million Barrels a day of gasoline usage. Thats a near record high. So, as america goes back to work, were going to burn more gasoline in our cars. Led by india, china and demand here in the u. S. , we pretty confident that that demand level stays at a pretty constant level, and thats at about a plus 1. 4 Million Barrels a day yearoveryear. That would bring it into balance and more so. Youre absolutely right. David demshire. Thank you for having corps lab back on mad money. Corps lab is a company that did well throughout the trough, its not going back to 28. Im not as certain that its going to go right from 50. This is a very wellrun company. Mad moneys back. Hey there. Hi, im looking for a deal on an iphone. I was thinking, something along these lines. Oh, okay. Well, how about this . Heres my answer. Is this you with a dinosaur body . Its just me with happy hands. It just means ill take it. Right now, buy an iphone and get another one free when you add a second line. Will your business be ready when growth presents itself . American express open cards can help you take on a new job, or fill a big order or expand your office and take on whatever comes next. 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With Liberty Mutual new car replacement™, you wont have to worry about replacing your car because youll get the full value back including depreciation. And if you have more than one Liberty Mutual policy, you qualify for a multipolicy discount, saving you money on your car and home coverage. Call for a free quote today. Liberty stands with you™. Liberty mutual insurance. It is time time for the lightning round sell, sell, sell, sell [ buzz ] and then the light nning rou. Lets start with cory in massachusetts. Caller jim, thanks for having me on. Hope all is well. All good, whats going on . Caller the allergan deal is going to be closing very soon. And thats going to cause an uptick in m a activity. And i think its way overblown, but when m a heats up, what do you think of this stock . For the exact reason you indicated. I, too, many frustrated. I do believe the allergan money will come in in the next few weeks. Lets go to howard in new york. Howard . Caller hello, jim, howard from new york. Thanks for taking my call. Of course. Caller id like your buy, sell, hold opinion on communication sales and leasing. We like digital. This is a red hot stock. And i think its a good one. Theyre all trading at their highs. But i like you, i like this. It has a good yield. Lets go to south carolina. Caller hey, jim. What about monsanto . Theyre in talkover talks. I would not the stock on an earning basis. I would not touch it at this level, and that, ladies and gentlemen, is the conclusion of the lightning round. The lightning round is sponsored by Td Ameritrade. Thay Trading Platform wherever i go. You know that thinkorswim seamlessly syncs across all your devices, right . Oh, so my custom studies will go with me . Anywhere you want to go the markets hot sync your platform on any device with thinkorswim. Only at Td Ameritrade an ordinary experience into an extraordinary one. Get great offers at the lexus golden opportunity sales event. Lease the 2016 es 350 for 329 a month for 36 months and well make your first months payment. See your lexus dealer. Wont replace the full value of your totaled new car. The guy says you picked the wrong insurance plan. No, i picked the wrong insurance company. With Liberty Mutual new car replacement™, you wont have to worry about replacing your car because youll get the full value back including depreciation. And if you have more than one Liberty Mutual policy, you qualify for a multipolicy discount, saving you money on your car and home coverage. Call for a free quote today. Liberty stands with you™. Liberty mutual insurance. 12 the last time we checked in with xpo, they were coming off a tricky few months, with their recentcquisition of conway. It is down from a year ago. So what do we make of this unique Logistics Company . Before the 3 billion conway purchase, they snatched up a european shipping company. They posted a smaller than expected loss. So can this stock get some lift here . I think this company has its pulse on global commerce. If it can do well, the whole stock market can continue to levitate. I want to take a look with the chairen wh chairman and ceo. This is actually a kind of a seminal moment. For the last five years, weve purchased 17 fantastic companies. Weve built the company like a tank, put the whole infrastructure in place, the technology, and now were reaping the benefits of that. Youve found some refinancing that makes it so i shouldnt be as nervous. We raised 2 2. 5 billion in equity. It looks to me that you caught the bottom in europe. Are you seeing that . It was luck. Better to be lucky than good. I was just over in the uk and in france and spain for a couple weeks recently. The mood is better than there than its perceived to be from here. And brexit, i understand that you are hedged. Currencys fully hedged till the middle of next year. Most of our business in the uk is contract logistics, very stable, longterm contract business. Youve got your pulse, really, on pretty much everything. And technically, the omni channel. I want you to describe to people, your macys, home depot, lowes, youre the other guy, hows that business look . We do it on both ways, we deliver the last mile to the houses, home electronics, appliances, but we take the reverse logistics, the returns, which is a fastgrowing business. Its pretty new that people are buying heavier equipment. The heavier stuff is in vogue, and you have a huge market share in that. Queerwere an a leader. Five, six, seven years ago you wouldnt have bought a stove or refrigerator on the internet. You have 35 of the business coming from mexico . Of the trucking business in north america. What are you bringing from mexic mexico. White goods mainly. Auto parts and fullfinished autos coming back. Where do you think we are in the full Global Economy . Our view is this. Things just arent as bad, but there actually may have been, like your company, a bit of an Inflection Point in the last couple months, where despite brexit, it looks like things are better. You kneuropes in a differen of the cycle. Theyre not raising rates, theyre almost having negative rates. Theyre p theyre putting capital in the market. Its more buoyant than it is here. Thats not what people are thinking. I wonder how you can change peoples impression on that . Show the results. Now i want to talk about the concept, we had a guy from federal realty, a graeat shoppig center company. He was saying amazon isnt necessarily what you love. Weigh lo we love the cop septembncept oft now. Whether people go into bricks and Mortar Stores and buy it, it we deliver. This is from the Postal Service. Why is the Postal Service using it . We have two things, contract logistics for the Postal Service, and weigh a are a cust in that we go into the big warehousing and do next to the last mile. We go in at 2 00 in the morning, put them on the truck, get them to the post office so our customers customer can get them delivered by 8 00 in the morning. I was concerned that you were going to continue to buy things and instead you should be integrating. Are we done for now . Do you need to do more acquisitions . Youve done a bunch. Now isnt it time to take out costs and watch the cash flow bloom . We are going to do about 1. 25 billion of ebid of. Im very bullish on the company right now. If you do believe that the economys getting better, Xpo Logistics might be the way to go. You heard him, its an Inflection Point. I believe it. Stick with cramer. If you do believe that the [beekeeper] from bees to business expenses, im in charge of it all. So ive been snapping photos of my receipts and keeping track of them in quickbooks. Now im on top of my expenses, and my bees. Best 68,000 employees ever. Thats how we own it. All right, three good, one not so good, united rentals. Soaring. Qualcomm, very good, china orders, i think that matters. An internet structure company. And a lot of people think that companys going to get a takeover bid. Intel, on the other hand, the stock had run. So that ones taken a bit of a pause. Theres always a bull market somewhere, i promise to find it for you right here on mad money. Im jim cramer, and ill see you tomorrow male narrator tonight on the west texas investors club. We have built a wristband that allows you to save the last minute of anything you hear. Were asking for 750,000 for 10 . Lets try it out with yall. Pick up some clues thatll lead us to the treasure. Everywhere you go. These tunnels may contain the treasure you seek. [speaking spanish]. Everybody who goes there come out cursed. Little soya is a lowsodium, glutenfree, nongmo soy sauce. Weve raised 2. 5 million. How much you got left . 30,000 to 50,000. [eagle cries] narrator deep in the heart of texas, two men carved a fortune