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Cramer's Mad Money Recap 5/10: Upstart, Crocs, Biohaven Pharmaceuticals

Jim Cramer says that when the facts change, investors need to change their strategies.
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This has become a trader's market, Jim Cramer told his Mad Money viewers Tuesday. That means that when the facts change, you need to change your strategy and not stick to mistaken beliefs.

If you live by the sword, you need to die by the sword. If you were selling stocks because interest rates on U.S. Treasuries were rising, then you have to sell those same stocks now that rates have reversed course. That's called conviction.

Far too often, changing your mind is seen as weakness. But when the facts change, you have to change your mind. There's no other choice but to be wrong. Back in the dot-com heyday, everyone was sure that Internet startups were here to stay. But once the bubble burst, investors needed to quickly pivot from long-term winners, to lucrative short-term trades.

The same thing happened this past November, when the Federal Reserve first told us higher interest rates were coming. Back then, Cramer announced that the "silliness" was over, and investors had to dump their high-flying meme stocks and only invest in real companies that make real things with real profits and dividends. That pivot proved perfectly correct.

Now, thousands of Dow points later, those same stocks that were expensive in November are now starting to become attractive again. If you liked Microsoft MSFT at $300 a share, why wouldn't you love it more at $260 a share?

This is a trader's market, Cramer concluded. Investors need to be nimble and change along with the facts.

Executive Decision: Upstart Holdings

In his first "Executive Decision" segment, Cramer spoke with Dave Girouard, co-founder and CEO of Upstart Holdings  (UPST) - , the loan originator that's seen its shares plunge from highs over $400 to just over $33 after Tuesday's tremendous 56.4% decline.

Cramer immediately called into question Upstart's business model, which was supposed to be a fintech loan platform. As it turns out, Upstart has loans on its books and is seeing a high high 2.9% default rate on those loans.

Girouard defended his company by saying that the fundamentals haven't changed and Upstart has delivered seven consecutive quarters of growth and profits. He explained that 90% of the loans originated on their platform are bought by banks and Upstart only holds loans to test new products.

As for those delinquency rates, Girouard said that defaults were lower during Covid as consumers had access to stimulus checks, but now they're returning to more historical levels.

Cramer disagreed, saying that 2.9% is far too high and Upstart would be a better company if it did not have loan risk on its balance sheet.

Executive Decision: Crocs

For his second "Executive Decision" segment, Cramer also spoke with Andrew Rees, CEO of Crocs  (CROX) - , the footwear maker that's down 70% from its highs and now trades for just five times earnings.

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Rees explained that Crocs continues to make "a ton of money," including $600 million in profits last year. The company has given clear guidance for 2022, with estimates for $10 of earnings per share.

Crocs has a long track record, Rees added, but investors have lumped it in with the overall markets, despite its outperformance.

When asked about the recent acquisition of Hey Dude, Rees said Crocs got an incredible deal on the company and the acquisition will give it both growth and diversification. Hey Dude will be a valuable asset for the future.

Executive Decision: Biohaven Pharmaceuticals

In his third "Executive Decision" segment, Cramer checked in with Dr. Vlad Coric, chairman and CEO of Biohaven Pharmaceuticals  (BHVN) - , which announced Tuesday it will be acquired by Pfizer  (PFE) - , news that sent shares up 68% by the close.

Dr. Coric said it's a great day for both patients and shareholders of Biohaven. Pfizer is a "global powerhouse" with the resources needed to bring Biohaven's migraine therapies to millions of patients around the globe.

Coric added that Biohaven has the only therapy that both treats and prevents migraine, but many doctors and patients still don't know the company exists. Pfizer's sales and marketing machine will help remedy this problem.

Lightning Round

In the Lightning Round, Cramer was bullish on AmerisourceBergen Corp.  (ABC) - , Funko  (FNKO) - , Aecom Technology  (ACM) - and McKesson  (MCK) - .

Cramer was bearish on Affirm  (AFRM) - , Mission Produce  (AVO) -  and Black Knight  (BKI) - .

Executive Decision: Sysco

For his final "Executive Decision" segment, Cramer spoke with Kevin Hourican, president and CEO of food distributor Sysco  (SYY) - , which continues to benefit as Covid restrictions are lifted and consumers return to restaurants.

Hourican said March was a very robust month for restaurants and that trend continues into the second quarter. Sysco aims to grow at 1.2 times the market and is actively taking market share from its rivals.

Sysco has also made significant changes to how it does business. The company now delivers to customers six days a week, but has shortened its work week for associates to four 10-hour days. Hourican said customers love the six-day deliveries while employees love the new work-life balance options.

Sysco is also doing its part for the environment and plans to convert its fleet of trucks to electric in the coming years.

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