It's time to clean up the dot-com space and go through with an Internet stock purge, Jim Cramer told viewers of his "Mad Money" TV show Tuesday.
There's been a revolution among the Internet stocks, he said, and it's time to remove Internet stocks that have been disloyal to investors and replace them with stocks that should be more dependable.
The first Internet stock Cramer told viewers to get rid of is
eBay, which completed the single worst acquisition in buying
, needs to be swept out of your portfolio, he said. Skype is a company that will generate no profit and cost too much.
"a bookstore that sells at 60 times earnings." It's the second Internet play people should ditch.
The management at Amazon already has enriched itself, and it doesn't seem like the CEO Jeff Bezos cares about the company anymore, Cramer said. In fact, Bezos is busy building a space port, Cramer said.
Cramer's last target for a dot-com purge was AOL, which is a part of
AOL, which is rapidly shrinking into a pop-up ad fest, says Cramer, is giving its service away for free. This is not a smart move, he said.
In fact, Cramer believes that people are sticking with AOL only because of their AOL screen names.
In addition, Cramer said he is giving
, which he owns for his charitable trust,
Action Alerts PLUS, one more quarter to turn itself around.
Instead of eBay, Amazon and AOL, Cramer said there are three kings in the dot-com sector that can make you money.
The first two are smaller than the third. These are
Blue Nile, the largest online jewelry business, focuses on engagement rings and has zero inventory, he said. First, the company takes the order and then buys the diamond to assemble the ring.
The company blew out its last quarter; recently bought back 8% of its stock; and has the opportunity to expand its business, Cramer said.
ValueClick is the second-fastest-growing Internet stock after
, which he's leaving off this list because it's obvious that Google is a moneymaker.
The last king, which Cramer said has made a major comeback and could be the biggest Internet story of 2007 -- much like Google in 2005 -- is
Cramer said he thought it was run by the most arrogant management in the nation, meaning Barry Diller. But all that has changed as the company has brought in Doug Lebda.
Diller has been promoted to a position where he doesn't have to handle the analyst community. Lebda takes care of that, Cramer said. While analysts may not be too smart, you have to coddle them because they hold the fate of your company in their hands, Cramer said.
Analysts love Lebda, Cramer said. He is the outside guy that makes everyone feel good about the company.
The company's search engine, Ask.com, is doing well, said Cramer. Ask.com is getting a ton of searches, and therefore tons of ads, and therefore boatloads of money.
Another reason to buy IAC is that it owns Ticketmaster, and ticketing is "en fuego," he said. In addition, the company's dating service, Match.com, is on fire, too.
IAC is also involved in the retail business through its Home Shopping Network. This division is led by CEO Mindy Grossman, who Cramer has heard is very smart.
The final reason people should buy this company is because it has a huge real estate business. Although this space has done horribly, the
is finished raising rates, says Cramer, and it could turn around.
IAC has oodles of cash and is cheap, Cramer said, crowning it the new king of Internet stocks.
Cramer said that the company is still hated and advised people get into it before it makes its next big move.
is Cramer's pick for best of the best in the pharma space.
Although people hate Big Pharma, Cramer insisted that the company is in the House of Pleasure.
Big drug companies are routinely demonized, but Merck is one company that has decided to punch back, he said. When Merck was taken to court for its Vioxx drug, it decided it wasn't going to take it lying down.
Merck told people it came out with Vioxx to make people feel better, not to kill them. The company said that millions of people took the drug, and it worked.
In addition, the company's new, CEO Richard Clark, wants to communicate to people that Merck is in the lifesaving business, Cramer said.
Plus, Merck has the best cholesterol drug out there and is benefiting from Medicare Part D. Right now, Merck is the only company that is working off the idea that big drug companies are here to save people -- not harm them. That's why it's the one company to buy in this space now, Cramer said.
Cramer welcomed Timothy Guertin,
Varian Medical Systems
president and CEO, to the show and asked him to explain the company's two big oncology and medical businesses.
Varian's oncology business is the largest maker of every type of hardware and software in the world for radiotherapy, Guertin replied. The company is also the largest maker of X-ray tubes and has a security business that makes machines that can X-ray large devices, he said.
When Cramer asked if the two companies belong together and if they might be profitable as separate companies, Guertin said that although Varian could run them as separate businesses, there are certain advantages of keeping them together.
One of these advantages is shared technology, Guertin said.
Cramer said he liked the stock before the interview and after it as well. He called it the perfect slowdown stock to put with
To view Cramer's interview with Timothy Guertin, please click here.
Cramer was bullish on
Johnson & Johnson
Cramer was bearish on
Smith & Nephew
In the "Sudden Death" round Cramer was bullish on
For more of Cramer's insights during the most recent Lightning Round, click here.
Want more Cramer? Check out Jim's rules and commandments for investing from his latest book by
At the time of publication, Cramer was long Yahoo!, UnitedHealth Group, Anheuser-Busch and News Corp.
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