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Almost all of the damage caused by an interest rate hike occurs before it happens, Jim Cramer reminded his Mad Money viewers Wednesday. That means selling now along with everyone else won't prove to be a smart strategy.
Cramer said it's been nine years since the last time the Federal Reserveraised interest rates, so many newer investors might not even remember what a rate hike does to the stock market. Typically, most of the selling occurs in the 10 days prior to a rate hike, he said, with the buyers usually returning once the event actually happens.
This will especially be true if the Fed looks at falling commodity prices and decides not to raise rates, or issues a statement saying it is taking a pause after the first one.
But if it looks like the first rate hike will be blindly followed by a host of others, investors should be prepared for the autos and housing stocks to take a beating on repeated estimate cuts.
Cramer said he doesn't blame people for taking profits -- after all, "no one every got hurt taking a profit," as he likes to say. Indeed, when companies like Kinder Morgan(KMI) - Get Report are forced to slash their dividend and Costco(COST) - Get Report the terrific retailer Cramer owns for his charitable trust, Action Alerts PLUS, posts weak earnings, you have to wonder how bad things must be at lesser companies.
But Cramer said he's buying more Costco for AAP because the company has a history of bouncing back from weakness.
If you get out now, you might not be able to get back in before the bounce, Cramer concluded, which is why following the pack right before a rate hike usually doesn't pan out in the end.
Executive Decision: Dan Schulman
For his "Executive Decision" segment, Cramer sat down with Dan Schulman, president and CEO of AAP holding PayPal(PYPL) - Get Report , the online payments processor that had a rocky initial public offering earlier this year but has now seen its shares rise 17% from their lows.
Schulman said PayPal is solely focused on building a digital and mobile payment platform and has over 173 million users and over 13 million merchants around the globe. He said unlike other processors, which have legacy platforms to support, all 17,000 PayPal employees are focused on today's needs including security and customer service. That's why PayPal is growing at almost twice the rate of e-commerce as a whole.
Schulman added that younger users grew up online and are perfectly acclimated to paying with their phones. That's why Venmo, a service PayPal recently acquired for person-to-person payments, did $2.1 billion in transactions last quarter and is growing 200% year over year.
Dollar General vs. Five Below
Cramer said when Five Below came public in 2012, the stock took off like a rocket and was hot until 2014, when things started to cool off. Now, in 2015, things are just getting ugly, with shares of Five Below off 30% for the year and just above the 52-week low.
So what went wrong? Cramer explained that with so much exposure to the Northeast, bad weather can take a toll on Five Below. However, more important, the company has a focus on kids and teens, a segment that is extremely fickle.
That explains how the company went from 8% same-store sales growth to forecasts for just 2% to 3% this quarter.
Cramer said he thinks Five Below's new merchandise and store growth initiatives are compelling, but at 23 times earnings, shares of Five Below just can't compare to Dollar General, which is a superior operator with broader appeal and a stock that trades at just 16 times earnings.
Executive Decision: Tommy Thompson and Rick Finizio
In his second "Executive Decision" segment, Cramer sat down with Tommy Thompson, chairman, and Rob Finizio, CEO, of TherapeuticsMD(TXMD) - Get Report , a biotech working on hormone replacement therapies for menopause. Shares of TherapeuticsMD shot up 38% today on positive Phase III testing results.
Finizio explained that nearly half of all post-menopausal women suffer from a condition known as VVA, but currently only 7% are receiving treatments -- which is why TherapeuticsMD hopes to file its drug with the U.S. Food and Drug Administration in the first half of 2016.
Finizio saidt TherapeuticsMD is here to make a difference and it plans on pricing its therapy in line with current products. He also noted TherapeuticsMD has $80 million in cash on hand and has no plans to raise additional money.
When asked about price gouging in the pharmaceutical industry, Thompson said it does exist at some companies and the government will need to get to the bottom of it and stop it.
No Huddle Offense
In his "No Huddle Offense" segment, Cramer opined on difference between seized opportunities versus missed opportunities.
Cramer said the CEOs at Dow Chemical(DOW) - Get Report and DuPont(DD) - Get Report have been trying for years to do everything they can for shareholders. But in the end, they cannot stimulate global demand for their products. That's why news of a potential merger would instantly create value, providing an opportunity to do even more.
Meanwhile, Yahoo! (YHOO) had the world as its oyster, leading the pack in online search, advertising and communities, only to slowly lose it all. Cramer said when he interviewed CEO Marissa Mayer earlier today, he noted a lack of enthusiasm that was palpable, the definition of missed opportunities.
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At the time of publication, Cramer's Action Alerts PLUS had a position in BIIB, DOW, PYPL and TWTR.