Mad Money

Apple is worth a lot more than you think

Cramer: Why Tim Cook is Babe Ruth
Cramer: Why Tim Cook is Babe Ruth

Sometimes a CEO knows the value of its stock, and sometimes they don't. That is why Jim Cramer rolled up his sleeves, to expose two stocks that are worth much more than you think.

With Apple now the first stock ever to close with a market capitalization north of $700 billion, can this amazing stock possibly go any higher?

Absolutely, said Cramer.

"In an era where the average stock sells at about 18 times earnings, it's out and out ridiculous that Apple sells at merely 14 times earnings given its balance sheet, sustainability of earnings, breadth of product, and wondrous engineering," said the "Mad Money" host.

Jim Cramer on Mad Money.

Tim Cook knows it, too. That is why he has been borrowing money to buy back shares of Apple. He knows it's worth way more than people realize.

Cramer suspects that the market is holding back Apple, because it is skeptical that its market cap is so darned high. Rumors are now swirling that it is worth more than the Russian stock market, and valued higher than both Google and Microsoft combined.

These comparisons remind Cramer of the time that Babe Ruth made more money than President Herbert Hoover. When asked about the difference, Ruth replied, "I know, but I had a better year than he did."

"In short, Apple's stock should be worth more, perhaps much more, which is why, as always, I say don't trade it, just own it," said Cramer.

However, not all CEOs realize that their companies are worth more than they are trading now. Cramer's charitable trust has a position of General Motors, and he believes it is worth $48 a share.

GM's CEO Mary Barra has done a wonderful job with their product line, especially considering the line of gas-guzzling trucks they have at a time when gasoline is at record low prices.

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Unlike Cook, Barra has not maximized all of the capital on its balance sheet by repurchasing a large quantity of stock. Cramer thinks that with GM's $37 billion in liquidity, it can afford to do a tender offer above market price; a move that would be very beneficial to shareholders.

"It's time to recognize that Tim Cook is Babe Ruth, and that Barra should take a bow for her performance and buy back GM stock like a banshee."

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