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Cramer’s lament: Too few investors understand this stock

Thursday, 29 Aug 2013 | 6:54 PM ET
No Huddle Offense: Zillow's short-sellers
Thursday, 29 Aug 2013 | 6:58 PM ET
Mad Money host Jim Cramer shares his final thoughts of the day.

(Click for video linked to a searchable transcript of this Mad Money segment)

Cramer says there's a stock in the market that investors don't really understand. And he doesn't want you to be among them.

The stock in question is that of Zillow – the company behind a website that allows visitors to compare home prices in neighborhoods around the country.

The issue, Cramer says, is that a large number of pros are betting against this stock or shorting it. "With gains of 74% in only 3 months, the stock's often the subject of overvalued chatter, with shorts just thinking it has to roll over," Cramer said. "18% of Zillow's float is short, that's a huge percentage of the stock that trades."

Cramer, however, thinks those naysayers are missing something important.

"Shortsellers regard Zillow as a housing play. And they repeatedly frame the story as the ultimate fad connected to a rapidly fading business," he said.

The Mad Money host doesn't see it that way and he doesn't think bulls see it that way either.

"The longs that embrace the stock, are growth hounds who love internet stocks broadly. They regard Zillow in the same light as Yelp and LinkedIn, because they have subscription revenues and ad revenues that are growing like crazy."

Therefore, Cramer believes the stock will still attract buyers, even if the housing market stumbles.

In other words, betting against Zillow isn't a bet against a real estate trend, it's a bet against a hot Internet growth stock. And betting against a hot stock can burn.

"I know the company's being valued at $3.7 billion, yet it only has $150 million in revenues and no earnings," Cramer said. But in this market growth commands a premium, often times a sky-high premium.

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In fact, growth stocks can defy gravity, at least for a while.

Therefore, anyone who sold Zillow short, "got it wrong and now they are paying the price for their lack of understanding," Cramer said.

Let this be a lesson, he added. "Know what you own. If you don't do your homework carefully you may be holding or betting against a stock that's not what you think it is."

Adam Jeffery | CNBC

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

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