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NEW YORK (
) -- The markets are starting to get weird now that the
initial public offering is getting close, Jim Cramer said on
Monday. Most of the market is doing fine but the fast-growing, high-multiple stocks are getting clobbered, he said.
Cramer explained that Alibaba is a magnet for hedge fund and mutual fund managers because the company is growing like a weed. But with only a limited supply of money available, these fund managers need to sell their slower-growing stocks in order to make room for Alibaba.
That means stocks like Amazon.com (AMZN) - Get Amazon.com, Inc. Report , Celgene (CELG) - Get Celgene Corporation Report and Tesla (TSLA) - Get Tesla Inc Report will continue seeing rampant selling because these names are fast growers, although not as fast as Alibaba.
The Alibaba deal is already being touted as "oversold," which is Wall Street-speak for shares that are in limited supply. That means many funds will only get a fraction of the shares they want on the deal and will have to purchase the rest in the open market.
Cramer said using Facebook (FB) - Get Facebook, Inc. Class A Report , a stock he owns for his charitable trust, Action Alerts PLUS, as a comparison, funds should be willing to pay up to $100 a share for Alibaba.
For those who cannot get in on the IPO, and most of us won't, Cramer said Yahoo! (YHOO) remains a great way to profit from the deal. Yahoo! is selling 120 million shares of its stake in Alibaba to raise $6 billion in cash. Cramer said the company is likely to use that money for a big acquisition or two to help it continue to grow.
Take Angie's Off Cramer's List
Angie's List is suffering from intense competition, Cramer explained. While its business model is flailing, the company is now running at a serious cash flow deficit. What's the problem? Cramer said Angie's List has a membership model, selling subscriptions to its ratings and reviews while other sites, like Yelp (YELP) - Get Yelp Inc Report , give their information away for free and sell advertising instead.
That's why Angie's List has only managed to round up 2.3 million subscribers and why it spends 83% of its revenues on sales and marketing efforts to replenish them. Cramer called the subscription model "extremely limiting."
But Cramer said he would not be surprised if Angie's List becomes a takeover target given its ailing stock price. He said any number of companies could swoop in, change the company's business model to rival Yelp, and become a substantial player in that space. He suggested Angie's List could also hone in on specific industries such as home improvement contractors and attract a broader audience as well.
But Cramer said he never recommends a company on takeover speculation alone when the fundamentals are bad, which is why he's taking a pass on Angie's List -- the company, in its current form, is just too risky.
Profit Times Two
With the announcement last week that JDS Uniphase (JDSU) will splitting itself up into two separate companies, Cramer said investors have yet another way to profit from this leading provider of optical components.
JDS has certainly had a wild ride on Wall Street, Cramer explained. The company hit an all-time high of $1,182 a share back in the dot-com boom of 2001, only to be stuck in the doldrums around $13 a share ever since. But with an activist investor pushing for change, Cramer said investors are poised for a big win with JDS Uniphase once again.
Cramer explained that the company is splitting itself into an optical components maker, which will have gross margins around 30%, and a test and measurement company, with margins over 60%. After the spinoff, both parts should be valued at $15.23 a share. But with the premium multiples they deserve, Cramer thinks they'll fetch a combined $17.30 a share for a 27% gain even after the 10% pop shares enjoyed after the announcement last week.
No Huddle Offense
In his "No Huddle Offense" segment, Cramer started picking through the rubble created by the pending Alibaba IPO to tell viewers which names he'd start buying into the weakness.
Cramer said three Action Alerts PLUS names come to mind: Apple (AAPL) - Get Apple Inc. (AAPL) Report , Facebook and Google (GOOGL) - Get Alphabet Inc. Class A Report . All these stocks have seen weakness as money managers sell to raid cash to buy a stake in Alibaba.
In the Lightning Round, Cramer was bullish on Enterprise Products Partners (EPD) - Get Enterprise Products Partners L.P. Report , Alkermes (ALKS) - Get Alkermes Plc Report , Deere & Company (DE) - Get Deere & Company Report , Torchmark (TMK) , American International Group (AIG) - Get American International Group, Inc. Report , St Jude Medical (STJ) and Edwards Lifesciences (EW) - Get Edwards Lifesciences Corporation Report .
Executive Decision: Michael Forman
For his "Executive Decision" segment, Cramer sat down with Michael Forman, chairman and CEO of FS Investment (FSIC) , a fairly new and unknown $10 stock with a hefty 8.5% dividend yield.
Forman explained that FS Investment is a business development corporation, or BDC, that acts as a middle market lender, offering financing to companies with $50 to $100 million in annual revenues. The company partners with Blackstone Group (BX) - Get Blackstone Group Inc. Class A Report to fill a void where traditional banks typically don't lend.
Forman said investors can think of FS Investment as a mutual fund, one of five the company currently operates, with 140 loans in their portfolio. That's how it can offer the 8.5% dividend.
When asked about what happens when interest rates rise, Forman explained that FS Investment will do very well in a rising rate environment.
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-- Written by Scott Rutt in Washington, D.C.
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At the time of publication, Cramer's Action Alerts PLUS had a position in AAPL, AIG, FB and GOOGL.