Never Too Expensive
When is a turbo-charged growth stock too expensive? It's not when an analyst downgrades it, Cramer told investors. Consider generic drug maker Perrigo (PRGO), which is up 90% since Cramer first got behind it on Feb. 9, 2010.
Cramer said last July, an analyst at Goldman Sachs (GS) advised selling Perrigo after the company received a warning letter from the FDA. But that call proved dead wrong, as Perrigo fixed their issues and shares surged 58%.
So what should investors do after the same analyst finally capitulated today, upgrading Perrigo from a sell to a hold? Cramer said it's time to sell half your position and lock in profits. He explained that when all of the nay-sayers finally turn positive, there's less upside potential and investors must get more cautious.Cramer identified a similar pattern in Chipotle Mexican Grill, a stock that's up 97% since Cramer began recommending it on June 4, 2010. Chipotle also received downgrades back then, also citing valuation, only to surge to new 52-week highs this week. Cramer said investors should never sell a hot growth stock because it seems expensive. He said as long as the company keeps executing, its stock will continue heading higher.