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NEW YORK (TheStreet) -- All-time highs are a time for reflection, Jim Cramer reminded his Mad Money viewers Tuesday. The markets are more expensive than they were Monday, and that condition will eventually put a kink into our "buy low, sell high" strategy.
New highs inject confidence into the markets, which keeps the investment bankers very busy lining up the parade of mergers, acquisitions and takeovers that we've been seeing lately. Whether it's DirecTV (DTV) or AstraZeneca (AZN), Cramer said to expect a lot more activity in the food, drug and oil sectors. He also expects Sprint (S) to make a bid for T-Mobile (TMUS) before the end of the month.
Yet, despite the new highs and the many mergers, Cramer said there are still whole segments of the markets that are lagging the averages and are exceedingly cheap. The industrials is one such group, the airlines are another. American Airlines (AAL), for example, trades at just six times next year's earnings compared to the market average of 17 times.
No reflection would be complete without also examining the bear case. Cramer admitted that while some sectors of the market are reasonably priced, others -- like the software-as-a-service stocks, the 3-D printers, e-commerce, early-stage biotechs and anything relating to fuel cells -- still have room to fall. Case in point, Splunk (SPLK), which inexplicably fell over 8% in today's session. These stocks are not yet on solid ground, Cramer said.
Overall, Cramer still thinks the rewards outweighs the risks, but investors need to be cautious in the stocks they choose.
Off the Charts
In the "Off The Charts" segment, Cramer went head to head with colleague Carly Garner to see what the technicals are saying about the Nasdaq and how it compares to the S&P 500 index.
Using a daily chart of the two indices, Garner noted the Nasdaq tend to lead the S&P. In February, strong buying in the Nasdaq led the S&P higher while in April, strong selling in the Nasdaq led the broader markets lowers. She concluded that continued selling in the Nasdaq will eventually begin to weigh on the S&P.
Looking at other metrics, Garner noted the slow stochastic momentum indicator showed the Nasdaq in an oversold condition, meaning a snap-back rally could be possible. But longer term, the MACD momentum metric signaled a bearish crossover.
The S&P didn't fare much better, with both the MACD and stochatics signaling there's not much upside left for the index, which has been trading in a channel for over a year. The upper limit of that channel would be 1,934.
Cramer said his take on Garner's analysis is that caution remains a prudent strategy. As he's not a fan of trading indices, he said there's no reason to dump the good stocks. Then again, no one ever got hurt taking a profit.
Amazon vs. Alibaba
It hasn't been a good year for Amazon.com (AMZN) shareholders, with the stock down 25% so far in 2014, but Cramer said with the upcoming Alibaba initial public offering, things aren't likely to change any time soon.
Cramer said his logic is simple -- until now portfolio managers haven't had a choice. If they wanted to be in the e-commerce space, Amazon was the unparalleled leader in the space. But with Alibaba set to unleash $20 billion worth of its shares, money managers will now have a choice. Since they're not likely to own both companies, Amazon will lose out.
The growth metrics for Alibaba are simply better than Amazon, Cramer noted. The total addressable market in China is 540 million users and growing, over twice that of the U.S. Alibaba also has a superior business model, acting as a platform rather than a retailer, which means it holds no inventory. Revenue at Alibaba was up 62% last year, more than enough to keep money managers salivating, and mobile payments grew from 7% in 2012 to 20% in 2013.
While Amazon already gets over half of its sales from overseas, Alibaba is just starting its expansion. Given the company holds no inventory, Cramer said that expansion will come a lot quicker for Alibaba than it has for Amazon.
Add all that to the fact that Alibaba has 50% operating margins and it's safe to say Amazon will lose more than a few institutional investors when Alibaba hits the market later this year.
Executive Decision: Burton Goldfield
For his "Executive Decision" segment, Cramer sat down with Burton Goldfield, president and CEO of TriNet Group (TNET), a recent IPO that's been bucking the downward trend, trading at 22 times earnings with a 20% long-term growth rate.
Goldfield said TriNet has both growth and profits, something that's not common among many of today's newly public companies. He said small businesses need help navigating the new health care environment and TriNet provides it, plain and simple.
Goldfield continued that for many small businesses, the reporting requirements of the Affordable Care Act have been causing the most problems. For those businesses with employees in multiple states, those requirements increase exponentially. There are 50 million people who go to work in small businesses, Goldfield noted, and they all need TriNet's services.
Cramer said TriNet remains the only recent IPO that he's recommended holding onto because the company lives up to all its promises.
No Huddle Offense
In his "No Huddle Offense" segment, Cramer said if you want to pick good stocks, you need to know where the demand is -- and nothing tells you that better than new offerings of stock. Case in point: Concho Resources (CXO) and ExamWorks Group (EXAM).
Concho is a red-hot oil driller in the Permian Basin. Its shares are up 22% for the year. The company needed to raise money so it can expand its drilling operations, so it offered up six million shares in a secondary offering at $129 a share. Demand was so strong, the deal was upped to 6.5 million shares, but even then, shares closed up at $132 by the close.
Compare that to ExamWorks, a company that offers support services to the health care industry. Cramer said this is one of a dozen companies in this space and, yes, it's losing money. But that didn't stop it from offering 3.1 million shares a $33.90 a share, down from the original price of $35.30 the night before. Despite the lower price, shares still fell instantly, down 11.6% for the day.
While Concho was using its proceeds to expand and grow its business, ExamWorks used its cash to instead let executives cash out and dump their shares all at once. The distinction between these two offerings couldn't be clearer, Cramer concluded.
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-- Written by Scott Rutt in Washington, D.C.
To email Scott about this article, click here: Scott Rutt