Mad Money

Up 300% in a year, Cramer says sell, and hurry!

Kandi (KNDI) has too much risk: Cramer

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

Cramer advocates speculation but he wouldn't hold this stock for all the tea in China.

The company is Kandi.

"A week ago, I got a call from Stacy in New Jersey, who wanted my opinion on this $651 million China-based firm that makes go carts, all-terrain vehicles and other specialized vehicles."

After extensive research, Cramer learned that Kandi had captured the imaginations of many investors as a bet that it could be the next .

"You see, in 2008, Kandi came out with an inexpensive electric car known as the Coco. Now they're trying to develop a newer model that could be more popular," Cramer explained.

Then, in 2013, Kandi partnered with Geely, a major automaker; the move sparked even greater speculation that they're on the brink of a something big.

"Hey, low cost electric cars plus China, that sounds like a great idea!" said Cramer. As a result shares have surged more than 300% in a year.

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Unfortunately, Cramer doesn't think this opportunity is that opportunity. In fact, if you're long, he thinks you should take profits – quickly.

"As far as I can tell, the electric car side of the story is more about hopes and dreams than reality at this point. There's nothing that suggests to me Kandi is anywhere close to becoming next Tesla."

After such sharp gains, that fact alone is enough to send Cramer to the sidelines. But there's more.

The stock has no analyst coverage. "That's right, there's not a single brokerage house covering these guys." That, too, is a red flag for Cramer.

And to make matters even worse, Kandi is facing litigation, from the SEC! That's right, "Kandi is under investigation by the Securities and Exchange Commission," Cramer said.

Although Kandi has offered no details on the nature of the SEC investigation, which began in November, it should be noted, "As indicated in the subpoena, the investigation is a fact-finding inquiry and does not mean that the company or anyone has broken the law,'' Kandi said in the filing

Nonetheless, an SEC investigation is the last thing Cramer wants to hear when he's holding a stock.

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All told, "this is exactly the kind of company I don't want to own," Cramer said. "I believe it's a hot stock that ran too much for no real reason. And now there's a serious catalyst looming that could send shares sharply lower."

Therefore, if you've been along for the ride, Cramer says it's time to exit.

"There's only so much risk I'm willing to accept. And at the moment, Kandi has way too much risk for me," Cramer said. "If you have gains ring the register and if you're looking at a new position, looks elsewhere. You can circle back after the SEC issue is resolved but not a moment sooner."

Call Cramer: 1-800-743-CNBC

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