NEW YORK ( TheStreet) -- "When hedge funds bet against 'overvalued' stocks, they better have the whole story," Jim Cramer told his "Mad Money" TV show viewers on Tuesday, as he opined on a handful of high-momentum stocks that seem to have defied gravity. Cramer explained that all investors, even big ones, can get themselves on the wrong side of a trade and bet against the wrong stocks. Such was the case with a handful on names, he said, those where hedge funds determines that the fundamentals didn't justify the stocks' sky-high prices. The only problem was, they were wrong. The newly-minted shares of Michael Kors ( KOR) was one such name, said Cramer. He noted that just last week he declined to recommend the stock because it had exceeded his limit of a multiple twice that its growth rate. But today, Kors delivered stellar numbers, seeing a 35% surge in European sales alone. The news sent shares rocketing higher, forcing out all those who shorted it. Cramer noted that another accessory retailer, Fossil ( FOSL), also seemed overvalued with a slowing growth rate. Yet on the company's conference call, company management said they see growth accelerating, news that sent shares up 14% in a single day. Whether it's Netflix ( NFLX), which ramped another 4% today, or Apple ( AAPL), a stock which Cramer owns for his charitable trust,
Movie Catalyst"Every once and awhile there's a new product that's big enough to move the needle," Cramer told viewers. Once such product is a new movie called The Hunger Games, coming in March. Cramer explained that movie studios have a hit-or-miss record when it comes to financial success, but in the case of Lion's Gate Entertainment ( LGF), shares have already run up 35% for the year ahead of the Hunger Games release. So what makes this movie so special? Cramer said it's the first book in a trilogy by Suzanne Collins, a trilogy that has already sold more than 23.5 million copies and comes with a built-in fan base. Lion's Gate plans to covert the series into four movies, the first of which could generate $400 million in revenues for the company in the U.S. alone. Cramer said that number translates to 87 cents a share for Lion's Gate, a huge swing for a company that was expected to earn only nine cents a share this quarter but delivered a penny a share loss instead. yet despite the disappointment, shares of Lion's Gate rallied 7% in the follow day's trading, another sign that momentum for the new movie is building. But Lion's Gate is more than just a single potential hit movie, said Cramer. The company also has one more film in the popular Twilight series and is actively developing other pop-culture young adult titles for its portfolio. Cramer said that movie studio stocks often don't trade on earnings, but rather on the anticipation of new releases. In this case, that anticipation is reaching a fever pitch, which is why Cramer recommended buying the stock on any weakness.
Low ExpectationsWhile personal break-ups may be painful for you, Cramer said that corporate break-ups are often great for your portfolio. Such is the case of Post Holdings ( POST), the spin-off from Ralcorp ( RAH), which went public on Jan. 27. Post Holdings is the maker of Post cereals, with includes such household names as Raisin Bran, Honey Combs and Grape-Nuts. Ralcorp acquired Post in August, 2008, but Cramer said the merger went so awry that the company was forced to jettison the brands in order to save itself. But that's great news for Post, said Cramer, as shares are now on the run higher, up 7% today alone. So what went wrong at Post? Cramer said just about everything. Ralcorp's primary blunder was cutting back on ad spending, something that caused Post brands to lose marketshare. Additionally, gross margins eroded to just 16%, down 8% from before the merger and Ralcorp raised prices three times, taking Post brands out of their "sweet spot" just below the competition. But Cramer noted that with expectations so low for the company, just about any good news from here will be seen as a positive for Post, which has almost no analyst coverage on Wall Street. He said the company's new management has a great track record of success and it should be hard for Post to ramp up ad spending, return margins to their historic levels and begin taking marketshare again. Trading at just 12 times earnings with an 8% growth rate, Cramer said shares of Post are a $15 stock masquerading as an $11 stock. He would be a buyer.