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RealMoney Radio Recap: Pooh-Pooh Yahoo!

Cramer says that the fundamentals aren't good enough to get in despite takeover possibilities.

"Choosing the right stock to purchase is not an easy feat," Jim Cramer said on his

"RealMoney" radio show Friday.

"There are times when a stock looks good, but the company just can't seem to get it together," he added.

For example,

Yahoo!

(YHOO)

, which he owns for his charitable trust,

Action Alerts PLUS, has been a "disaster," he said.

However, the stock which recently declined to $22 and is now at $25.54, reminds Cramer of

Microsoft

(MSFT) - Get Microsoft Corporation Report

when it was low and everyone thought it was bad before it rallied.

"The company has failed to deliver on dozens of metrics, and while the top management is steady, the place has become turnover city," he said.

But after listening to

Comcast's

(CMCSA) - Get Comcast Corporation Class A Report

TheStreet Recommends

call and reading the Microsoft notes, Cramer finds it hard to believe that Yahoo! will stay independent.

"Microsoft reported just an abysmal Internet number, and Comcast didn't rule out buying Yahoo!" he said.

Other companies that could possibly buy Yahoo! are

Time Warner

(TWX)

and

IAC/InterActiveCorp

(IACI)

, Cramer said.

Yahoo! does have some "scarcity value" like

eBay

(EBAY) - Get eBay Inc. Report

and

Amazon

(AMZN) - Get Amazon.com, Inc. Report

, as one of the only companies that "made it" in the Internet market, except for

Google

(GOOG) - Get Alphabet Inc. Class C Report

, he said.

Image placeholder title

This makes Yahoo! worth something to these companies.

The bottom line is that although Yahoo! may have bottomed and could be taken over, Cramer said he still can't recommend it as a strong buy because the company's fundamentals are not good.

"The rally is taking a breather, but it's the most impressive I have seen since 1991," Cramer said.

Whereas in the past, companies issued stock to raise capital, they are not "by and large" issuing stock now -- they are buying back stock because they have more than enough money to manage their businesses," he said.

"This is a melt-up, the opposite of a meltdown," Cramer said. "Buyers are coming in the market and they are willing to pay more money to the sellers."

The demand is huge, but the supply of stock isn't, he said, adding that it's becoming a theme for companies to buy back stock.

Every conference call Cramer said he listens to sounds the same. In each one, companies state they have bought back 2% to 3% of their stock in the past year and are looking to buy back more.

The market is "simply bullish" and is going higher, he said.

Qwest for Fire

Focusing on small dollar stocks, "the need to speculate is ingrained in us and important," said Cramer.

After market players have closed their 401k or IRA accounts and own a house, they should speculate part of their Mad Money portfolios, he said.

"If you have five positions, one of them can be a speculative stock," Cramer said.

His favorites are

Qwest Communications

(Q)

,

Level 3 Communications

(LVLT)

and

Arena Pharmaceuticals

(ARNA) - Get Arena Pharmaceuticals, Inc. Report

, he said.

Qwest is turning around fast, and Cramer said he wants people to get into it before it reports on Halloween.

"I believe it's a winner," he said. "It's gaining share and growing again. These phone companies are cash machines, and I think you should be in Qwest."

In addition, Cramer believes Level 3 -- a play off the shortage of broadband -- could double as people begin to realize its potential.

He also likes Arena as a speculative stock, as it has "a limited downside and a lot of upside," he said.

"Wall Street thrives on numbers and research," Cramer said.

Today the number for the gross domestic product came out as 1.6%, signifying a slowing economy. Cramer said that and although this may not sound good, it is.

"This is what we needed to see to keep the

Fed

at bay," Cramer said.

Cramer's Callers

"I don't have confidence that

Parker-Hannifin

(PH) - Get Parker-Hannifin Corporation Report

can make it back to its 52-week high," Cramer told a caller.

It has a two points up and two points down risk/reward, therefore he recommended selling the stock.

Responding to another caller, Cramer said there is a "major turn" going around at

Mattel

(MAT) - Get Mattel, Inc. Report

, so even though it looks expensive, it isn't.

He said he likes both Mattel and

Hasbro

(HAS) - Get Hasbro, Inc. Report

going into the holiday season.

As

Revlon's

(REV) - Get Revlon, Inc. Class A Report

balance sheet is "horrible" and the company's fundamentals are "quite weak," Cramer told a caller he could not recommend it.

When another caller inquired about

Panera Bread

(PNRA)

, Cramer said it is the right place to be right now.

He advised buying the "casual dining trend stock."

At the time of publication, Cramer was long Yahoo!.

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for

Action Alerts PLUS. Listen to Cramer's RealMoney Radio show on your computer; just click

here. Watch Cramer on "Mad Money" at 6 p.m. ET weeknights on CNBC. Click

here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click

here to get his second book, "You Got Screwed!" and click

here to order Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by

clicking here.

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