At this point in the business cycle, every company wants to be seen as a secular growth stock, Jim Cramer told his Mad Money viewers Wednesday. That's because with interest rates on the rise, no one wants to be seen as a cyclical stock. But investors need to approach these stocks with skepticism, because not every company can pull off such a transition.
There are lots of companies that have made the jump from cyclical to secular grower, but none more successfully than Micron Technology (MU). For years, Micron was merely a commodity memory chipmaker, one beholden to the boom-and-bust cycles of mismatched supply and demand. But then the company changed its stripes, diversifying itself into a high-end chipmaker for all of today's hottest markets. Micron hasn't been able to completely shed its past however, which is why shares rose on strong earnings Wednesday morning, only to fall 3.5% by the close as investors feared a slowdown in its forecasts.
Devon Energy (DVN) is another company that has been able to successfully become a secular growth stock. Oil producers were notoriously undisciplined, that was until Devon instituted a variable dividend and made a commitment to return more money to shareholders. Now, the company can provide shareholders with stable growth no matter where oil prices are at the moment.
Even companies like Deere & Co. (DE) have been able to break free of the boom and bust of agriculture to reinvent itself as a provider of high-tech farming equipment.
That's not the case with high-end furnishings retailer RH (RH), which finds itself still at the mercy of consumer demand. That's also the case for automakers, who will soon suffer as auto financing prices many buyers out of the market. Only Tesla (TSLA) seems able to buck this trend and continue its trajectory as a secular growth company.
Executive Decision: Paychex
Macroeconomic data can only tell you so much about what's really going on in our economy. For the rest of the story, you need to check in with Marty Mucci, chairman and CEO of Paychex PAYX, the payroll processor that has its finger on the pulse of small business.
Mucci said that Paychex just delivered its third straight quarter of double-digit revenue growth thanks to its growing suite of payroll and HR offerings. He said most small businesses are still alive and well due to a combination of strong demand and government assistance.
Paychex has teams of professionals ready to respond to new programs and changes in regulations the moment they occur, Mucci added, and that's how they're able to help companies stay ahead of the curve to attract and retain the best employees for their businesses.
While it's true that Paychex makes more money as interest rates rise, they make even more by offering new services, like health plans, 401K plans and other benefit packages.
When asked about the state of the economy, Mucci noted that the South and Southwest continue to be hot spots. That's where the people are, he said, and that's where they are seeing the biggest increases in wages.
Avoid After-Hours Trading in Earnings Season
Today, Robinhood (HOOD) announced that it's extending after-hours trading from 7 a.m. to 8 p.m., but Cramer cautioned that after-hours trading is the Wild West, and should be avoided at all costs, especially during earnings season.
Why is after hours trading so dangerous? Cramer cited three recent examples. First was Micron, which reported a good quarter that sent shares up from $82 to $85 in after-hours trading. But after the company's conference call, which included warnings about Chinese lockdowns and Russian sanctions, shares gave up all of those gains and lost another 3% by the close Wednesday.
Next was Lululemon Athletica (LULU), which announced a 10-cents-a-share earnings beat and a $1 billion stock buyback. Pretty cool, right? That was until confusion over the company's same-store sales numbers created a flash crash in after-hours trading. If you had used a market order during those 15 to 20 minutes, you could have lost big through no fault of your own.
Finally, Cramer noted RH, the home furnishings giant that also delivered an earnings beat. Shares of RH were on a roller coaster after hours, however, trading up to $410 a share, only to fall back to $350, rising back to $390, and settling in at $370 a share.
If you trade in after hours, when volumes are light and volatility is high, you're "playing with fire," Cramer warned.
Executive Decision: Tellurian
For his final "Executive Decision" segment, Cramer also spoke with Charif Souki, chairman and cofounder of Tellurian (TELL), the authority on liquified natural gas (LNG) and the state of energy around the globe. Shares of Tellurian were up another 6.2% today as the company announced construction has begun on its first LNG export terminal.
Souki reiterated that the U.S. has over 100 years' worth of natural gas, more than enough to share with the EU and other countries in need. The U.S. can supply all of Europe's natural gas needs, he said, but only if we have the will to get it done.
Souki added that Tellurian doesn't need the government's assistance to bring up to 120 million tons of natural gas export capabilities online, as they're already permitted to do so. The demand and economics support their business model, he said, and it's principally labor and other shortages that will be slowing them down.
"Russia got everything wrong," when they invaded Ukraine, Souki said. Russia could have been one of the largest economies in the world, he said, but instead, they sent themselves back into the dark ages.
Lightning Round
In the Lightning Round, Cramer was bullish on Hertz Global Holdings (HTZ) and CF Industries (CF).
Cramer was bearish on Olin (OLN), Crocs (CROX), Canopy Growth (CGC) and JD.com (JD).
Nothing Solid to Chew On
In his "No Huddle Offense" segment, Cramer said the clock has run out for pet supply retailer Chewy (CHWY), as investors now have zero patience for companies that aren't making any money.
Shares of Chewy plunged 16% Wednesday on yet another quarter of the company spending more to attract new customers while it loses gobs of money on the ones it already has. Investors were willing to pay up for growth last year, but that all changed when the Federal Reserve started raising interest rates.
Cramer said he much prefers the stock of Petco (WOOF), which combines pet supplies with all of the things Chewy can't, including vet services, grooming, community and even pet insurance.
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