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Jim Cramer is a much admired investor and investment guru (with a strong long term track record) who often recommends shares in controversial stocks which are riding trends in the consumer, technology, and other industries. Mr. Cramer is practically worshiped on Wall Street for his ability to find top growth stocks which squeeze short sellers and make new highs regardless of the current market direction or individual company valuations.

Like anything else on Wall Street, Cramer's picks are momentum and perception driven as much as they are driven by fundamental reality. Today's market, for example, represents a challenging time for momentum, value, and growth investors alike as many of the momentum favorites are now trading for P/E ratios that are simply not justified by the corporate fundamentals.

The following 10 Cramer favorites are trading for price to earnings and price to book value multiples that make them extremely vulnerable to a large, swift correction which could easily knock off 30-50% of the following 10 companies' market caps. I am not saying that a swift fall is guaranteed, but investors in these names should not be surprised by a quick correction in many of these names, which have each gained over 100% in the past year.

I am certainly not advocating a large short position in these names at this time, but skilled traders can fade large up-moves in these names or can sell bear call spreads or calendar put spreads on these names to profit from the apparent overvaluation that exists in each of these stocks. In the worst case scenario, many of these stocks could completely implode, as demonstrated in 2000 and in 2008. In the "best case" scenario for these names, a further bubble could persist in which these names rise 30% or more before either crashing or reaching some "permanent prosperity" plateau.

NFLX - Netflix is certainly a strong company with amazing revenue and earnings growth rates, as well as a stock price which has appreciated from $30 or so just a few years ago to $245 today. NFLX shorts have been torn apart as the company has benefited from the bankruptcy of Blockbuster (OTC:BLOAQ), Movie Gallery, and countless mom and pop retailers which compete with the company in the movie rental space.

NFLX is risky not because of their business model, but because of their valuation (the company trades for over 80 times earnings, a multiple not widely seen since the heady days of the Nasdaq bubble). NFLX is also at risk because they are cannibalizing the revenues of the content providers and creating an environment where movie studios must create films at a much lower price point or suffer operating losses trying to release content. NFLX is certainly the king of online streaming, but the movie studios have pushed back as they sell Blu Ray DVDs for the same price that NFLX would like to offer the content over their streaming service for a full three month time period.

As they say, customer satisfaction is not as important as customer loyalty - any businessman will tell you that it makes no sense to sell your product at a loss, and NFLX offers a dismal proposition for content providers who need to sell their product profitably in order to stay in business. Unless NFLX starts producing movies internally (historically a volatile business), they will eventually face headwinds as movie studios realize that selling a physical product is the only way to make any money in the home entertainment market. Our price target for NFLX is $150 per share.

CRM - Salesforce.com is another Cramer favorite and he has clearly forged a close friendship with CRM's CEO Marc Benioff. CRM trades for an astronomical P/E ratio that is unlike almost anything investors have experienced since the dot com fiasco (memory of the risks involved in 200 P/E ratio stocks is clearly short on Wall Street and Cramerica except for those who already were fleeced in 1999 and 2000, and they don't have much left to trade with). CRM does boast a 70X 2013 earnings estimate, however, their current acquisition spree may lower earnings in the short run.

Earnings, in fact, are actually moving lower and in the recent two quarters, CRM has seen YOY quarterly earnings actually decline. Normally, it would be easy to short a name like this as the earnings growth (or decline) would make a stock at 200X earnings an obvious trade. However, in this market, stocks with astronomical P/E ratios are rising while stocks with low P/E ratios or low price to book ratios are dropping like anchors in the sea. Eventually, however, people will realize that Intel (NASDAQ:INTC) at 8X earnings is a better investment then CRM at 240X earnings. When this realization happens, my guess is that the fall will be swift and lethal for those without stop loss orders or put option hedges in the name.

GMCR - Green Mountain Coffee Roasters looks incredibly vulnerable on a valuation basis after rallying nearly 45% over the past month. GMCR announced that Starbucks (NASDAQ:SBUX) will be selling K Cups in a joint venture with GMCR, which will certainly add to GMCR's bottom line. The baby boomer generation is incredibly infatuated with the Keurig Brewer and this trend is certainly only starting. That said, GMCR's patents on the Keurig Brewer expire next year and it remains to be seen if their competition will be making knock-off models at lower price points in the future.

With a P/E ratio well over 100X, GMCR is certainly vulnerable to a large stock price decline which could easily erase 30% off the company's generous public market cap. If GMCR experiences additional SEC questioning into their accounting practices, look for another swift stock price collapse as the hot money hits the sell button faster then the time it takes to brew a K cup of hot chocolate.

LULU - Lululemon is one of the fastest growing companies in the world and likely the fastest growing mid cap retailer on the planet. LULU is trading at 52X earnings, however, and the stock is a high beta name that will likely fall faster then the overall market if a correction hits equity markets. LULU is a promising company with an expanding customer base, and as many people already know the appeal of their apparel is really undeniable.

That said, trends in consumer behavior are not easy to predict and many times trends and tastes in clothing can change in a very short period of time. Investors who want to speculate on LULU stock should consider buying the name with a married leap put as a hedge against their stock position.

OPEN - OpenTable is one Cramer favorite that I actually am short, and I believe the stock is due for a 40% or greater correction at some point in the next year. OPEN simply lacks a large enough market to continue growing at a 30% or higher level and eventually the stock, which trades for over 180 times last year's earnings, may reflect the fundamentals of the company's market base. OpenTable may already be nearing market saturation and several competitors are rapidly moving into the space (not only that, but some people like me will likely never reserve a table online when we can simply Google the phone number and call the restaurant directly).

AMZN - Amazon.com is a stock which trades for an astronomical 70X plus P/E ratio while facing extreme challenges from state governments which will likely challenge a Supreme Court ruling that makes the company exempt from paying state sales taxes. The "Main Street Fairness Act" will likely come into the spotlight as the municipal bond and state government fiscal crises become even worse as time goes on. Amazon's growth directly hurts mom and pop retailers in their markets and as more and more people move to online shopping, the states will be faced with even more severe budgetary shortfalls.

Eventually, state governments will likely find a way to charge Amazon the taxes which all of their small business competitors must pay (it truly is unfair for AMZN's small business competition to have to pay them and AMZN to skirt them). When this happens, look for AMZIN's razor thin margins to contract significantly.

CMG - Chipotle is a Cramer favorite which trades for nearly 50 times reported earnings and has exhibited 30% or higher historical growth. CMG, however, has projected same store sales to rise at a low single digit rate which would certainly not justify the large price to earnings ratio the company currently commands. CMG is also vulnerable to rising food and labor prices as well as a general shift to healthier dining (their burritos are highly caloric and contain large amounts of fat per serving).

Chipotle is a great company led by a dynamic management team, but the stock is highly vulnerable to a 30% correction after the tremendous run it has seen over the past couple of years. CMG has not been able to make new highs and the overall markets look extremely "toppy" in my opinion with oil and commodity prices making new highs almost every day. Investors in CMG are taking big risks, and should consider selling calls against their stock or simply taking profits on their long positions.

TZOO - Travelzoo has risen nearly 100% over the past month. That was not a typo. The company has benefited from the real or perceived similarities of its business model with that of Groupon.com and Priceline.com (NASDAQ:PCLN). Before you rush in to buy the stock and start daydreaming of what kind of new car you are going to buy with your TZOO profits, understand that TZOO shares may reflect an enormous speculative bubble which could burst at anytime. The shares have shot straight up and trade for over 80X earnings; all the while, the company has only displayed revenue growth of 19% over the past year - hardly a bargain.

TZOO has seen this type of momentum craze before as the shares traded for $100 a few years ago before falling below $10 in 2008 and 2009. Some investors (the ones salivating over vertical stock charts) may think that the $10 per share number was the anomaly, but if you look at financial statements all day like me, you may think the company is in a 1999 bubble all over again. Remember, trees don't grow to the sky and stocks don't go straight up forever.

SFSF - SuccessFactors offers a rare blend of nineties-esque valuation multiples which are almost more representative of that era than hot pink wristbands, polka-dot neon orange T shirts, or Hypercolor clothing which dominated the era of the tech boom. SFSF has really no earnings to speak of, yet the company commands a valuation worth over $2 billion dollars. I know a lot of people who aren't earning any money would love to be worth over $2 billion. From the example SFSF gives us, all they need to do is IPO themselves and presto -- insta cash is dropped right into your online brokerage account - ain't Wall Street grand?

RHT - Red Hat is another "new" Tech stock which commands an extreme premium market valuation. Cramer recently recommended the stock even though RHT trades for a whopping 94X earnings (something the dot com day traders will surely remember as being a "normal" valuation). At 10X sales and 8X book value, RHT investors should consider putting in a stop loss order, or at least buying a put option on their position, as the company has only grown at a 20% or so pace over the past few years while commanding a 90X plus P/E ratio. Additionally, RHT is a low margin business which boasts just an 8% return on equity. In the future, RHT's cloud services may command a better margin, but for now, investors should steer clear of any stock trading at near 100X earnings.

So there you have it, my list of Cramer favorites that actually look to be good investments from the short side at some point. With today's market failing to break above the psychologically important 1333 level on the S&P, that point may be today. Investors who watch Cramer on TV should realize that his investment style is extremely aggressive and not suitable for everyone, as many times investors will buy a stock and not research the trade at all (they do not buy and do the "homework" as Cramer recommends).

To be sure, I am a huge fan of Cramer and recognize that he has been dead right on many of the names listed above. That said, some of these stocks are getting so expensive that only their CEOs could love them, so watch out and hedge accordingly. All in all, I am not recommending shorting these as much as I am recommending not buying them. However, astute option investors may want to consider bear call spreads on these names or calendar put spreads to profit from the extreme overvaluation in the ten companies above.

Disclosure: I am short OPEN, SFSF, CRM.

Additional disclosure: I am short call options in CMG, LULU, NFLX, and AMZN but trade around core positions and use these only as an overall market hedge. Many times I use bear call spreads and calendar spreads to protect capital and profit from option time decay.

Source: 10 Cramer Favorites That I Don't Recommend Buying