Mad Money Recap

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Cramer's 'Mad Money' Recap: What to Know About IPOs

TheStreet.com Staff

Click here for an archive of Cramer's "Mad Money" recaps.

Updated from 7:48 p.m. EST

Jim Cramer told viewers of his "Mad Money" TV show Tuesday to take a look at three initial public offerings scheduled to take place this week: IPG Photonics, Guidance Software and Artes Medical.

The public, media and Wall Street all are "fascinated with IPOs," he said. But although market-players can get coverage on these IPOs everywhere, only "Mad Money" gives advice on which ones to buy and which ones to avoid, and at which price to get in and out, Cramer said.

Cramer recommended staying away from Burger King (BKC) and Hertz (HTZ), and suggested getting into iRobot (IRBT) and Under Armour (UARM) when they came public.

Cramer also warned people to beware "Vonage (VG) the Dog." However, he said he got Sealy (ZZ) wrong because he trusted the private-equity firms that took it public.

When analyzing an IPO, Cramer said there are a few things people should consider. He advised investors to take a look at how the IPO is priced, then closely examine its "hotness."

Third, when Cramer looks at an IPO, he said he tries to figure out if it's "desperate" and needs the cash or if it's in good shape on its own. Furthermore, he thinks about whether or not the IPO should be "tossed back," and he always decides at which price he should sell it.

Finally, Cramer said he uses only limit orders.

IPG Photonics, an industrial laser company, was forecast to trade in the $13.50-$15.50 price range under the symbol IPGP.

The company manufactures fiber lasers for a range of uses from welding to delicate surgery.

Cramer said that if IPG Photonics prices in the middle of the range, it will be more expensive than its competitors. Although he said it should come public for $11.50 when comparing it to other laser companies, Cramer said IPG Photonics is not just any laser company. He believes it deserves to trade at a premium and said the Street knows this.

Cramer called IPG Photonics "a keeper" and said it controls 60% of its market. He said it has growth and could become a core tech holding.

He advised people to let the stock's action settle down before buying it, saying he would put his first limit order in between 10:30 a.m. and 11:30 a.m.

"This is a stock worth paying up for," he said. "It is the cream of the IPO crop."

(After the show aired, IPG Photonics priced above its range Tuesday night at $16.50, according to a Reuters report, raising $148.5 million in a 9 million-share offering that represents 21% of the company.)

Guidance Software develops digital investigations and will trade under the symbol GUID when it debuts this week.

He called this initial offering the "price is right IPO." The company should come public somewhere between $12.50 and $14.50, which are "right prices," according to Cramer.

Cramer believes Guidance is worth buying under $18 a share, but when it gets above $20, he said people should ring the register.

Moreover, Cramer said he has "no doubt" Guidance is a "quality business" and has "a really rapid growth market." In fact, the $600 million market the company is in is expected to become a $1.4 billion market in 2009, he said.

Guidance sells its product to law enforcement agencies and big organizations, Cramer continued. Nearly one-fifth of the Fortune 500 companies use its software. Further, it has "high gross margins" and is "a pure play on digital forensics," he said.

Although Cramer said he doesn't consider this IPO "hot" like IPG Photonics, and it has established competitors, he said it is not "a desperation offering" and "it's not late to the game."

Guidance has the potential of becoming a core holding, he added. But it could go "unloved," which is why it's all about the price, Cramer said. He endorsed buying it anywhere under $18, but nowhere over $20.

As people have the desire to have wrinkle-free skin, Cramer said he has liked Medicis (MRX) for its Restylane product and Allergan (AGN) for its Juviderm and Botox products.

And although Artes Medical, which is scheduled to go public later this week under the ticker ARTE, looks like it was designed to get his approval, Cramer said he's dumping it.

He said he would call it "a triple sell to the third power," but it's not even public yet, so nobody's in it. Cramer explained he doesn't like this IPO because Artes is a start-up company with no revenue and one product.

Its one product, ArteFill, sounds "terrific" and the company says it's a permanent solution for wrinkle-free skin, he said. But even though "ArteFill sounds like a real game-breaker," Cramer said the Food and Dug Administration will not let Arte advertise it as a permanent solution.

Also, he pointed out the possibility that doctors will be unreceptive to ArteFill, like doctors in Europe and Canada have been. There is also the chance people who use ArteFill will develop skin inflammations, just like people who have used it allegedly have, and sue the company, Cramer said.

Arte has been losing money and is a "risky" IPO, he went on to say. Plus, Cramer believes if Allergan decided it wants to figure out how to make a competitive product, it could.

"As IPOs go, Artes has everything you don't want," he said. "It has no earnings, it has no sales and it can be easily abused by Allergan."

No matter how good its product might be, it is entering a market that already has a lot of players, Cramer said. "There's no room for Artes Medical."

Mad Mail

Responding to his next mailer, Cramer said the viewer was right and that companies have no obligation to follow through with their buyback announcements.

These are called "phantom buybacks," he said. To keep a check on which companies' buybacks are for real, Cramer said he continuously checks companies' share counts.

Lightning Round

Cramer was bullish on aQuantive (AQNT), ValueClick (VCLK), Timberland (TBL), Hewlett-Packard (HPQ), Cisco (CSCO), Praxair (PX), Airgas (ARG), Rio Tinto (RTP), BHP Billiton (BHP), Research In Motion (RIMM) and Encysive Pharmaceuticals (ENCY).

Cramer was bearish on Gateway (GTW), Finisar (FNSR), @Road (ARDI), Trimble (TRMB), Garmin (GRMN), Oshkosh Truck (OSK), Ford (F) and Symbol Technologies (SBL).

For more of Cramer's insights during the Lightning Round, click here.

Want more Cramer? Check out Jim's rules and commandments for investing from his latest book by clicking here.

In his "Sudden Death" round, Cramer was bullish on TurboChef Technologies (OVEN) and Devon Energy (DVN).