Jim Cramer's 'Mad Money' Recap: The Perils of Competition

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When it comes to stock prices, competition has a lot more influence than you might think, Jim Cramer told his Mad Money viewers Wednesday. If there is just enough competition, Cramer explained, stock prices are kept in check, but too much will crush you, while too little will cause prices to soar.

That's extremely apparent in the airline industry, where today's announcement that Southwest Airlines (LUV) is reducing capacity sent shares of the entire industry up sharply. Southwest closed up 4.6%.

Over in the tech sector, too little competition for memory chips gave Western Digital (WDC) better than expected profits, sending those shares up 12%. Cramer recommended Micron Technology (MU) as his pick in that sector.

To the other extreme, however, is Sprouts Farmers Market (SFM) , which plunged 13.7% today after announcing flat same-store sales. The problem there... too much competition. So much that even the venerable Whole Foods Market (WFM) fell 5.2% on the news.

Executive Decision: Steve King

For his "Executive Decision" segment, Cramer spoke with Steve King, CEO of Dave and Buster's (PLAY) , the restaurant and gaming center chain with 85 location that today posted a six-cent-a-share earnings beat but with only a 1% increase in same-store sales. Shares of Dave and Buster's fell 1.9% on the release.

King feels positive about his company's outlook for the rest of the year but acknowledged that macroeconomic pressures have been hurting all of the casual dining space.

When asked about advertising and promotions, King explained that national cable television advertising has remained the most effective type of advertising for Dave and Buster's, with live sporting events being particularly effective.

Cramer said he is encouraged by the fact that Dave and Buster's stock did not go down more on the news. However, he was concerned that this consistent high-flyer has hit some unexpected turbulence.

Executive Decision: Howard Schultz

In his second "Executive Decision" segment, Cramer spoke with Howard Schultz, chairman, president and CEO of Starbucks (SBUX) , a core holding of Action Alerts PLUS.

Schultz commented on Starbucks' new original series, Upstanders, which features the stories of ordinary people doing extraordinary things. He said that with so much divisiveness this political season, Americans are hungry for uplifting stories. The series is not about marketing or PR, Schultz added, it's about being a good citizen. Starbucks has always been about investing in its people and the communities it serves.

Upstanders also allows Starbucks to uniquely leverage its mobile application and give its customers something to watch in the two to three minutes they typically wait for their beverages to be made.

Beyond its media endeavors, Schultz said Starbucks' business is healthy around the globe and despite being a mature company, he still feels the biggest and best opportunities are ahead of them. Starbucks has many new initiatives and expansions underway, not the least of which is opening roughly one new store a day in China.

Hurray for Bill Ackman

Americans tend to forgive and forget, Cramer told viewers, and now that Chipotle Mexican Grill's (CMG) food crises are in the rear-view mirror, the markets will soon forget all about them.

That's why the news that activist investor Bill Ackman has taken a 10% stake in Chipotle sent shares surging 5.8%. History says that Ackman is buying at the bottom and you should be, too.

Cramer said he doesn't expect anything good when the company next reports earnings, but beginning next quarter the comparisons will get a lot easier and analysts will begin their upgrades in anticipation of those earnings beats.

Cramer reiterated his buy recommendation of Chipotle under $400 a share and told viewers the time to invest is now, before the markets take notice.

Lightning Round

In the Lightning Round, Cramer was bullish on Walt Disney (DIS) , Tech Data (TECD) , Avid Technology (AVID) , Adobe Systems (ADBE) , IBM (IBM) , Cummins (CMI) and Caterpillar (CAT) .

Cramer was bearish on Corrections Corp of America (CXW) and Sage Therapeutics (SAGE) .

Executive Decision: Mick Farrell

In his final "Executive Decision" segment, Cramer sat down with Mick Farrell, CEO of ResMed (RMD) , the medical device maker that treats breathing disorders. Shares of ResMed are up 25% so far this year.

Farrell explained that ResMed helps to move patients from hospitals to their homes by providing portable ventilation devices to help with breathing for such conditions as sleep apnea. The devices not only improve the quality of life for patients but also save on hospital care expenses.

Farrell said ignorance is ResMed's biggest competitor -- nearly 89% of patients who have sleep apnea don't know it, leaving incredible opportunities for growth. ResMed is also a leader in technology, with over two million cloud connected devices that continually sends data to physicians and patients alike to improve their care.

To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.

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At the time of publication, Cramer's Action Alerts PLUS had a position in SBUX.

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