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Jim Cramer Reviews the Snowflake IPO

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Jim Cramer emphasizes discipline in investing. And when he sees a situation like the Snowflake IPO, when investors at the open will pay any price just to get a few shares, he holds his fire. Here, speaking to the September 2020 meeting of the Action Alerts PLUS investing membership club, he elaborates on his team’s decision not to follow the crowd.

Yet, you know what, behind the scenes I almost did. That's right. I almost put a market order in for the charitable trust because I knew the stock was going to go higher. I obviously didn't know it was going to go this high, but I was thinking about that. 

Momentarily tempted, I suggested to Jeff Marks and Zev Fima that perhaps we just bite the bullet and buy some because I know that the growth hounds will pay any price, any price at all. No ceiling on what they're willing to take down, as we see this very morning. The basis will always be better than ours; our basis will always be bad. 

So even though I think that the first price might end up not even being the high, I can't stomach it. I can't because we have discipline. And discipline - it doesn't rule out owning companies that sell at high multiples to sales, not earnings but sales. But it does say you can't have many of them. 

And you look at our current portfolio. And we have, really, Amazon, Salesforce and Nvidia. And I think that makes us full up. I have no desire to add another company that sells at a huge multiple unless I take off one of those. And I don't want to. I feel that we would have to sell one of those to buy Snowflake, and I'm not going to buy a company that sells at 100 times sales, the most expensive company in history when it comes to price-to-sales. 

So then why didn't I … just sneak a little on? … Let me tell you why. Because that, I think, will explain behind the scenes why I was so torn here and why, frankly, as I watch this stock try to open, it's driving me crazy. 

Some of it is because I am sick and tired of watching Nvidia go up, Coupa Software go up, CrowdStrike go up, Okta go up, Lemonade go up, Zscaler go up, Ring Central go up, DocuSign go up. And all these companies are repeat, repeat visitors to “Mad Money.” 

Look, I could be … wrong entirely about where Snowflake ends up today, but I know that all the stocks I just mentioned are stocks that money managers don't care about how much they pay. And I am always going to care. I know there is nothing more fraught than buying a stock with no valuation underpinnings whatsoever. And you are just hostage to your fellow shareholders, who probably think that Snowflake is some meteorological disturbance. 

See, if we get a sudden sea change and somehow growth goes out of fashion because we're about to have a vaccine, and the economy is going to speed up, then Snowflake stock will end up being a mistake, and we will lose money. 

If all the companies that are scheduled to come public now actually do -- and there's so many; there's been eight billion already. I'm telling you after this, everybody will come public -- if all the companies that are scheduled to come public now actually do, then you might see what I call buyer's fatigue. And we'll be selling off all the expensive stocks. 

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