This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Cramer: Three Specs Powered by Lust

The stocks of Amazon, Netflix and Tesla are animal-spirited love affairs that defy traditional metrics. Lots of people were disappointed when Amazon reported last week, but for the life of me I couldn't figure out why. The company is simply continuing its build-out as the world's largest retail store. It has been going down that path since its inception, and it is expensive to dominate the world. So the quarter was status-quo. If you liked it before, you should like it after even as it has become hideously overvalued by any metric.

Netflix? You can actually make an earnings case for it if you go out far enough -- certainly much further than this year's earnings estimates, against which the stock sells at at P/E ratio of 228. Again, though, if you like Netflix and you think the world will like it, too, you can see why the stock might be cheap if everything works out, internationally. You obviously think it will because, alas, it works for you. Darn the valuation -- full speed ahead.

Tesla is, in many ways, the toughest. Unlike Amazon and Netflix, whose products are widely used, only a handful of people have test driven a Tesla auto, let alone bought one. Yet the company is valued at $16 billion, largely because its product is fascinating, it works well -- at least for now -- and it is highly rated by Consumer Reports. The company was able to show a level of profitability that all of the rigorous analysts out there have said is chimerical, yet this was enough to allow many of Tesla's boosters to push the stock hard. BMW rolled out a rival car Monday, but that only made the Tesla stalwarts more bullish -- because the comparisons, alas, did find the BMW version wanting.

Still, Tesla has a lot in common with Amazon and Netflix. The bulls foresee mass adoption of a car that will put all other automakers to shame. As long as Tesla has access to the capital markets and can tap them if it needs to do so, I don't see how this cult will run out of gas, or battery life, at least for now.

Now, if you ask me whether I like Amazon, Netflix and Tesla, I say: "Absolutely." They are the best three firms in their respective classes. In fact, they are in classes by themselves. But if you ask me whether I would buy their stocks with my Action Alerts PLUS charitable trust, the answer is, "No." That's because these companies simply don't meet the criteria that has saved me so often in the past, even as it cuts off the potential future upside.

At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in the securities mentioned.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Our Tweets

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs