Jim Cramer's 'Mad Money' Recap: Time to Make Room for Alibaba

 

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NEW YORK ( TheStreet) -- The markets are starting to get weird now that the Alibaba initial public offering is getting close, Jim Cramer said on  Mad Money Monday. Most of the market is doing fine but the fast-growing, high-multiple stocks are getting clobbered, he said.

Cramer explained that Alibaba is a magnet for hedge fund and mutual fund managers because the company is growing like a weed. But with only a limited supply of money available, these fund managers need to sell their slower-growing stocks in order to make room for Alibaba.

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That means stocks like Amazon.com (AMZN) , Celgene (CELG) and Tesla (TSLA) will continue seeing rampant selling because these names are fast growers, although not as fast as Alibaba.

The Alibaba deal is already being touted as "oversold," which is Wall Street-speak for shares that are in limited supply. That means many funds will only get a fraction of the shares they want on the deal and will have to purchase the rest in the open market.

Cramer said using Facebook (FB) , a stock he owns for his charitable trust, Action Alerts PLUS, as a comparison, funds should be willing to pay up to $100 a share for Alibaba.

For those who cannot get in on the IPO, and most of us won't, Cramer said Yahoo! (YHOO) remains a great way to profit from the deal. Yahoo! is selling 120 million shares of its stake in Alibaba to raise $6 billion in cash. Cramer said the company is likely to use that money for a big acquisition or two to help it continue to grow.

Take Angie's Off Cramer's List

With shares of online review Web site Angie's List (ANGI) falling over 50% so far this year, is it time for value investors to jump in? Cramer thinks not.

Angie's List is suffering from intense competition, Cramer explained. While its business model is flailing, the company is now running at a serious cash flow deficit. What's the problem? Cramer said Angie's List has a membership model, selling subscriptions to its ratings and reviews while other sites, like Yelp (YELP) , give their information away for free and sell advertising instead.

That's why Angie's List has only managed to round up 2.3 million subscribers and why it spends 83% of its revenues on sales and marketing efforts to replenish them. Cramer called the subscription model "extremely limiting."

But Cramer said he would not be surprised if Angie's List becomes a takeover target given its ailing stock price. He said any number of companies could swoop in, change the company's business model to rival Yelp, and become a substantial player in that space. He suggested Angie's List could also hone in on specific industries such as home improvement contractors and attract a broader audience as well.

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But Cramer said he never recommends a company on takeover speculation alone when the fundamentals are bad, which is why he's taking a pass on Angie's List -- the company, in its current form, is just too risky.

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