Cramer: 3 Things Needed to Kill a Cult

Editor's Note: This article was originally published at 3:21 p.m. EDT on Real Money on Aug. 5. To see Jim Cramer's latest commentary as it's published, sign up for a free trial of Real Money.

NEW YORK ( Real Money) -- What does it take to stop a cult stock? What can reverse the price of Tesla ( TSLA) or Netflix ( NFLX) or Amazon.com ( AMZN)?

First, it's harder than you think. These are stocks backed by products everyone loves. Last week I took a hard look at the new BMW electric car, the one that goes 100 miles on one tank, and I said it had none of the panache of the 180 miles-per-tank that the Tesla has. The fact that BMW's being branded as a city car leaves me cold, too. How many chargers are there in the city? The Tesla's a driving wonder. It is without a doubt the most sought-after car I have ever seen. Yet there are tons of nonbelievers everywhere.

When I was at the Delivering Alpha conference, a young buck kind of guy comes up to me and says he's just kiting, hasn't paid the fee for Delivering Alpha, he just wanted to see me about a job prospect. Some people remain under the delusion that I have a lot of jobs to give as I did a decade ago.

But I played along, even as I felt proprietary enough to almost want him thrown out, and I said, "give me your best idea." He said, "Short Tesla." First, I asked why. He said the sales numbers are inflated. I asked him whether he had ever tried to get one? He said, "No." I urged him to go to the Short Hills Mall dealership and try to get on the waiting list. He didn't know there was a dealer or a waiting list. Unimpressive. Then I asked him, "Have you ever driven one?" He said, "No." I was wide-eyed and said, "Why do you insult me with your lack of homework?" I am as miserable to arrogant professionals as I am nice to unsophisticated amateurs.

So he said that it was only a matter of time until the novelty wore off. I asked, "Do you know how many Teslas have been sold in Europe?" He had no idea. I said, "How about two? Is that novelty about to wear off?"

I think that Tesla's loved from afar, but not Netflix. In a week, Breaking Bad starts its last season. I heard Vince Gilligan, its amazing creator, speak on another network about why his show is a success. He said it was simple: "Netflix." Before Netflix it was impossible to get into a new drama. Not anymore. That, more than original content, drives people to Netflix.

Amazon's so loved it's obvious. Amazon Prime is like Costco ( COST), a membership, and it gives you automatic two day shipping, something that's getting cheaper and cheaper for Amazon to do with the addition of all-new warehouses. That cuts the vig to United Parcel ( UPS) and is a huge win for both the customers and the cult.

So, the unstoppability of all three is extraordinary.

Second, you need to see insider selling of the massive variety. To sustain the cult you need the managers of it to believe, too. When they sell you are in greater-fool territory. We just haven't seen that happen. It's something that I think a lot of the analysts thought would happen, particularly with Tesla, but it hasn't occurred.

Third, we need to see financing dry up. Unless a company's about to be shot and left for dead these days, there is financing, and that's the case for all three of these. Tesla could easily get a state loan to build a plant. We heard from CBS ( CBS) on its call how much it needs Netflix and will pay. Amazon could issue $3 billion in bonds of different tranches and I think they would all be lapped up.

Now, here's the tricky part. You need all three of these to occur. Any one of them won't kill the cult. Without them you could see ridiculous price targets be set: "Tesla goes to $400!" And who is going to argue with that, especially in an up tape?

Now when Tesla started its remarkable run there were tons of bears out there, many of whom believed that the fated last conference call, which was a total game changer, was a total fraud. But ask Bill Ackman about total frauds. Until you get the Securities and Exchange Commission involved, those calling fraud don't have a leg to stand on. And given that these are all cults, valuation means nothing.

So, be careful. I totally understand why you would want to play. You don't know when the three Achilles' heels will play out -- if they ever will -- but the long side, preferably with deep-in-the-money calls, most likely, is the way to go.

I wish more people understood the concept of the cult. In the old days, there were always several dozen of them and typically they were losing fortunes, not the case with these three. In fact, if Amazon wanted to show a huge profit it could do so tomorrow. Same with Netflix if it shuttered international. Tesla? Not going to happen any time soon.

Still, these could run some more. It is just a fact of life.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.

More from Investing

Market Can't Handle the Wild Ride: Cramer's 'Mad Money' Recap (Thursday 5/24/18)

Market Can't Handle the Wild Ride: Cramer's 'Mad Money' Recap (Thursday 5/24/18)

Musk's Tweets About Unions Draw Fire From United Auto Workers

Musk's Tweets About Unions Draw Fire From United Auto Workers

Replay: Jim Cramer on North Korea, Oil Prices, Apple and Carnival Corporation

Replay: Jim Cramer on North Korea, Oil Prices, Apple and Carnival Corporation

Gap Drops After Hours on Disappointing Earnings, Weak Same-Store Sales

Gap Drops After Hours on Disappointing Earnings, Weak Same-Store Sales

Canopy Growth: First Cannabis Firm on the NYSE Fails to Generate Buzz

Canopy Growth: First Cannabis Firm on the NYSE Fails to Generate Buzz