Cramer's Mad Money - The Facebook No Buy Zone (5/15/12)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday May 15.

No Buy Zone For Facebook (NASDAQ:FB), Zillow (NASDAQ:Z), Jive (NASDAQ:JIVE), Linkedin (NYSE:LNKD)

It has been announced that the Facebook IPO will be priced 14% higher than anticipated, to over $38. A huge pop on Friday is a foregone conclusion, since recent social media IPOs jumped an average of 42% the first day. While Cramer urges investors to get in on the FB deal and buy as many shares as possible, he calls Friday a "No Buy Zone" for Facebook. Even if the stock falls dramatically from its initial pop on Friday, there will be a better time to buy it than Friday. Cramer discussed other social media IPOs that have worked as long-term investments: Zillow , Jive and LinkedIn. Investors who were patient and waited for a lower entry point in ensuing weeks and months reaped a 90% gain from Zillow, and could have bought Jive 4.7% lower than it fell initially after its IPO. It is just as important to stay away from Facebook on Friday as it is to buy as many shares as possible before Friday.

Whole Foods (NASDAQ:WFM), Chipotle Mexican Grill (NYSE:CMG), Starbucks (NASDAQ:SBUX), Disney (NYSE:DIS), Home Depot (NYSE:HD), Costco (NASDAQ:COST), JPMorgan (NYSE:JPM), Yahoo (NASDAQ:YHOO), Morgan Stanley (NYSE:MS)

Before investors buy stocks, they should know what they own. Cramer recommends great companies with popular appeal and easy-to-understand business models, like Whole Foods (WFM), Chipotle (CMG), Starbucks (SBUX), Disney (DIS), Home Depot (HD) and Costco (COST). While the latter two have faced obstacles lately, Cramer thinks these are merely "speed bumps" on the road to growth. JPMorgan (JPM) seemed like a straightforward company, but its hiccups in the past few years, including the latest scandal that cost the company $2 billion, are a sign that not even a great CEO like Jamie Dimon can stay on top of the complexity and inner workings of the bank. While Yahoo (YHOO) doesn't seem so complicated, it has no cloud, mobile and social networking exposure and is worth buying only as a takeover target. The bullish thesis for buying Yahoo would be too complicated and dependent on some other company buying it, so Cramer would give Yahoo a miss.

Cramer took a call

Morgan Stanley (MS) is an expensive stock; "An international bank is not something I want to own."

Ingersoll Rand (NYSE:IR)

Sometimes it pays to "piggyback" off of successful hedge fund managers, but what if the news about an activist investor like Nelson Peltz is already out? Is it worth buying a Peltz holding after he has already bought it? Cramer looked at 7 of Nelson Peltz's holdings and found that the stocks increased an average of 10% a year after he bought them, with most of the gains occurring in the first 3 months. Ingersoll Rand (IR) jumped 5% recently on news Nelson Peltz purchased a 7.3% stake in the company, but the move might not be over. While IR has a diverse array of businesses, from HVAC to locks and high tech security, it has been an under-managed company. Peltz may have enough influence to pressure management into aggressive restructuring in the company, which will unlock value. Cramer would not buy IR without doing thorough research on the company, but the fact that it is now one of Nelson Peltz's holdings may be one reason to buy the stock.


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