We live in a world where individual investors now have the power to destroy overly-confident short sellers, Jim Cramer told his Mad Money viewers Wednesday. That fact is a hard lesson for hedge fund managers to grasp, and many of them still have yet to learn.
For years, the short sellers piled into Tesla (TSLA) – Get Tesla Inc Report, betting against the company at every turn. But individual investors never gave up on Tesla and have propelled the company to a $1.2 trillion valuation. That valuation is divorced from reality and isn’t based on how many cars the company makes, but rather on its vision for the future.
Individual investors took busting the shorts to a whole other level earlier this year with stocks like GameStop (GME) – Get GameStop Corp. Class A Report and AMC Entertainment (AMC) – Get AMC Entertainment Holdings, Inc. Class A Report. But those lessons seemed to fall on deaf ears this week, when hedge funds were once again caught on the wrong side of the trade.
This time, the company was Avis Budget Group (CAR) – Get Avis Budget Group, Inc. Report, which saw its shares double during yesterday’s session. Cramer explained that for many money managers, the strategy was to go long with rival Hertz (HTZ) – Get Hertz Global Holdings, Inc. Report and short Avis as a hedge. They were completely unprepared for the auto shortage, which allowed Avis to blowout the earnings estimates.
Today, the shorts lost again with Bed Bath & Beyond (BBBY) – Get Bed Bath & Beyond Inc. Report. When the company announced new partnerships and a stock buyback program, shares soared, causing the shorts to run for cover.
Even in stocks like Estee Lauder (EL) – Get Estee Lauder Companies Inc. Class A Report, individuals are winning. When the company reported yesterday, shares fell at the open, only to close up over 4% as individuals stepped in and never looked back.
Executive Decision: NiSource
In his first “Executive Decision” segment, Cramer spoke with Joe Hamrock, president and CEO of NiSource (NI) – Get NiSource Inc (NI) Report, the utility that just posted reboots earnings that sent shares up 2.2% by the close. Shares of NiSource currently yield 3.5% and are up 10% year to date.
NiSource has pledged to reduce its carbon emissions 90% by the year 2030 and Hamrock said it’s on track to make that target. There are many different paths to get to a renewable future, he said, and in NiSource’s area that means transitioning from coal to natural gas and investing into renewable natural gas from agricultural sources.
Every storage is also a key factor in any renewable energy plan, as is a highly-skilled workforce to get the job done. That’s why NiSource is investing in training the workforce of tomorrow so they’ll have the skills they need to navigate a tight labor market.
Cramer said if you’re going to buy a utility, you need to be sure they’re getting off of coal and transitioning to a renewable future, just like NiSource is.
Executive Decision: Wingstop
For his next “Executive Decision” segment, Cramer spoke with Charlie Morrison, chairman and CEO of Wingstop (WING) – Get Wingstop, Inc. Report, the restaurant chain that missed both top and bottom-line estimates amid rising costs. Shares responded by falling more than 10%.
Morrison said prices at Wingstop are already starting to moderate from their pandemic highs. He said wing prices have fallen 40 cents per pound from their highs and franchisees are paying out few retention bonuses to keep their workers.
New franchise development was up 13% in the quarter, Morrison continued, and it’s a great time to build new restaurants.
Growth is still the word for Wingstop’s international business. Morrison said that Mexico is their largest international market, but it still only has 100 restaurants. Ultimately, Mexico could see as many as 250 locations.
Wingstop is also working with a partner in China to break into that country. Meanwhile, here in the U.S., digital orders now account for 60% of sales and delivery continues to grow.
Cramer said the worst may already be behind Wingstop, which makes the company a buy, not a sell.
Special Interview: Jane Goodall
In a special interview, Cramer spoke with famed primatologist and anthropologist Jane Goodall about her latest project, Trees For Jane, which aims to help the planet through reforestation.
Goodall explained that forests and oceans are the lungs of the world. They absorb carbon dioxide, release oxygen, provide us with clean air and water and even help make it rain. That’s why it’s so important to heal the environment that has already given us so much.
Goodall added that businesses are finally embracing the needs of the planet in a big way. They understand that profits alone are not enough, they have to do more and give back.
Individuals can also step up to help, Goodall said. If you plant the right tree, in the right soil, at the right time of year, and take just a little time to nurture it, even a single tree can provide a lifetime of enjoyment.
Trees give us hope, Goodall said.
The Wall of Shame
In his No-Huddle Offense segment, Cramer added Zillow (ZG) – Get Zillow Group, Inc. Class A Report CEO Rich Barton to the Mad Money Wall of Shame for the three deadly sins of hubris, arrogance, and stupidity.
When Zillow announced in 2017 that it was entering the house-flipping business, Cramer warned the move would be very risky. He also said at the time that buying homes was not a business that belonged in a company that derived all of its revenues from advertising. But that didn’t stop the overly-confident Zillow.
Zillow felt that its experience, coupled with artificial intelligence, would allow it to spot underpriced homes that could quickly be fixed up and sold for a profit. But Cramer said the company turned its investors into suckers.
Just last quarter, Barton told investors that he was more confident than ever in the home buying business. Today, the company is taking a $500 million charge and laying off a quarter of its workforce. Shares have plunged more than 25% in response.
Cramer said this type of risky behavior is unacceptable, and shareholders deserve better. “Barton has to go,” he concluded.
Lightning Round
Here’s what Cramer had to say about some of the stocks that callers offered up during the Mad Money Lightning Round Wednesday evening:
Nano Dimension (NNDM) – Get Nano Dimension Ltd Sponsored ADR Report: “I don’t like the 3D printing business. I don’t have a lot of hope for this one.”
Xos (XOS) : “I got excited about these, but then I couldn’t make any money for people, so now I’m saying no.”
Sharecare SHCR: “They need a blowout quarter. We need to see the quarter.”
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