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NEW YORK (TheStreet) -- U.S. stocks posted a “fantastic rally” on Thursday, Jim Cramer told his Mad Money viewers, pointing out the Nasdaq hit a new all-time high in the process. He attributed the rally to several factors, one of which was the Federal Reserve.
On Wednesday, the Fed released its statement that while the economy isn’t doing great it’s improving. “That opened the door for this magnificent rally” and money managers had to start buying more stocks, Cramer said.
The idea of lower rates for longer also prompted investors to sell the U.S. dollar, which is good for multinational companies such as Boeing (BA) and and 3M (MMM), a holding in Cramer's charitable portfolio, Action Alerts PLUS. As long as the dollar doesn’t begin to rally, many companies will benefit come earnings time.
Then there’s Greece, Cramer said. Investors went from assuming a deal would get done to thinking there would be no deal and eventually concurring that a Greek-less eurozone wouldn’t be all that bad — all in one week! Whatever ends up happening, investors seem to be prepared for it all, he said. As uncertainty fades from investors’ worries, the market has a better chance to stand tall and continue higher.
Cramer then looked at investor confidence, which, according to the latest AAII poll on Wednesday, was at its lowest point since October. He reminded investors that at that time, the market was at a recent low and would go on to post enormous gains after registering such a low sentiment result.
Pessimism and skepticism are surprisingly big contributors behind bull market runs, Cramer said. Look at the Fitbit (FIT) IPO. The stock soared almost 50% in its first day of trading and Cramer heard many investors saying the gains were too much. He disagreed, saying it should have gone even higher, because it’s “terrific company with tremendous sales and earnings growth.”
Bottom line: As long as these factors stay in play and nothing too unexpected comes out of left field, there’s no reason stocks can’t continue to rally, Cramer said.
A number of biotech stocks were winners today, Cramer said, starting with BioMarin Pharmaceutical (BMRN), which shot higher by 12% on Thursday on positive Phase 2 results for its dwarfism treatment that was tested in children.
However, BioMarin wasn’t the only winner. Shares of Radius Health (RDUS) jumped more than 15% on its own positive data. Its Phase 3 results for its osteoporosis treatment showed a significant decline in breakage for patients using the drug compared to those using the placebo.
Then there’s Allergan (AGN), another AAP holding, which put in a bid to acquire Kythera Biopharmaceuticals (KYTH) for $2.1 billion. The latter company has climbed nearly 25% since the announcement on Wednesday.
As Allergan's CEO noted on last night's Mad Money, the acquisition will fit in perfectly with its current portfolio of treatments. Kythera, known for its non-surgical procedure to treat double chins, will be a nice complement to Allergan’s eyelash and Botox procedures, said Cramer.
Diageo (DEO) stock climbed nearly 2%. Shares are now up more than 10% over the past two weeks, following a report that suggested private equity firm 3G Capital was interested in buying the company.
Should you indulge? No way, said Cramer. Diageo, the world’s largest producer of hard liquor, “has been a total dog” for the past year and a half, Cramer said. But the idea of a takeover has left many analysts upgrading the stock, including J.P. Morgan, RBC Capital Markets and Credit Suisse.
These analysts felt they had to upgrade the stock because they couldn’t risk having a sell rating on a stock that rips higher on a potential takeover announcement, he explained.
However, he said, based on the most recent deals in the space, a potential acquisition could be done at 20 times Diageo’s Ebitda for 2014, or $195 per share. That whopping 62% premium seems like too much though, given that sales and shipping volume are on the decline.
Despite the company’s deteriorating fundamentals, 20 times Diageo’s expected Ebitda for 2015 (which is lower than 2014), would still value the company at a takeover price of $172, a 42% premium today’s current price.
And even if this is too bullish, a simple 20% to 25% premium still leaves the stock much higher from here, Cramer said. However, he says he can’t recommend the stock on M&A speculation alone, especially when its fundamentals aren’t improving.
Executive Decision: Niraq ShahOn the show’s “Executive Decision” segment, Cramer said down with Niraj Shah, the CEO of Wayfair ( W). Shares of the online home goods retailer are up a robust 89% so far on the year. Shah, who spoke at a Goldman Sachs conference on Thursday, said the company is looking for revenue of $2 billion for this year, ahead of analysts’ expectations for $1.87 billion.
Shah said the company is using superior technology, marketing, operations and merchandising to get ahead in the online commerce market. “You really have to be great at all of them,” he added, because one weak link in those four core areas can really drag down results.
For marketing, the company has relied on Facebook, which has been a success for Wayfair when it comes to getting in front of their key demographic. “It’s been a really fantastic platform for us,” he said.
The company doesn’t carry any inventory, which is what allows Wayfair to provide consumers with such a vast selection. Conversely, most retailers pick out what they think will sell the best and force consumers to choose from only those options, Shah explained. By offering selections that the customer wants and by continuously looking to improve each aspect of its business, Shah says this is helping Wayfair’s growth rate.
Cramer said investors interested in the stock should check out the company’s terrific investor presentation from May on Wayfair’s Web site.
Off the Tape
In the “Off the Tape” segment, Jim Cramer sat down with Ryan Feit, co-founder and CEO of privately held SeedInvest. Thanks to the company’s platform, investors will be able to put money to work in small businesses and startups.
Previously, one either needed to be an accredited investor or a venture capitalist. But thanks to new legislation that’s part of the JOBS Act, ordinary investors will be able to invest in startups, beginning Friday, Felt said.
What if the company isn’t legitimate? There are safeguards, Feit said. First, any company looking to raise capital has to file with the Securities and Exchange Commission, as well as get an audit by a third party. The companies also have to go through well-vetted platforms, like SeedInvest, or through a bank. The company charges a commission to the startup that’s raising capital, Feit said. There's no fee for investors to use the platform.
Investors looking to get into the private market should be careful and only allocate a maximum of 10% of their portfolio. They should also stay diversified by choosing up to 10 companies for their private holdings, he explained.
Cramer said these are exciting times for investors, thanks to companies like SeedInvest.
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