tv Mad Money CNBC May 10, 2013 6:00pm-7:01pm EDT
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the right track with disney. i think you can still look for opportunities to buy put spreads or sell call spreads there. >> scott? >> competition is eating mcdonald's lunch in this week's web extra. all about how to take advantage of that. >> dan? >> listen, if you want to short anything in thist ♪ my mission is simple, to make you money. i'm here to level the playing field for all investors ecigs there is always a bull market in summer ecigs i promise you to find it eci. hi, i'm cramer. this is cramerica. every night i come out here and help you find high quality stocks, well, that are worth owning. many stocks that i believe will reward you by either going higher or paying you juicy
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dividends or often both. perhaps because of my four decades in the business, i sometimes leave way too much unsaid and take too much knowledge for granted. knowledge you need to know to be the best investor you can be. so tonight, i'm taking the timeout to impart some of that knowledge in a special show about the way stocks really work and how they inter-relate or don't with the companies they stand for and are supposed to represent. on "mad money" we analyze companies, trying to find out what makes them tick. what expectations they are supposed to beat. we don't trade these companies, we invest in these stocks. you should never forget the company and their stock aren't the same thing t. kind of thing that should go without saying. people constantly make a mistake of equating a fohne company with its stocks. economists think it can wreck your move, especially in volatile marks, leak these, where many stocks trade off a big picture macrodata about the
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global economy rather than what's known as the micro, meaning the individual companies behind the stocks, macro still rulesch when it's good, they go higher. when it's bad, they go lower. the fact is a company and its stocks are synonymous. we see this all the time a. stock gets crushed, pum verized, we assume something is wrong with the company. on the flipside, we presume the company must be doing something special, something right. that's simply not how markets work, people. often shares of a company's stock will have big moves up or down for reasons that have nothing to do with the underlying business. that's okay. it happens all the time i. doesn't mean the market is crazy or ir irrational. there wouldn't be no "mad money", if there were, we wouldn't have much to explain. should stocks trade based on changes in the underlying company? isn't that the way the markets
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should work when it isn't broken? don't we spend lots of time on this show doing homework, aen liesing companies, to figure out what makes businesses better than others, teaching them how to have companies improving or doing better than bem people chicago i tell you the determinant is increases in earnings estimates for the underlying company. that nothing correlates more strongly with a rising share price than estimate increases. increaseling -- increasingly why isn't it enough to buy the stocks that look like they have if most that will grow earnings faster than expected. why isn't it enough to invest? because we can't buy companies fms you got hundreds of millions of dollars to go around. it's simply not an option, instead, we have to buy shares of stock, shares of stock that trade on the open market where you have lots of buyers and sellers who might have different motivations from you. so when you find a high quality company with seemingly expert
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prospects, you can't assume u seum the shares of the company will go higher since you need to take into account the way the stock trades. the way it tradess in the market, up and down. don't get me wrong here. over the long haul, the best way to pick winning stocks is by identifying winning companies. ones that are growing faster than anyone expects or vastly increases their dividends or improving. i'm not changeling my mind one bit. that is still the way to go. but a lot of times you call me on a day-to-day basis. it doesn't work. these stocks on a day-to-day basis can trade wildly with no relation to what's happening at the company. those movements may be confounding, so confounding you sell low or buy higher or give up entirely, you know why i think you should stay in the game to save money for retirement, vacation, tuition, all the necessities in life. if you assume it makes sense, you are going to end up passing
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up incredible opportunities to boy merchandise that's been marked down for irrational reasons and, you know what, you will miss when you should sell stocks that have run up too much, courtesy of market mechanic, rather than anything related to the company. in recent years, we've witnessed the rise of a tonne of factors that can cause the stock's performance to differ even more radically from the performance of the underlying company, at least in the near term. over the long term, of course, they do tend to converge. over day, weeks, maybe even months. you have all sort of things that can make the stocks of a performing company fall or a detrior rating company rise. they say use etfs. some allow them to buy or sell with leverage, giving them the option of bike or selling the needless buck. this needily proliferation of etfs won't mean they can trade in lock step with each other the
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good moving in tandem with the bad the mediocre as ultimately the facts will go out, stocks that do go up will go up. if a stock is a hour, then it sectors the neighborhood. nobody wants a good house in a lousy neighborhood. >> the house of pane! >> but these days the influence of etfs i think has become obnoxioustious. they made the sector more important than ever when it comes to day-to-day action. too important. you have the high frequency tradetaries can hijack the entire market causing massive across the board moves that makes no sense from the respect of the fundamental also, especially at moments of extreme volatility. these new waves all start the stock picking beaches we know from the flash crash and myriad other short-term blips down. of course, when times get tough for companies, they can get much
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tougher for their stocks. i spent time foreselling on this show. stocks can get slammed because head funds that own them are in trouble and they desperately need to -- sell, sem, sem, in order to raise cash. you see this happens every time a bunch of hedge funds, you saw it if gold, things doesn't go its way, money managers in europe lost when the eurozone's sovereign debt began to dominate the headlines. they had to sell everything, they had to sell totally unrelated stocks, too, because they got hurt so bad, especially when their investors were clamouring to get the money back. this is what happened in 28 and 29 when we crashed when selling began before selling which took stocks down to absurdly cheap levels. the reverse happened in 2012 when those who bet against european stocks, almost all stocks, particularly the financials, had their heads handed to them when the european
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central bank put its foot down and re-inflated stock prices by backstoping financial institutions and lending money all over the plals. the bank stocks soared. it didn't matter whether they were vol vent or insol vevenlt they all flew up together. i know you have never shorted a stock. it's dominated by hedge fund, which have to make bets and against whole stocks and whole markets every day. their influence must be taken into account when we figure how a stock can differ from the company underneath. when lots of shorts pile into a stock and get hit with unexpected good news from the company, you can get what is known as a short squeeze, that propels the stock to the ab durd heights that short sellers have to boy in order to admit defeat. a lot of people feel that's what happened to tesla. okay. the elon musk company. remember, the market is a market which means it is dominated by supply and demand. so when there is not enough supply of a given stock or kind of stock to satisfy that demand, you could see a stock rise
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beyond what you'd expect based on the fundamental also of the companies. when there is too much supply relative to demand, then shares get hammered well beyond you might have thought they could go. we saw a lot of this with the super hot areas like the chinese ipos in 2011. at first they were staggering to give you this incredible performance. everyone got so excited. they wanted nothing but china. but the gains became smaller and smaller and smaller as we got more chinese.coms coming public. ultimately, they flooded the market with their supply t. same thing happened at the end of our dot-com boom at the turn of the century and the deluge in 2011 and 2012, we saw it again. no chinese deal was worth war tis pating. supply was way too heavy and demand way too heavy. they reached their lowest level in 2012, only two deals completed, an 83% decline from 2011.
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95% decline from 2010. in the end, the buyers are the media out of the shoot the groupions and the zincas. they were crushed by insider bailing seemingly at any price imaginable. they became super cold ones simply because the public was first fascinated then turned oon them with a vengeance that i haven't seen since 2001. of course the fundamentals were never any god to begin with. so the bottom line, recognize that water happening with your stocks doesn't always necessarily reflect what's going on with the underlying business and use that fact to your advantage. don't get freaked out about it. when a company in strifk shape sees its stocks smashed, that could be an amazing buy opportunity. just remember that it can sometimes take a long time for the action in the stock to sink up with the performance of the company it represents a tiny piece of. that way you won't be frustrated with what you thought should happen immediately after you heard fabulous news. instead, you can wait until the
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market gets smart and rewards your stock with the move it deserves. let's go to dave in virginia, please. dave. >> caller: yes, how are you today, jim? >> i'm real good. how are you? >> caller: i'm doing real well. i have a question for you about after-market trading. i was curious what exactly is it? who gets to participate in it? what are the ups and downs? >> anyone can participate. the market doesn't close anymore at 4. there's bids and there is offers. i don't like it because it's uniraqi e regulated so to speak. there is not a lot of depth to the market. you could end up buying something too high and selling it too low. i i don't encourage it. i encourage homework, no snap judgments. stay away. jay in texas. jay! >> caller: boo-yah, jim, from south texas. >> how are you? >>. >> caller: just fine, thank you. the question i have for you, jim, is if distribution in a stock throughout the day,
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meaning more sellers than buyers, how is it that many times the stock can defy gravity and close up for the day? >> well, i mean, the sellers do sometimes complete and while the sellers are selling, buyers are lining -- buyers get lined up by brokers who say i have a big serial, so what happens the stock goes down and then when the final piece trades, all tease buyers converge and they end up overwhelming that last piece and the stock goes higher. that's what happens time and time again. look, sometimes the stock's performance doesn't match the company's under lying business. i know that can shock you. and it can take a while for the two to sync up. if you get a bargain, be patient, wait, your rewards will beckon. "mad money" we'll be right back. don't miss a second of "mad money." follow @jimcramer on twitter.
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tweet him on twitter, #jimcramer@madmoney. or give us a call. 1-800-743-cnbc. if you miss something, head to madmoney@cnbc.com. woman: everyone in the nicu -- all the nurses wanted to watch him when he was there 118 days. everything that you thought was important to you changes in light of having a child that needs you every moment.
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welcome back to tonight's special edition of "mad money." what i'm trying to explain what really moves stocks. they often diverge from the fundamentals of the company, they purport to represent. i know this confuses you mightily. i read your e-mail. i know this bothers you immensely. i talked about the need to get familiar with how stocks trade. you need to learn more about the traders who drive stocks in different directions. they need to have stock prices. take advantage, rather than pretending like so many pundits do the short-term. >> tim:rations in stock prices are beneath their notice and will somehow pollute your gains. may we never be so self important or arrogant around here as the entry and exit points don't matter. they control the ability to outperform the market. they control how much money we
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make. they affect our profit margins. we care more about the supermarket at times than the price of stocks we buy. that's plain wrong. so how do we square the idea when you buy a stock its prices can become unglued about the fundamentals of the company. how do you balance that? my insistence is you do your homework, read quart ily conference call, transcript, quarterly filings, myriads of pieces not available on the web, to keep current with the companies. stock price you think are going to bounce around anyway. if they're often at the mercy of macrofactors, etfs, the companies can't control. ditz sound familiar? or stocks held hostage by big institutions, why am i giving you this focus on learning, learning as much as you can about the underlying company? why? the home work s ownerous and least interesting in the
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process, the fundamentals matter a whole lot. the reason we focus on the fundamentals is just about any one can understand can do it. the information is readily available. you may think the homework is tedious and boring, it's easy to predict so much of what's out there that simply is unnoticeable. this stuff is available. it wasn't when i got in the business. investors are looking for a leg up, an edge, over everybody else. that will not change. not every advantage is of scale. by following my home regimen, you should have an edge over the people that trade the stocks you follow. your homework involves looking at publicly available information. according to some economists and armchair investors, the very fact that the information is out there means it should already be baked in that's the term, baked into the stock. meaning the share price should reflect what you know from your research. we know that's not how the market really works. lots of people are real lazy.
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lots of money managers are technician, meaning they are looking at charts and dismiss the fundamental fundamentals if you keep up with this information, you will know more than most of the professionals do. they will never admit. that if that's not an edge, i don't know what is. home work s taking control of your own financial destiny, eliminating as much emotion as possible. i know i'll get results, not any results, but the very actual, very objective kind. it doesn't fall prey to fears of fiscal cliff, a sequester to your stock worries, or a federal reserve minutes. it don't mean a thing to your position. maybe the homework won't always give you that much of an edge. we'll give you enough information to tell you which direction the stock will ultimately head. maybe it won't protect you from the whims of children in washington, d.c. who play with the economy willie geist nilly. learning about companies isn't an all or nothing proposition.
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i don't think familiarizing yourself with a company should ever be dismissed as less than useful just because it doesn't immediately translate into immediate profit and remember, ultimately, as i said at the top of this special show, stocks do tend to drift back into line with where they deserve. they do sink, ul matly. given how the underlying companies are doing. in addition to know, pertinent things about a business, you can assume your stock will probably end up within a certain price range, but you got to wait long enough. you got to let it percolate. on top of that, as long as you keep up with the home, you have a good, clean way to decide whether or not to the cut your losses in a stock that isn't working. and that's an incredibly valuable tool. especially when you claw your way back if your stock went down because of a typical mark sell-off. you need to know enough whether you should be a buyer, you need to know whether opportunity's really knocking or is your head about to be knocked to the
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canvass. on the other hand, it will give you the conviction to stay in a stock hammered bety market for wrong reasons. either way, you always know why you are buying or selling something. you won't be beholden to anyone but yourself within it comes to your investment decisions. you can think over time how many stocks have dropped, not just because of a quick decline and you wish you had bought themment you didn't know the fundamental also, so you couldn't. the better you are at avoiding stocks in a risk war changing from good to bad or bad to good, the courtesy of the homework, you will be able make more calculated, intelligent risks, be more aggressive with your risc. they are of paramount importance when it comes to envesting in stocks. the tension between needing to protect your capital and risking that capital in order to make money. even those these skills are handy, they aren't what most people call compelling. they may not give you the total picture you need to get where you want to go. as for the boredom factorment let me take care of.
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that i spent years trying to make investing more accessible, more interesting, more intreged if not entertaining. no sin given that so many focus on skark you out of your shoes. i think i have shown i will do anything to keep investors engaged with their money, especially on this show. i have come out filmed while wearing a hazmat suit. i have taken a nap on a cozy bed at cheerio, explaining the virtues of general mills, driven on to set by a lawn mow tore sfwreeg you to look into john deere. i can't put a figure on the expensive gizmos i've read. i've tried to catch an airline to show you the insides of a brand-new boeing and, yes, i chipped my tooth telling you not to touch krispy kreme with a 10-foot pole. iiate dog food. i am not concerned too many of you skipped the homework because
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you didn't have the enthusiasm. we have ways of making you motivated. the bottom line is, it is important for you to know why you are doing all this work. what the point is. it's a way for you to build conviction in your stocks. it's a way to get an edge, one that's totally lee. even in the most volatile or calmer marks. where so many panic at the sight of the president coming on the podium or the speaker of the house giving a press conference, you need to know that it might be a buying opportunity and not just a selling one like the panicers all around you. i need to go to tom in florida. tom! >> caller: hey, jim, a big boo-yah to you. hey, jim, in january, i invested when the stock was at 43 t. stock seems to be going strong and i'm up 104%. should i close out or hold on? >> what you do is sell common
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stock adependence it in a spread up top. in other words, you sell tomorrow. you'll sell a quarter of your position in common stock. you keep selling on the way up. if the stock takes a sudden downdraft. you buy the common stock back and play with the call. that's how i like to use that strategy. i need you to stop panicking. if there is a panic, i need you to take advantage of it. the only way to do that is to do the homework. it gives you a conviction t. conviction gives an edge. after the break, i'm give more money. .
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i want to tell you about a tool that can help you make money quickly but carries a certain amount of rick and can be trouble if you den know what you are doing, investing in public offerings, ipos. there has been so many december, many have gone to a premium and are red hot from the moment they are born and others that fizzle
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from the opening bell. theodore are led, in particular, by technology and social media names, which have been led with hype and not enough scent michigan. hype doesn't begin to surround the buzz. maybe hyper-hype for a company that does, indodi, have excellent long-term prospects. sewer, ipos are sexy. they are talked about endlessly. you are hardly told what to do with them. i will teach you the basics. when you know how to tell the difference about an about to be public company that will sort and one that could quick go down in flames, let's say you will have the potential to rake in serious profits t. lure of ipos is when you nail it, when you get in on the right one, you know what, you can have gains of 20, 30, 100% in a day, in a few minute's time. the instantaneous nature of these profits make it attractive. they can cause you to invest in
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initial public offerings that end up stimplging up the room. don't let the brokers trick you into believing buying every ipo is a way to make money and the real challenge is to make sure your broker can fenning ale you into making shares, wrong, wrong, wrong. the investment banks will always try to slip in clunkers after they've molded you into thinking all the deals work. partially because the new public offerings tends to be all over the map, partially because there simply isn't that much available beyond that prospect us most people don't read. it's a question of luck. i think you can accurately figure out which ipos you can wroi off and which ones deserve to be bought. it isn't about luck. it's about analysis. the kind of homework professional money managers do all the time and i advocate
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endlessly and tirelessly on the show. know the pros have it right. that's how i still do it. i made a boat load of money for myself and my client at my old hedge fund by investing in ipos. i want you to know exactly how i did it. here's "inside information" you node to know about ipos. i think the investment banks have their own agenda, one i believe is often as much about bringing regular people, retail investors like you back into the game as it is about helping their clients raise money in the equity markets. one of the things i learned on hocking stocks and bonds and managing money for myself, is when the market turns south, when it becomes really difficult to make money and people start to sell, sell, sell, you know what those brokers like to do? they like to throw investors easy wins, lay-up ipos that are intentionally underpriced so they will pop when the shares start trading. why do i think they will short
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change their investment banking clients? it's just as important to their brokers, the other clients, the ones who pay interests, most investors gain from a sweet underpriced ipo or often u offerings are a great reason to feel good about being in the stockmarket about owning these stocks, about buying stocks. when times are tough, the brokers want to entice you back into the stockmarket. hey, that makes a lot of sense, right? they got to figure out ways, their business depends on you buying and the investors teleselling. by the way, the companies don't mind this, as long as too much stock isn't given away. for the anatomy of ipos, i need you to looked a linkedin and groupon that rose 29% and 31% respectively on the first day of trading. there is also no doubt that the issue was the artfessional way they were priced. putting out very little stock, a sliver.
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knowing that it would cause a big pop and creating bunl all by itself. the brokers knew these stocks would be hot and hype for the group. they knew if they offered a limited number of shares and set the pricing below the hyped valuation levels, demand would overwhelm supply. even those these were well-known companies the brokers tightly controlled the spot, partially to accounts they ploev would not put the stock and gave out to the large mutual funds, they'd be able to start, but fought finish their outside positions. that way the much wam funds appetites would be whetted. they would bid linkedin up and get the rest of the positions in, that's why linkedin kept soaring. never forget the trick to a successful ipo is this rationing process. the syndicate desks, they're the ones who allocate the stock to the potential stockholders. they know how much the big funds, much wam funds, ultimately need to be able have enough linkedin to impact their
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own performance. so what the sipped cat does does is they give them a percent annual. sometimes a third, half of what they ned to own. what is half of a full position. thattorss the client's hands to finish in the open market. of course, they could flip the positions, themselves, brokers have ways to monitor who takes that quick money. they may not be allowed to get big allocations the next time around. you benefit, though the syndicate desks save some stock as the brokers know the retail investors are likely to hold on to stock and not play that flipper game. my goal, is try to help you money. up with thing i don't think you should do ever is go into the after mark. that's okay. listen to me. i don't want you to go into the after market meaning i don't want you to buy the ipo on the after market. particularly at inflated valuation levels, if you don't get in on the deal. just forget about it. i got staggering statistics that show you you are almost always a sure loser if you buy a hot
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stock after trades with only a couple stocks allowing you to make money after several months, most gigantic losers that could destroy your nestegg. sure, linkedin, a total winner. groupon still remains in the doghouse as so many of the bygone era. the odds favor losing not making money in after-matter of fact investing in ipos. trust me in that, i've done the work. remember you don't need to buy a lot of stock well above the offering price in order to be assured have you enough shares. you can pick and choodz provided you do enough business. in the after market, wait until you get a reasonable industry price and performance details before coming n. like with facebook in the fall of 2012. when everyone feared there would be a tonne of inside selling when the company got religion about going gloevenl that was the time to boy, not sell. as the weakest hands were gone, people jumped in to do boying. here's the bottom line, ipos can be a great way to make money.
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>> dealing with ipos can be difficult and dangerous because the prospect of instant gains is so enticing the euphoria can cloud your better judgment. as everyone who got in the aborted facebook deal knows all too well. that's why you need a consistent method to make sure you don't get torn to pieces by something you don't understand, a deal you can't fathom or make heads or tails of. so here's your primer on an leadsing smoking hot deals an ice cold deals the safer and the
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dangerous. the first and most important thing i look for with an ipo isn't what the company does, believe it or not. it's the company's pedigree, yes, the blood leans, who the investors are, but most important who the brokers doing the deals are. the first cohort the managers, can often be a relatively unknown group of people. strangely, it's the least important part of the pedigree, education. here's why, it's interesting. many of the best deals represent technology companies, including social media. those companies revolve around invention much more than a management team. if you looked at google's management team, for example, you would have avoided this ipo like the plague. think about it. who the heck are larry paige and sirgay brint? they were a couple 20-something wild men. those relatively new kids on the block, the new young innovators.
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do you know anything other than mark zuckerberg other than he a hoodie? my second check works are the investors? it's more of a negative check, a disqualifier, if you will, than a pos five one. i'm concerned about you getbling caught up in another investment. one funded by private equity companies simply anxious to cash in on a better market. private equity companies, they have bought dozens of companies the last few years. in many cases, they paid far too much for them. they badly need to offload them into the open market to get them off the books. some will be profitable. others will be stinkers the brokers will hope to entice you to pick up. the way i see it, the private equity ipos almost as a rule are difficult to judge. i'm not being that per jortive. some will work. but they're difficult. this brings up another aspect, recognize that just because a
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company can be publicly traded, that doesn't mean it can be a piece of junk. there are plenty of companies that are a sham. some of the smaller fitness category the regulators don't have a mandate to judge the quality of the business of ipos. they just make companies disclose as many facts and financials as possible so you can judge yourself, at home. the brokers, at least when dealing with private equity firms, they got a conflict there. they do so much business with these outfits that they're hard to say no to. the brokers houses get immense amount of money when they take a company private and more fees when they spun off as a public entity again, large fees associated with the ipo. they buy back a lot of debt and refinance like you do at home. i think that's why the investment bankers bend over favor to favor the private equity firm rather than the brokerage companies buying them. if you see the pain investors coming public.
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let's call it a yellow flag. it would be a red flag if there has been a lot of bad deals. third, i look at the brokerage houses bringing the deal. this is important. i want them to be major firms. yes, you may not like them. along the line of gold man sachs and j.p. morgan. why does this matter? >> these firms have their reputations on the line with that view. that makes them less willing to bring up a clunker in public just for the fees. once you've cleared the private equity hurdle, you can write it as a fairly good seal of approval for the enterprise. don't be all that jaded, people. i know many are and it's wrong. why do i think? let me tell you a story. in the 1980s, as a young broker, at the goldman sachs, i had personally helped brooke with the finances of the people behind a young company start up really by some brilliant inventors out of m.i.t. it's called thinking machines. the company's claim to fame was
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it had the fastest computer than any other machine. i remember dow jones used it. it was so good for their back office. i had done so much work with the principals, i was able convince them to use goldman sachs, it was a big plum. there is only one problem. i couldn't convince goldman sachs to put its name on the deal, despite the impens fees it brings to the firm. the analysts at the time who followed the company poured over the financials, he looked at the product. he made a judgment. he made a judgment that the company while having short-term momentum, most definitely, would not have any staying power. that was a gas. oh, man, i was looking at a big pay day. i stood to make a big sex-figure ticket for bringing the deal to goldman sachs. this analyst, though, he simply wouldn't budge, reminding me that this was the goldman sachs, not some schlop firm that put
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its name on any company just because it was hot. sure enough we passed. in a couple years, if company failed. a victim of better technology and poor financial management. >> the house of pane! >> so take it from me, that's why the broker's pedigree matters and i would pass on deals you never heard of or have little or unsuccessful track records. avoiding the smaller once helped you to weed out the failers. in the heyday of the social media, every firm good and bad got caught up. so there are never overassurances. checking the deal remains integral to a good ipo. nothing is perfect. that's why i have a checklist. hopefully, one of these will flag you. here's the bottom lean. only going through that three-step betting process would i consider what the company does? imagine how it has done in the
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ah, we've reached the final step. how to analyze the actual company coming public. here you have to assess what the company makes. you have to ask if it's profitable. most important, if you are thinking of hanging onto the stock after the deal, you need to know how big the end markets are. this isn't that different from analyzing other stock except you have less information to go on. most of the information comes from the prospect us. under armor of crocks, it can be difficult to figure out what the company makes if it involves a sophisticated product, especially with technology. these technology companies like those ones checked to broad band or optimization or networking, semi conductor minimization, no wonder why warren buffet said, don't go there.
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if a company coming public makes a consumer product. first you bought the to ask yourself, is it a product you like? this isn't the only question, it does matter, take it back to a thing called heelies, a shoe with wheels. i predicted it would jump when it gained public. it had a lot of buzz. the craze would soon pass. then it would be a long decline that took it to as low as a dollar a few years later. on the other hand, when the company has a good product, one you like, one that is profitable and many ipos aren't and have solid financials, then you can catch the giannis from the first day the initial public pop and the extended run afterwards. that's what happened with the under armour. on the first day it popped, 12-25, i urged people to hang on. you have to take something off the table. remember it's doubled. even at that higher price, they were valued the same as nike.
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even though it had a much higher growth rate. that's a classic example of mispricing that worked to your advantage. once in a while you get a price blessed ipo, lots of room to run and a great brokerage house sponsor. a yoga based apparel company lulu lemon. the stocks dovent grow because of the gigantic addressable market that was initially just women that perform yoga. now it extended to all women and athletes. not just women athletes and some men, too. some of the best ones from 2012 are organic food maker anny's. five below. an internet software guidewire. they fit the three-prong test. the trick is to recognize the size of the market the power of the competitors, physical out how it is coming public vs. value of similar players.
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deals like under armour and lulu lemon, they are rare. to analyze an ipo, including the ob truce tech following product companies, look at the competitors the see whether the company is profitable. make sure of the broker's pedigree, then you will know whether it's worth it to put in for the deal. mad money is back af the brake. .
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well, cramerica, it's time for your tweets. first from@clarkevans3 who writes the following, why don't more companies split the stock? you are so on point here, clark. i got to tell you. one of the great things about some of the stocks i follow when they do split the stock like a salesforce.com, i get a lot of wick widity. it makes it so it doesn't trade so hercan i-jerky. those that get to 300-$400. they should split it. it doesn't create value but it does make it so individuals are much less scared of a stock. maybe that's enough. no value created, but very pro retail and here's one from@'02swizlewizle who writes, advice for a young person, what's the best strategy of
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investing small apples at a time, kwantty or value? i like to pick stocks that are below 10 for my first stock and buy five shares. that way i get to feel if pain if it goes downment i can buy more if it goes down. it's easier, only later do i get up to stocks? i know it shouldn't matter what the dollar amount is. i know what you think. you don't think like a yale professor. you want a little capital, be able to buy five shares. that's the way to play it. another tweet fro from @harrisonfresh. this says diversified among asset classes or just stocks? which should i be most concerned with? boo-yah, norcal. okay. here's what i care about. i care about baskets. it can be etfs. i don't like etfs. i like to buy the individual stocks or it can be individual stocks. remember, you have to think about what they do. i care about the end market. that's why i do diversification.
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if ev everybody's end market has to do with finance or technology, then you end up being hurt. consider who the customer is. the next tweet comes from to us from pgallagher3118. what's the best investment book i read? one from wall street "beat the street." two, those are peter lench books. they're really terrific. i think those are great places to get started. let's go to @jehamilton. how many hours do you get each night? >> i tend to get three or four hours a night. friday and saturday i sleep twice or three times. that i believe, i know it sound fanciful that you save up the sleep if you get a lot of sleep on saturday night, you don't need to get a lot on sunday or monday and i don't. another great tweet comes from, boo-yah, jim, just finished your book. great book.
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just as relevant today as when you wrote it. i thought it would be popular. a lot of people didn't like the title. container cramer said, why did you call it this for? it was spot-on how wall street sometimes the stab you right in the face as well as the back. mad money is back after the brake. i defend ben bernanke next up on "the kudlow report." now's the time to send in the scotts turf builder plus 2, man! .
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.>> i like to say there is a bull market somewhere. i like to find it for you. i'm jim cramer on mad money. i will see you next time. ♪ good evening, everyone, i'm larry kudlow. this is the kwud low report. we begin with an outrageous story from washington. the internal revenue service in full scale damage apologizing for targeting conservative political groups for extra tax scrute if i during the last presidential campaign. chief correspondent john horowitz joins us with automatic deteams. good evening. >> good evening. the white house was on two issues about credibility. one is about benghazi, the other is about this ir
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