"Even the best of the best companies can get too expensive," Jim Cramer reminded his "Mad Money" TV show viewers on Tuesday.
And that's exactly what happened to Cramer fav
Chipotle Mexican Grill (CMG) as the stock's multiple approached two-and-a-half times its growth rate.
Cramer reminded viewers that despite its movie fame, greed is not good, which is precisely why Chipotle's stock soared up $10 a share today, only to come crashing back down to close down almost $3 a share. "Nobody ever got hurt taking a profit," said Cramer.
There's still a lot to like about Chipotle, which Cramer has championed since it traded at a scant $48.10 a share back in February 2009. Cramer said the company has great food, excellent service, a high-end concept and exceptionally long lines at practically every restaurant.
Coupled that with great management, measured growth, efficient execution and the ability to roll out multiple restaurant concepts and it's no wonder Chipotle shares now trade over $330 a share.
Cramer said even in the face of a Labor Department investigation and soaring commodity prices, he held fast to his belief that Chipotle was a winner worth holding onto. So what's Cramer's "beef" with investors buying Chipotle shares at today's prices? He said its simple, the stock has simply gotten too hot and is now trading at a multiple over 2.5 times his growth rate.
Cramer noted that Chipotle is certainly better than a company like
Netflix (NFLX), which is seemingly imploding, but he reminded viewers that even great stocks can get ahead of themselves, and it's better to take profits while you have them than to not have them in the first place. Cramer's advise to investors: let Chipotle cool down some before buying back in.
Solar Power
In the "Executive Decision" segment, Cramer once again sat down with David Crane, presi! dent and CEO of
NRG Energy (NRG), a company Cramer called one of the most forward-thinking utility companies on the planet.
Crane discussed the company's new partnership with the Washington Redskins football franchise to install a two-megawatt solar power array in the parking lot. He said the array is up and running and can power the stadium in its entirely on non-game days. In addition, Crane said the parking lot panels also provide shade for cars and even withstood the beating from hurricane Irene.
Crane went on further to say that solar is not just a public service any longer, it's a real business. He said the price of panels continues to fall and within three to four years, solar panels will be cheaper that grid power in about half of the country. Plus, he added, solar power will always be free, so there's no fear of inflation. Consumers are demanding renewable power, said Crane, and solar power can serve as a billboard for what companies stand for.
When asked about other energy sources, Crane said that a lot of pieces need to fall into place for offshore wind power to become viable, but his company is still hopeful. When talking nuclear, however, Crane was less optimistic about our country's nuclear future.
Finally when asked about the probability of providing a dividend, Crane said that while he's a fan of dividends, NRG is committed to buying back its stock at these low levels. Cramer said that he's still a fan of NRG, even without paying a dividend.
Nifty Moves
Continuing his "Time For Tech" series, Cramer highlighted
Avnet (AVT), a component supplier that serves as the supermarket for tech, supplying over 100,000 customers.
Cramer said Avnet has always been his gauge for the health of the overall tech sector, which is why he was pleased to see the stock rally 9% over the past nine days, a signal that the slow summer season for tech is now behind us. Avnet currently trades at just 6.4 times earnings, ! an absur d level, said Cramer, when compared to the company's 12% long-term growth rate.
Cramer also gave a shout out to the company's monster stock buyback program. Cramer said while he despises most buyback programs, Avnet is set to purchase between 10% and 12% of the company's float, a meaningful amount that provides downside protection.
Avnet posted mixed results on Aug 10, posting a seven-cent-a-share beat on a 32% bump in revenues, slightly lower than Wall Street expected. The company also offered disappointing guidance and a cautious tone based mainly on fears about Europe.
But Cramer noted that Avnet still has a healthy business, and one that's only getting stronger now that the fall buying season has finally arrived. He said at these levels, Avnet has little downside risk and huge potential.
Off the Charts
In this segment, Cramer went head to head with colleague Richard Ross over the overall health of the markets.
According to Ross, there are several charts signaling an impeding bearish move in the markets. The first of which was the U.S. dollar, which Ross feels is gearing up for a major rally after trading sideways since April. Cramer reminded viewers that what's good for the dollar is bad for everything else, as companies that export goods make less money.
Ross also sees the Euro breaking down, with its chart signaling that the currency could head sharply lower towards its 2010 lows. He saw a negative outlook for copper as well, noting that the commodity's chart showed a nine-month rolling top, ending with a breakdown in a recent head and shoulders pattern.
Cramer said if this were true, a global recession would be likely as copper acts as a barometer for world's markets. Finally, Ross noted that even gold is signaling a bearish trend, one that could spell trouble for the precious metal.
Cramer said that while Ross paints a very negative view, his opinions should be noted as th! ey're fo llowed by many technicians. Cramer, on the other hand, said he's not as pessimistic on the market's outlook, especially when it comes to gold. Cramer said that everything doesn't crash at once, and while it may be true that the U.S. dollar and the Euro may be heading in the direction, sending copper with it, it's unlikely that gold will follow.
Cramer once again made the case that gold is the asset class that investors turn to when things go bad, so while Ross' opinions may hold some value, gold won't likely follow his lead.
Lightning Round
Cramer was bullish on
Alcoa (AA),
Exco Resources (XCO) and
CenturyLink (CTL).
He was bearish on
GT Advanced Technologies (GTAT) and
Hudson City Bancorp (HCBK).
Illogical Oil Markets
In his "No Huddle Offense" segment, a passionate Cramer said that the recent moves in oil and the oil service stocks are illogical, stupid and unprofitable. He said traders are acting like its the end of the world, and the market continues to be manipulated by hoarders and ETFs that are controlling the entire market. Cramer said simply that the price of Brent crude is simply too high and it should have reacted to the global slowdown a long time ago.
But that doesn't mean that the price of oil service stocks should be heading lower, said Cramer. He said the need to drill more oil and gas is extraordinary, and companies like
Range Resources (RRC) and others should be heading higher as they are indeed likely takeover targets. To contact the writer of this article, click here: Scott Rutt.
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