When big-cap stocks act like start-ups, then maybe they're cheaper than we think, Jim Cramer told his Mad Money viewers Tuesday.
Stocks are, after all, valued on their future earnings potential, and if this quarter is any guide, the future is looking very good.
Case in point: Johnson & Johnson (JNJ) - Get Johnson & Johnson (JNJ) Report , a company with a stellar balance sheet and sales that are up 15%. Shares trade for just 18 times earnings, Cramer said, well below its peers like Colgate-Palmolive (CL) - Get Colgate-Palmolive Company Report , at 26 times and Clorox (CLX) - Get Clorox Company Report , at 24 times earnings.
Another cheap stock is UnitedHealth Group (UNH) - Get UnitedHealth Group Incorporated Report , which posted 21% revenue growth but trades at 19 times earnings. Earnings at Morgan Stanley (MS) - Get Morgan Stanley (MS) Report keep getting better, but that company trades at a paltry 14 times earnings, as does JPMorgan Chase (JPM) - Get JPMorgan Chase & Co. (JPM) Report .
Cramer called these valuations ridiculous. He said the airlines are also undervalued, as is General Motors (GM) - Get General Motors Company (GM) Report , which he discussed on last night's show, at a scant seven times earnings.
Then there are the stocks that defy the four walls of the spreadsheet, Amazon (AMZN) - Get Amazon.com, Inc. Report , Netflix (NFLX) - Get Netflix, Inc. (NFLX) Report and Tesla (TSLA) - Get Tesla Inc Report , which seem to know no bounds at all.
Back in 1987, right before the crash (the anniversary of which is this week), the average stock traded at 29 times earnings. Interest rates were at 7%. Cramer said this market is nothing like 1987.
Over on Real Money, Cramer explains what impact he thinks Washington, tax reform efforts and Fed interest rate policy have on this market. Get his insights with a free trial subscription to Real Money.
Off the Charts: Consumer Staples
In the "Off The Charts" segment, Cramer checked in with colleague Ed Ponsi over the charts of the consumer staple stocks to understand what's happening with the losers and laggards in this otherwise red-hot market.
Ponsi first looked at a daily chart of the Consumer Staples Select Sector SPDR ETF (XLP) - Get Consumer Staples Select Sector SPDR Fund Report , which follows names like Procter & Gamble (PG) - Get Procter & Gamble Company Report , Pepsico (PEP) - Get PepsiCo, Inc. Report , Walgreens Boots (WBA) - Get Walgreens Boots Alliance Inc Report and Costco (COST) - Get Costco Wholesale Corporation Report .
The Staples ETF has been essentially flat since February, Ponsi said, recently making a bearish head-and-shoulders pattern. The ETF is already below its 50-day and 200-day moving average, and the averages just made a death cross, where the 50-day falls below the 200-day.
Among the worst performers in the group was Kraft Heinz (KHC) - Get Kraft Heinz Company (KHC) Report , which also recently saw a death cross in August and has been plummeting ever since. The chart of General Mills (GIS) - Get General Mills, Inc. (GIS) Report and J.M. Smucker (SJM) - Get J.M. Smucker Company (SJM) Report weren't faring any better, making series of lower highs and lower lows and having some of the worst charts possible.
Cramer said these stocks are clearly not done going lower and he'd continue to steer clear of all of them.
Netflix Finds it's Hard to Impress
Netflix just posted a fabulous quarter, but after an initial spike, shares closed down 1.5% by the end of the day Tuesday. What happened? Cramer said there was a lot of hype and a wave of bullish analyst reports going into the quarter, and when everybody is expecting the moon, it's hard to impress.
Cramer reminded viewers that Netflix doesn't trade on earnings, it trades on subscriber growth, where the company posted 5.3 million new subscribers when analysts were only looking for 4.5 million. Even with Netflix mastering the art of under-promising and over-delivering, the markets were still not impressed.
There are some things to be concerned about, Cramer admitted, including the company's cash burn and its piling debt. Then again, the company continues to deliver fabulous content that viewers are willing to pay up for, so over the long haul, this probably won't be a problem. That's why Cramer said he's still a believer in Netflix and would use this weakness as a buying opportunity.
Off the Tape: ThoughtSpot
In his "Off The Tape" segment, Cramer sat down with Ajeet Singh, founder and CEO of the privately-held ThoughtSpot, a search-driven data analysis engine powered by artificial intelligence.
Singh explained that for every data analyst a company has, there are typically 600 users with questions that need to be answered. ThoughtSpot aims to liberate both the users and the analysts by using artificial intelligence.
Using his company's software, users can ask questions using natural language and get back answers, reports, charts or dashboards to their queries. Using AI, ThoughtSpot can even deduce which questions should be asked and provide answers for those questions as well.
Most of ThoughtSpot's clients are large enterprises, Singh said, and his company's software can be layered on top of any system of record.
Cramer and the AAP team are optimistic that the Broadcom (AVGO) - Get Broadcom Inc. Report - Brocade (BRCD) deal will eventually go through, helping Broadcom break out from this mixed trading pattern. Find out what they're telling their investment club members and get in on the conversation with a free trial subscription to Action Alerts PLUS.
In the Lightning Round, Cramer was bullish on Delta Air Lines (DAL) - Get Delta Air Lines, Inc. Report , BioTelemetry (BEAT) - Get BioTelemetry, Inc. Report , Littelfuse (LFUS) - Get Littelfuse, Inc. Report , Emerson Electric (EMR) - Get Emerson Electric Co. Report , TransUnion (TRU) - Get TransUnion Report , Amgen (AMGN) - Get Amgen Inc. Report and Dave and Busters (PLAY) - Get Dave & Buster's Entertainment, Inc. Report .
Cramer was bearish on Sangamo BioSciences (SGMO) - Get Sangamo Therapeutics, Inc. Report , Esperion Therapeutics (ESPR) - Get Esperion Therapeutics, Inc. Report and Kinder Morgan (KMI) - Get Kinder Morgan Inc (KMI) Report .
No-Huddle Offense: The Fun Bunch
In his "No-Huddle Offense" segment, Cramer proposed that someone create a "fun" ETF, one that includes only companies with CEOs that are really enjoying themselves.
That ETF would surely include Netflix, which boasts a non-traditional conference call that sometimes includes execs wearing ugly sweaters. It would also include T-Mobile (TMUS) - Get T-Mobile US, Inc. Report , with it's colorful CEO John Legere. Constellation Brands (STZ) - Get Constellation Brands, Inc. Class A Report is always upbeat on their conference call, as is Tesla (TSLA) - Get Tesla Inc Report CEO Elon Musk. And there are always good times to be had on the Restoration Hardware (RH) - Get RH (Restoration Hardware) Report call as well.
What do all of these companies have in common? They project confidence, which in turn instills confidence in us, the shareholders.
Cramer will host CNBC's Jon Najarian, TD Ameritrade's JJ Kinahan, famed analytics expert Marc Chaikin and other market experts on Oct. 28 in New York City to share successful strategies for active investors.
You can join them as they discuss how smart investors can make the most of options trading, futures contracts, fundamental and quantitative analysis and great ETFs to buy right now. Participants will also get a chance to meet Jim and other panelists.
When: Saturday, Oct. 28, 8 a.m. to 3 p.m.; Where: The Harvard Club of New York, 35 West 44th St., New York; Cost: $250 per person. Click here for the full conference agenda or to reserve your seat now.
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At the time of publication, Cramer's Action Alerts PLUS had a position in AVGO, PEP.