If you own the turbocharged growth stocks, be prepared to take the pain or cut your losses at the next rally, Jim Cramer warned his Mad Money viewers on another awful day for the markets.
He said investors must always remember that it's possible to have a great company with a bad stock. It's also possible that bad things can happen to great companies.
Why are the tech and growth stocks seemingly in free fall? In a word, bonds. When inflation heats up, so do bond yields, which makes the future earnings from stocks less attractive. This is even more true for growth stocks, which forego earnings to chase market share instead.
This is called multiple contraction, and it may be a new concept for younger investors but it's something veteran traders know all too well.
For a list of the stocks hardest hit by this multiple contraction, look no further than Cramer's "Woodstocks," a list of stocks owned by Cathie Wood's ARK Invest. ARK (ARKK) - Get Report was all the rage in 2020, posting huge gains, but in 2021, shares of Tesla (TSLA) - Get Report, Teladoc (TDOC) - Get Report, Square (SQ) - Get Report, Roku (ROKU) - Get Report and Zoom Video (ZM) - Get Report are all racking up huge declines. But Cramer, like Wood, takes a long-term view on these names, which can't be kept down for long.
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Executive Decision: Wendy's
In his first "Executive Decision" segment, Cramer spoke with Todd Penegor, president and CEO of Wendy's (WEN) - Get Report, the fast-food chain that just posted a 5-cents-a-share earnings beat with a 13% increase in same-store sales. Shares of Wendy's closed lower on the day, dragged down by the overall markets.
Penegor said he's very excited about Wendy's growth in the breakfast category. He said the company sees strong trials and repeat business and there's lots more opportunity ahead as more people return to work and school.
Beyond breakfast, Penegor noted that new product innovations are also driving growth, as are popular chicken sandwich options.
When asked about capital allocation plans, Penegor said Wendy's will always invest for growth, but also keep an eye on its dividend, which was raised from five cents a share to nine cents and more recently from nine cents a share to 10 cents as the company continues to reward shareholders.
Finally, Penegor reaffirmed Wendy's commitment to 100% sustainable packaging by 2026.
Executive Decision: Wynn Resorts
For his second "Executive Decision" segment, Cramer also spoke with Matt Maddox, CEO of Wynn Resorts (WYNN) - Get Report, and Bill Foley, founder of Austerlitz Acquisition Corp I, to learn more about the company's plan to spin off their online sport betting business into a separate entity.
Maddox said that online sport betting will become a $30 billion to $40 billion business in the next few years. Spinning off their operations as an independent company was the best way to attack this growing opportunity.
Foley added the new company has the potential to become a dominant player in this business and with Wynn's backing and support, it's only getting started.
When asked about the traditional casino business, Maddox said there is a lot of excitement and a lot of customers coming back to their casinos in both Boston and Las Vegas and things are looking up in Macau.
Turning to the topic of SPACs, Foley said there is still value being created, but investors need to look for solid concepts with management teams that can deliver on their promises.
Executive Decision: NortonLifeLock
Pilette said that NortonLifeLock is a security platform for individuals that offers identity protection and privacy features to keep your digital life safe. He said in the old days, if you lost your wallet, you could replace it with just a few phone calls, but on the Internet, your information can appear months or years after a breach and you might not even know it.
NortonLifeLock is continually scanning the dark web, looking for stolen information and will alert customers any time new information is detected. It's estimated that less than 5% of all Internet users are using identity protection services, despite an identity being stolen every three seconds.
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Listen to the Billionaires?
In his "No Huddle Offense" segment, Cramer said there are a lot of billionaire investors out there, but that doesn't mean you should listen to them. He said most billionaires offer nothing special, spouting the same opinions, often trying to scare you out of the market with worries over hyperinflation.
But then there are the billionaires that offer something different and aren't afraid to admit when they're wrong. That's why Cramer follows Cathie Wood from ARK Invest, who is predicting a collapse in commodity prices, not continued inflation. He also follows Stanley Druckenmiller and David Temper, two billionaires that are humble and aren't afraid to change their minds when the facts change.
So the next time you see a billionaire on TV, ask yourself if they're challenging your world view. If you don't hear rigor and common sense, you probably shouldn't pay much attention.
Here's what Cramer had to say about some of the stocks that callers offered up during the "Mad Money Lightning Round" Wednesday evening:
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At the time of publication, Cramer's Action Alerts PLUS had no position in the stocks mentioned.