Cramer's 'Mad Money' Recap: Cool Runnings
07/26/06 - 08:11 PM EDT
TheStreet.com Staff
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"What do art and stocks have in common?" Jim Cramer asked "Mad Money" viewers Wednesday. "They are cool," he answered. Cramer said stocks are not just valued by the numbers, fundamentals, sentiment or speculation. Companies with different levels of "coolness" get different valuations, he said. "When I talk about valuation, I mean the price-to-earnings ratio," he said. "The thing that is causing stocks to jump around is coolness." Cool stocks get higher multiples than others, he said. Wal-Mart Stores(WMT Quote - Cramer on WMT - Stock Picks) is not cool, but Whole Foods Market(WFMI Quote - Cramer on WFMI - Stock Picks) is cool, he explained. Tim Hortons(THI Quote - Cramer on THI - Stock Picks) and Home Depot(HD Quote - Cramer on HD - Stock Picks) are uncool, he added. "I have to compare stocks to art," he said. "The price of stock just like that of painting is determined by a market." The number of people that actually determine the price is relatively small, Cramer said, and might only amount to a couple of thousand. Investors need to understand how those people think. "There is a reason why cool matters," said Cramer. "That's because we have young managers." "They don't want to buy Wal-Mart because it's uncool, but they don't mind buying Best Buy(BBY Quote - Cramer on BBY - Stock Picks) because they see all the BMWs in the parking lot," he said, or extreme sports retailer Zumiez(ZUMZ Quote - Cramer on ZUMZ - Stock Picks) Understanding the cool or the subject feel is more important than the numbers, he said. "Not long ago you could not give away a General Motors(GM Quote - Cramer on GM - Stock Picks)." "Hewlett-Packard(HPQ Quote - Cramer on HPQ - Stock Picks) is like a Renoir, a benchmark," said Cramer. "Starbucks(SBUX Quote - Cramer on SBUX - Stock Picks) is like a Hockney" -- classic and cool.
"News Corp.'s(NWS Quote - Cramer on NWS - Stock Picks) acquisition of MySpace seemed like a dramatic overplay," he said. "Like a Klimt -- or Verklempt."
Cramer owns News Corp. for his charitable trust Action Alerts PLUS.
He said he wanted investors to buy a stock with hidden coolness like VF Corp.(VFC Quote - Cramer on VFC - Stock Picks), adding that the company owns the Vans footwear and North Face brands, and the stock is getting a coolness premium for it.
"It makes no sense," he said. "It's totally inscrutable. You need to be open-minded."
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