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.
Back From the DeadThe ratings agencies may be despised, but they're also buys, Cramer told viewers. He said Moody's (MCO) and McGraw-Hill (MHP), parent of the S&P ratings, are both back from the dead. Cramer said it's hard to recommend the ratings agencies after those who were supposed to be investors' last line of defense chose to side with the bankers and slapped AAA ratings on just about everything that came through their doors. But the fact remains that this ratings industry came off with a slap on the wrist and the many attempts to sue for damages have all failed. Cramer said the agencies acted like villains, rubber stamping what were supposed to be independent judgements on investments, but despite their failures, no new competition has arisen from the meltdown, leaving this happy duopoly intact. Cramer said Moody's and S&P are stronger than ever, with Moody's trading at just 14 times earnings with a 12% growth rate and McGraw-Hill trading at 12 times earnings with an 11% growth rate. "It might just be time to hold your nose and consider buying them," Cramer concluded.
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