GO
Loading...

Cramer Reveals the 3 Black Holes of Investing

The three black holes of investing, Cramer said Wednesday, are Chinese public companies, airlines and Russia.

An airstrike near Libya's oil infrastructure has markets bracing for a prolonged disruption from the OPEC nation, sending oilprices to a 2 1/2 year high. As the world's largest oil producer, Russia is cashing in on the recent spike in oil prices. Cramer, however, doesn't recommend investing in the former USSR.

"It has made tremendous steps backwards in the last 15 years," Cramer said of Russia, adding that it doesn't reinvest its money, allowing few to get rich there. "I just don't think it's a good place to invest in at all."

Charlie Sheen, Twitter and Valuations

Charlie Sheen may have lost his hit show "Two and a Half Men," but the troubled actor has become a social media sensation. In just 20 hours of having created his Twitter account, Sheen has more than 866,000 followers.

In the wake of Sheen's popularity on the microblogging site, Cramer commented on Twitter's valuation. JPMorgan Chase recently valued Twitter at $4 billion, but Cramer said others thought it should be between $8 and $10 billion.

"$4 billion probably sounds like a lot for most people, but when you go back to what it was like in 1998 to 2000, Twitter should be worth $12 to $15 billion using that prism," Cramer explained.

There is a subset of stocks that are priced along with Twitter, Cramer said. When Twitter is capped at $4 billion, it becomes difficult for Netflix to have a $20 billion valuation or OpenTable to have a $5 or $6 billion valuation.

"The bulls need to see those private market valuations continue to go higher to justify why these current prices are too low in the public markets," Cramer said.

Speaking of Netflix, Cramer likes the online content provider, but is in no hurry to get back into the stock. Cramer recommends letting the short position build into its next earnings release and then get long ahead of the quarter.

Still, now isn't a good time to get into high-growth stocks. Rising oil prices creates inflation, Cramer explained, which makes investors want to pay less for future earnings on growth stocks. Cramer likes seeing the market push higher, he needs to see oil going from $102 to $90 a barrel instead of $102 going to $110. He thinks that could happen once the Libyan unrest is resolved.

Cramer's Favorite Bounce Back Chip Stock

If you like Apple and a low-spec tech that hasn't moved very much, Cramer recommends looking at Micron Technology . It has prices stabilizing and Flash that's going into Apple products.

When this story was published, Cramer's charitable trust owned Apple.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the Mad Money Web site? madcap@cnbc.com

Symbol
Price
 
Change
%Change
MU
---
NFLX
---
3O9
---
AAPL
---

Featured

Contact Mad Money

  • Showtimes

    U.S.
    Monday - Friday 6p ET
    Australia
    Saturday 8a, 1p, 7p SYD
    Sunday 12a, 1a, 8a, 7p SYD
    New Zealand
    Saturday 10a, 3p, 9p NZ
    Sunday 2a, 3a, 10a, 9p NZ
  • Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

Mad Money Features

  • Grab the latest CNBC gear from the NBCUniversal Store!

  • Get a behind-the-scenes look at how Cramer formulates his investment advice. "Inside the Madness" is a column, which features e-mails and more with Cramer and his researcher Nicole Urken.

  • You’ve always wanted to hit the “Hallelujah!” button. Here’s your chance.