Cramer's 'Mad Money' Recap: Wrong Side of a Trade (Final)

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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, Action Alerts PLUS , or Chipotle Mexican Grill ( CMG), Cramer said sometimes it just doesn't pay to bet against these high-flying companies.

Cramer's recommendation to hedge funds, "bet against stocks where the fundamentals are actually bad, not those that seem to have run too far."

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