The only thing that can derail the many positives in the market is an avalanche of new stocks, Jim Cramer told his Mad Money viewers Thursday. That's why Cramer will be watching the IPO calendar next week, while also focusing in on a mountain of earnings.
First, next week's game plan:
Next, on Tuesday, we hear from United Technologies (UTX) - Get Report , which should do well following strong numbers from Honeywell (HON) - Get Report this quarter. Cramer was also bullish on Procter & Gamble (PG) - Get Report and health plan purveyor Centene (CNC) - Get Report .
Wednesday brings earnings from Boeing (BA) - Get Report , which will likely guide expectations lower, and Caterpillar (CAT) - Get Report , which should post strong results. Other Cramer favorites included Microsoft (MSFT) - Get Report , Paypal (PYPL) - Get Report , Facebook (FB) - Get Report and Domino's Pizza (DPZ) - Get Report .
'I Hate Froth'
"I hate froth," Cramer proclaimed to viewers, and that's exactly what we saw Thursday with the IPOs of Pinterest (PINS) - Get Report and Zoom Meetings (ZM) - Get Report . Cramer said while both of these companies have interesting and compelling stories, they are also both wildly overvalued stocks that threaten the overall health of the stock market.
Shares of Zoom nearly doubled during their first day of trading, closing up 72% from their offering price. Cramer said Zoom now trade for 52 times sales, which would be too expensive even if it was 52 times earnings.
Then there's Pinterest, which is a unique concept, Cramer admitted, but certainly not one worthy of trading at 20 times sales. Shares were initially priced below their last private funding round, creating a bargain, but that bargain quickly evaporated as shares rallied 28%.
Cramer explained that with so much new money flowing into index funds, there simply aren't enough growth-oriented mutual funds to buy all of these hot IPOs. That means stocks must we sold in order to purchase them, putting pressure on the entire market. While it's not time to panic quite yet, Cramer said he's keeping a close eye on this growing trend.
Cramer and the AAP team locked in a big gain in Danaher (DHR) - Get Report . 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.
Taking a Second Look at the Banks
Things were looking pretty grim for the banks going into this quarter's earnings, Cramer told viewers, but after some better-than-expected results, the whole group is now being revalued higher.
Wells Fargo (WFC) - Get Report posted mixed earnings with only tepid deposit and loan growth. Cramer said this bank remains a "show me" stock. That wasn't the case with Citigroup (C) - Get Report , which saw an uninspiring quarter, but trades near the bank's book value, making it incredibly inexpensive.
Cramer was also bullish on Morgan Stanley (MS) - Get Report and Goldman Sachs (GS) - Get Report , two more big names that saw fabulous results this quarter. He was slightly less bullish on Bank of America (BAC) - Get Report however, as this stock is starting to get expensive after a big run higher.
Executive Decision: Five Below
Anderson said Five Below now has over 750 locations in the U.S., but the company still sees a footprint of over 2,500 locations being possible. That means Five Below is only a third of the way towards their goals, having only recently expanded into both Iowa and Nebraska.
When asked about the effects of tariffs on their company, Anderson explained that Five Below sources goods from all over the world, including many items from India and t-shirts from Honduras. So far, rising tariffs and trade tensions have not adversely affected the company.
Finally, when asked for the secret to their success, which includes 13 years of consecutive same-store sales growth, Anderson said, the great customer experience, a treasure hunt environment and value are what keep customers coming back to their stores year after year.
Diversification Really Matters Now
In his "No-Huddle Offense" segment, Cramer reminded viewers why diversification matters. He said the recent decline in the healthcare sector has been swift and brutal, but if you maintained a properly diversified portfolio, no more than 20% would be at risk.
Diversification is the only free lunch in investing, Cramer said, but diversification is not only for defense, it can also be used for offense. Investors with a diversified portfolio always have cash on hand to take advantage of opportunities, like UnitedHealth Group (UNH) - Get Report , which is now down almost 80% from its highs.
Fear and panic always leads to poor decisions, Cramer concluded, but if only 20% of their portfolio is affected, investors can always keep their cool.
On Real Money, Cramer say that when a sector throws a tantrum, you don't want to be on the receiving end. Get more of his insights with a free trial subscription to Real Money.
In the Lightning Round, Cramer was bullish on Funko (FNKO) - Get Report , Marvell Technology (MRVL) - Get Report , Abiomed (ABMD) - Get Report , Edwards Lifesciences (EW) - Get Report , General Mills (GIS) - Get Report , PepsiCo (PEP) - Get Report , Allianceberstein (AB) - Get Report and Moderna (MRNA) - Get Report .
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At the time of publication, Cramer's Action Alerts PLUS had a position in HON, MSFT, FB, AMZN, JPM, C, GS, FIVE, UNH.