NEW YORK (TheStreet) -- TheStreet's Jim Cramer says El Pollo Loco (LOCO - Get Report) shares climbed higher Monday, which indicates the new pattern with IPOs. The same situation occurred with JD.com (JD - Get Report) and GoPro (GPRO - Get Report), which went public, immediately went up and then rose even more on their second day of trading.
Some investors think this has to be a top, but Cramer points to the prospectus and says El Pollo Loco is doing quite well and has solid numbers. The "crazy chicken" even has comparable sales stores somewhat like Chipotle Mexican Grill (CMG - Get Report) and an average unit volume better than Chipotle when that company went public in 2006.
Investors are using Chipotle's 50 multiple and saying El Pollo Loco could earn $1, so they are buying it up to $50. But Cramer says what really matters is the deal was small, as a sliver of the stock was for sale, and all that's happening is a handful of institutions are trying to get their full positions in the stock.
Cramer likes Chipotle as a more seasoned operator and wishes it would do a 7-for-1 split, but he encourages people not to assume that stocks such as El Pollo Loco have reached a top because the market doesn't work that way. He says the market does better when there is an overwhelming supply, earnings are bad and interest rates go sky high, which is not the case at the moment.LOCO Price data by YCharts