Jim Cramer's 'Mad Money' Recap: Bubbles vs. Valuation

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NEW YORK (TheStreet) -- Don't confuse bubbles with high valuations, Jim Cramer said on Mad Money Thursday. Cramer explained that the two are very different things.

Back in 1999, in the heat of the dot-com bubble, Cramer said nearly 300 companies came public, most of which were totally bogus and had no hopes of ever turning a profit. When the money dried up, these companies folded. That was a bubble.

However, many of today's high flyers can turn a profit if they wanted to, but are instead taking a page from the Amazon.com (AMZN) playbook -- Sacrifice profits to grow quickly and the market will reward you, which it did with high valuations.

That strategy worked up until a few months ago, when the market changed its stripes and demanded both growth and earnings, sending these once-loved stocks plummeting.

Cramer said there are indeed bubbles out there, particularly in the software as a service names, along with early-stage biotechs and certainly in the IPO market. But that doesn't mean that stocks like Twitter (TWTR) or Tesla Motors (TSLA), which have received "cult status," should be lumped into these groups.

Many of the newly minted IPOs have huge lockup periods expiring soon, Tesla and Twitter no longer do.

Profit in the Oil Patch

So if the market is craving growth and earnings, where are the money managers putting their money? In the oil patch, where companies like Pioneer Natural Resources (PXD), Cimarex Energy (XEC) and EOG Resources (EOG) have been shooting the lights out, Cramer said.

Analysts were expecting Pioneer to earn $1.06 a share when it last reported but the company was able to deliver $1.26 a share based on a huge 15% rise in production growth. The company now expects to grow production between 16% and 21% a year.

Meanwhile, Cimarex, which also drills in the Permian Basin, was able to deliver accelerating production growth between 19% and 22%, which was enough to send its shares up 21% for the year.

Then there's EOG, with its finger on the pulse of the Bakken, Eagle Ford and other hot areas of the country. EOG was able to post a stunning 42% year-over-year production number. That company is not only finding the oil but has the infrastructure in place to get that oil to market.

Cramer said the production growth play cuts both ways, however. When Gulfport Energy (GPOR) lowered guidance by 30% thanks to the unpredictable Utica shale region, shares immediately plummeted 18%.

Executive Decision: Jim Hughes

For his "Executive Decision" segment, Cramer sat down with Jim Hughes, CEO of First Solar (FSLR), which just delivered a monster quarter but still trades like a value stock at just 14 times earnings.

Hughes said First Solar continues to have a robust business model with long sales cycles and a huge backlog of business that affords it excellent visibility into the future. He said while the price of solar energy continues to fall, other fuels continue to rise, making solar even more economical.

Hughes continued that even with government subsidies scaling back or ending, solar remains a compelling option for more and more places around the world.

When asked whether his company will compete in the residential solar space, Hughes explained the market for utility-scale projects is so big the company will continue to focus on that segment of the market.

Cramer called First Solar a solar stock that offers deep value for investors.

Am I Diversified?

In the "Am I Diversified?" segment, Cramer spoke with callers and responded to tweets sent via Twitter to @JimCramer to see if investors' portfolios have what it takes for today's markets.

The first portfolio included Facebook (FB), Gilead Sciences (GILD), Bank of America (BAC), Merrimack Pharmaceuticals (MACK) and iRobot (IRBT).

Cramer said this portfolio has too much speculation with iRobot and Merrimack. He suggested adding General Electric (GE).

The second portfolio's top holdings included Enterprise Product Partners (EPD), Apple (AAPL), Honeywell (HON), Johnson & Johnson (JNJ) and NuStar Energy (NS).

Cramer identified two of a kind with NuStar and Enterprise. He suggested selling NuStar and adding a retailer like Costco (COST).

The third portfolio had Alcatel Lucent (ALU), Alcoa (AA), General Electric, Rite-Aid (RAD) and Xilinx (XLNX) as its top five stocks.

Cramer said Alcatel and Xilinx were too similar and suggested adding a drug stock like Bristol-Myers Squibb (BMY).

Lightning Round

In the Lightning Round, Cramer was bullish on TriNet Group (TNET), Ventas (VTR), SolarCity (SCTY), Pfizer (PFE) and Smith Wesson (SWHC).

Cramer was bearish on LTC Properties (LTC), Noodles & Company (NDLS) and Potbelly (PBPB).

Executive Decision: Irwin Simon

In his second "Executive Decision" segment, Cramer sat down with Irwin Simon, chairman, president and CEO of Hain Celestial (HAIN), the organic food maker that delivered a two-cents-a-share earnings beat on record revenue that rose 22% year over year.

Simon said Hain continues to grow into one of the largest natural and organic food companies in the world and it remains exciting times for all those involved. He said Hain's goal is to sell products everywhere there's a cash register because people need to eat well no matter where they are.

When asked whether the consumer is now rejecting non-healthy options, Simon noted consumers are more educated and when they compare Hain's organic juices with carbonated cola, they see the difference in sugar levels and artificial ingredients and choose Hain's products.

Finally, when asked about pricing, Simon said Hain remains aggressive about reducing costs but admitted it needs to do more to keep good food affordable for everyone.

To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.

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-- Written by Scott Rutt in Washington, D.C.

To email Scott about this article, click here: Scott Rutt

Follow Scott on Twitter @ScottRutt or get updates on Facebook, ScottRuttDC

At the time of publication, Cramer's Action Alerts PLUS had a position in AAPL, BAC, FB, GE and JNJ.

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