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Cramer's 'Mad Money' Recap: Wrong Side of a Trade (Final)

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NEW YORK ( TheStreet) -- "When hedge funds bet against 'overvalued' stocks, they better have the whole story," Jim Cramer told his "Mad Money" TV show viewers on Tuesday, as he opined on a handful of high-momentum stocks that seem to have defied gravity.

Cramer explained that all investors, even big ones, can get themselves on the wrong side of a trade and bet against the wrong stocks. Such was the case with a handful on names, he said, those where hedge funds determines that the fundamentals didn't justify the stocks' sky-high prices. The only problem was, they were wrong.

The newly-minted shares of Michael Kors (KOR) was one such name, said Cramer. He noted that just last week he declined to recommend the stock because it had exceeded his limit of a multiple twice that its growth rate. But today, Kors delivered stellar numbers, seeing a 35% surge in European sales alone. The news sent shares rocketing higher, forcing out all those who shorted it.

Cramer noted that another accessory retailer, Fossil (FOSL - Get Report), also seemed overvalued with a slowing growth rate. Yet on the company's conference call, company management said they see growth accelerating, news that sent shares up 14% in a single day.

Whether it's Netflix (NFLX), which ramped another 4% today, or Apple (AAPL), a stock which Cramer owns for his charitable trust, Action Alerts PLUS , or Chipotle Mexican Grill (CMG), Cramer said sometimes it just doesn't pay to bet against these high-flying companies.

Cramer's recommendation to hedge funds, "bet against stocks where the fundamentals are actually bad, not those that seem to have run too far."

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