Brokers Use IPOs to Entice Investors

Doctrinaire investors have been after me this week. They questioned how it was possible that I could say buy A123 (AONE - commentary - Trade Now) when the company is simply another version of ethanol, a government-backed battery company with no real near-term prospects. They thought I was hyping the darned thing to my viewers and wasn't rigorous.

The opprobrium for liking the stock of Select Med (SEM - commentary - Trade Now) was even worse. Management is reported to having conduct that raised the eyebrows, and the company will ultimately be in the crosshairs of the U.S. government's attempt to reform health care.

To which I say, So what? Big deal. These are just pieces of merchandise being priced so that the retail investor will be drawn back into the pool. This makes sense for the brokers because we have seen an explosion in interest of late in trading, mostly daytrading, but there are multitudes of people coming back into this market and there is demand. The purists among you think that despite the backing of General Electric (GE - commentary - Trade Now), Black & Decker (BDK - commentary - Trade Now) and Procter & Gamble (PG - commentary - Trade Now), A123's a travesty. There was a fabulous article here yesterday by Rick Pearson about how a Chinese battery company, Advanced Battery Technologies (ABAT - commentary - Trade Now), represented a much better bet than A123 because it has actual sales and earnings.

Again, I don't care. I just want to play the desire of the brokers to make these deals work.

Now this morning I am reading that Select Med priced at the lower end of the range. I think that's the brokers insuring that the deal works and don't want to get people hurt. Maybe you make a little money, maybe you don't, but that's a decent risk reward in this market.

People have to, at times, suspend judgment about companies and put credence into the need for Wall Street to lure you back in. This is one of those moments, which is why I feel strongly that being doctrinaire will leave 50% gains on the table, like with A123, where there was ample supply to be had.

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At the time of publication, Cramer was long Procter & Gamble.

Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here.

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