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Jim Cramer, Laura Bad, Sui Generis discussed on MAD MONEY W/ JIM CRAMER

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Automatic TRANSCRIPT

I mean they were really obliterated. Blitz surprise prize the salesforce tableau type was more of a one off transaction shows worse needed data analytics lettuce platform and they had a unique opportunity here which is why they agreed to pay such a huge premium cloud data in salesforce wondering when Wall Street realized that the other cloud cloudplayer's probably weren't going to be bought any time soon their stocks plummeted brutal day and once again it meant nothing the only take from that cloud pullback doc was that they never should have been up in the first place. There's the tablet news was again Sui Generis as we say at law school so what kind of action carries real. How do you know when a big move is foreshadow. Is something even bigger all right. There's a lot of single. That's obvious cup reports. A blowout quarter and stock was obvious and analysts cuts estimates stock plummets obvious that's just as usual and why I like to look for the unusual company Catches Nanos downgrading. Their stock goes up ooh interesting signal kanner intuitive in my experience. When the stock of users Laura Bad news it often means that stock is putting in a significant bottom and is ready to rock and higher. I like that but the center reports intestine quarter with great guidance Bush comfortable yet to stock get slammed all boy. SSL So it means Wall Street police is that this company is looking at its last good quarter. That happens very often when you stop fulsome positive news. I gotTa tell you something. That is the definition of a possible top for the the most part that you can't decipher hidden messages in the way stocks are trading except in some rare cases. You probably shouldn't even try. It's important to know what's working and what's not working and then CONNEC market but you can't let your money management decision to be complete be completely guided by what's in or out of style on the Wall Street fashion show. I always please tell you that otherwise. You end up owning stocks just because they're going higher. Oh that's terrible place to be because you don't know what to do. When we start coming down the bottom line. When you're evaluating stock. Take your cue from the fundamentals the underlying company don't put too much on day to day gyrations in the share price. Sometimes sometimes you get you can extrapolate a great deal from a big move in an individual stock put more often. It's telling you something you Orono or it's Jus- US noise it means nothing. Let's go to Dell in Florida del Kramer First Time Longtime here from the University of Florida. Allow love that go gainers and your book real money. You say that a company doing an in the whole secondary is not one. You want to be invested in so I'm I'm wondering is this rule without exception. Are there circumstances where it's okay for a not yet profitable company to do a secondary offering and expand while they can Thursday particularly piece of news they just driving the stock up and it's really positive news and they do a secondary. I might get behind it on a little case by case but typically no. I'm just I'm I'm suspicious I'm critical and that's the way to play how about a DJ in Ohio at Diya Jim. I'm a long-time listener. I appreciate taking my call. Oh come on. I love it. What's going on so you always adjust owning index funds and portfolio and Mike Mike Question for you is to par one what percentage of my portfolio should be an index funds versus individual equities and number two do you also suggest owning index funds that track the SNP. Do you also indicate also suggest that you should own sector related index funds in addition to do a general. SNP for example in health right no. I definitely don't want sector related. I think that those are wrong. I with a full plan of play. That's why like five hundred. I think that it should be eighty. Five to ninety percent index fund the rest is you're mad money for individual stocks. Did you can still make a lot of a lot of money but no index funds are the bedrock i. I wish you weren't the case but you know what I got to be worried too. I do think individual stocks with a lot of homework and make more money fundamentals matter not data and moves McMahon the money had I'm offering a word of warning for the next time we see him being wave of upcoming IPO's old. You're not gonna WanNa miss this then. You may want to do the right thing but if it's for the wrong reason season well it'll cost you explain and I'm taking your questions tweet by tweet so send them my way with Hashtag tweets and stayed with Jim Cramer. You're one of my heroes. Eric forages show every weeknight. Thank you so much for helping beginning investors like May and when you talk about the market just believe that your spot all thank you so much every night we watch you. I have learned and earned all night. I've been warning you about the dangers of being a fowler when everybody's fixed the same outcome in the stock stop. We're getting is a very good chance it won't play. House expected because it's already priced in that's why you need to be extra wary of the IPO cycle. We've seen this pattern over number served. We get a delusion new deals. If I many explode harder terrific saint time there flooding the market with new SUPPO- stock supply and that's why audibly drags us down. I've said it a million times. The stock stock market is like any other market so all about supply and demand too much supply and prices go lower. The problem is when making people fortunes well. You know what you tend to get a palpable sense of exuberance then when the deal start attracting less interest exuberance Philly and then we get slammed. We see this happen so many times we locate recently twenty nineteen the latest. IPO Chris one that was headed by Levi's deal that worked very well but then gave way to the license lift Uber to highly anticipated ridesharing services it really burner initial public investors once people started Salomon. IPO's the market sold off hard heart May of twenty nine thousand nine. That was a brutal month. It didn't help the president trump of course ratchet up the intensity of trade war with China. All the pain didn't last. It's something so you could have avoided if you listened to me ranting and raving about how the massive yu-gi-oh would be like an albatross around the markets neck what makes the IPO cycle so dangerous. Let's look back at two thousand fourteen because that's the best example of what a wrong in the first quarter of twenty fourteen. The market was overwhelmed with a wave of new deals in two particular industries. The cloud based software stocks as well. There's the SASS or service and the Baltics now in January February January twenty fourteen these newly minted software as a service docks and barbeques kept rory higher and higher but it's the IPO floodgates opened its. I started getting concern. You see in real bubble the kind that can devastate a decent portion of your portfolio. You'll also get a slew of initial public offerings as companies. Try to cash in on you for the public. Markets is natural but this process goes on the company's coming public attended declining quality until near the end of the move scraping the bottom of the barrel up by the way that's what we saw play out actually in the big one in the big one technology doc two thousand as tons of PROPOLIS DOT com rush to come public and we saw something similar in the first quarter two thousand fourteen as propolis software as service companies did the same thing of course we had also also a lot of secondary's those were bad. That's why I came out here about the dangers by me. I said that there was once you're far away to wound bull market and that's by flooding with lots of new supply hi again when tons of copy store coming public basically you had a supply glut stock market at the time. I told you money managers reps start selling the older more established how so for as a service companies like salesforce else force in order to raise cash to keep being these fresh face ideas and I also warned you that eventually this. IPO bubble would -burse sure enough. The bulk of the stocks became public in two two thousand fourteen with US bikes ended up losing fortunes in the aftermarket and it took many of them years to recover you had to be very selective at the time because most of those stocks were coming in public with incredibly stretched valuations even as they didn't have any earnings and in some cases didn't even have any revenue the actual winners were few and far between the DROSS. Ashley outweighed the rare nuggets of gold. That's what happened with. IPO overload always happens like that. If the class became public in two thousand fourteen the ones that are now cloud royalty took a long time to bounce back from it. I appeal overload. Don't forget hundreds really low quality companies that came public in the two thousand year old we went bankrupt twenty ninety four team wasn't nearly as bad but it's still brutal downturn in the cloud and biotech stocks and of course we saw the same thing in two thousand nine hundred sure winners like beyond me. Zoom Video Jio but for every IPO that work there was another one that quickly fell out of style with the Wall Street fashion show the Uber's lists and of course most of the Chinese which are always extra risky because China China doesn't seem to have the same rigorous corporate governance standards that we do the other big problem when portfolio managers get excited about putting a lot of money to work in new IPO's they need to raise that money by selling something else and when there are lots of large deals they need to do a lot of selling so companies and related industries tend to become sources of funds and if you believe you're going to make killing being in an IPO. You don't really care how you raise that money. This leads to managers who are desperate to raise cash which means they don't care about being disciplined but they're selling because well prices irrelevant relevant to them and that's what helped fuel the market why weakness in May of Twenty nineteen right around the Youtuber. IPO just like two thousand two thousand fourteen remember the bulk of the new money that comes into the market goes into index funds now and they can't participating IPO's because these stocks are the indices yet. The actively managed funds these participate in these deals in the aggregate. They don't have enough cash coming in over the TRANSOM. I get into all these big deals with selling something I so the next time you have a big wave initial public offerings coming. I need to remember that it pays to be cautious when the IPO's are coming hot and heavy the bottom line as much as I love anything that generates enthusiasm for the stock market and you know that and nothing does yet to be extra careful when we get a whole wave of new issues the IPO cycle tend to start out strong and generate a lot of euphoria but then it burns words out and all the news talk supply can really weigh on the market. Just keep that in mind the next time you get excited about a punch a red hot deals and stick with Kramer Jim Cramer. You're one of my heroes. Alex Corretja show every weeknight. Thank you so much for helping beginning investors like me when you talk about.