Mad Money Recap
Cramer's 'Mad Money' Recap: Pooh-Poohing Private Equity
TheStreet.com Staff
07/12/07 - 08:07 PM EDT
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"I am putting the private-equity
stocks in the sell block," Jim Cramer told viewers of his "Mad Money" TV show Thursday.
That means don't buy Blackstone(BX Quote) on its weakness, nor the planned Apollo or KKR IPOs.
"This is a business I know well," since being a hedge fund manager isn't very different from being a private-equity manager, Cramer said. "I can't have you owning these stocks. ... They seem like they could be the next big thing, but the truth is they're the last big thing."
These companies are too expensive, said Cramer, but more than that, it's just not the right time. "Now you're really getting in at the end, not the beginning, of this trend," Cramer said.
He said that even if these companies are great, with great managers and great track records, "buying them now may be close to a top. It's the wrong time."
One reason not to buy, Cramer said, is that especially if the Democrats get someone in the White House in 2008, they're going to "tax the heck out of" private equity and try to "squeeze them dry."
Another reason is that there are "too many people with too much money trying to get a piece of the action."
More $80 to $120
While many people were panicking when the market sold off earlier this week, Cramer said that "Cramericans" went to work buying things. "I'm trying to recall a little nostalgia for that down day," he said, "that spawned maybe one of the greatest rallies I have ever seen, up 284 [on the Dow]." But not everyone caught the rally, Cramer said. "This rally only reinforces everything I've been saying all week," he said. "Our strategy is simple. We want to stick with what is working. We want to buy the winners!" And the winners, he said, are the $80-to-$120 stocks he's been talking about on "Mad Money" this week. According to Cramer's theory, when a stock goes to $80 in a bull market, there's a good chance it'll go to $100. From there, it's usually smooth sailing to $120. And once a stock hits $100, Cramer said, the only way it goes back down is if it splits. "Everyone's got an inner value investor, a real curmudgeon that objects to ideas like this one," he said, and there's a good reason for that, because following his $80-to-$120 strategy is the laziest way to approach the market. "But it works!" he added. "And we're gonna keep doing it."Apache on the Up and Up
"Tonight's addition to this august assemblage of stocks," Cramer said, is Apache(APA Quote), an independent oil and gas exploration company that has been on the rise. "People have been buying Apache. It's a winner," Cramer said, and "people will keep buying it." Oil is one of the sectors leading the market right now, he said, and Apache is "exactly what we're looking for." But Cramer said that just because he says it will go to $120 is not a good enough reason for people to buy it. They need to do their homework, too. Apache has incredibly low production costs and thrives in areas where its peers have difficulty, Cramer said. It has a great business model of buying discarded products from other companies on the cheap and turning them around. In addition, the stock is cheap, trading at 10 times earnings. It "has a long way to go before its valuation comes near what the market gives its competitors," he said. "This stock is mispriced!"
The company increased its product guidance in June, and the majority of its reserves are in the U.S., Cramer said.
Apache has a "terrific track record," Cramer said. "I would buy APA before it gets away from you."