On a day like Monday, when the averages ended in the red, Jim Cramer thinks it is time to start to dream big with your portfolio. Many stock valuations are trapped by the index to which they belong, the ETF that claims them, or analysts' traditional methods of valuation.
Now, it is time to throw that all out the window.
Cramer thinks that some stocks are undervalued simply because investors just can't think big enough and imagine what could happen in the future. And there could be big bucks in store if investors try to think outside of the box and attribute a small portion of their portfolio to dreaming big.
"They have a literal and linear sense of things, taught at fabulous business schools and then honed at traditional research houses. These quizzical valuations are a product of that upbringing," the "Mad Money" host said.
With this in mind, Cramer used the example of Netflix to show how to think differently about the possibilities that a stock could hold and attribute that to its market capitalization analysis.
Looking back, Netflix pretty much came out of nowhere and is now the dominant way that people consume at-home entertainment. For a small monthly fee, customers have access to a huge library of content. Plus, it has its own programming, which has helped build brand loyalty. The concept that users didn't have to pay for every program that they watch helped Netflix corner the market on binge watching.
However, if Cramer were to value Netflix, he would not do so using the simple boundaries of valuation that are used currently.
"As a private company, Netflix would be thought of as an important form of worldwide entertainment, and if it were up for a new round of financing, I think it could easily be worth double its current public valuation," Cramer said.
Another stock that might be worth taking a chance on is Performance Sports Group. When one takes into consideration the strength of athletic apparel stocks like Nike and Under Armour, Cramer thinks that maybe this group could be in the right place to do some buying.
PSG is the maker of sports equipment for hockey, baseball, softball and lacrosse. This small-cap stock rallied 47 percent in just the past year alone. So if your kids play sports, you probably recognize PSG's brands, such as Bauer, Mission, Maverik, Cascade, and Combat.
Additionally, last year it acquired Easton's baseball and softball business for $330 million. Was the acquisition a homerun? To find out, Cramer spoke with PSG CEO Kevin Davis.
"No question about it. Easton is a fantastic company. Great people there, great innovation and really bringing compelling products to the sport and we are really excited to have it as part of the team," Davis said.
Lately, Cramer has seen a large shift in the market when it comes to activism. In the old days, it was expected that when the news that a company like Qualcomm didn't get a key contract for Apple's next iPhone, the stock would go down. Investors would shudder at the thought of dealing with Qualcomm and sell it with the thought that another stock should be bought.
But those were the old days of investing.
Qualcomm lost its contract with Apple, and on Tuesday Jana Partners pressured Qualcomm to spin off its wireless chip business in order to unlock value. In the old days of investing, hedge funds would have rang the register on the stock and ran. Now the tables have turned, and an activist such as Jana comes knocking at the door. It pointed out that Qualcomm's problem was never the Apple contract, it was the company's corporate structure.
"Jana is as much about refusing to be a faux index fund as it is about the notion that might makes right—meaning the might of the balance sheet," Cramer added.
Cramer thinks that Jana's track record is strong enough that it is worth following them. And after it takes a bite out of Qualcomm, only good things could be in store down the road.
With all of the huge acquisitions that investors have seen over the past few weeks, Cramer saw one major deal that seems to have gotten lost in the sauce. While many people were focused on the monstrous bid that Royal Dutch made for BG, FedEx buying TNT or Mylan's proposition for Perrigo—not enough attention was paid to one other key piece of news.
Last Tuesday, officials announced that enterprise software provider Informatica would be taken private by Pemira and Canada's Pension Plan Investment board in a $5.3 billion leveraged buyout.
Why does Cramer think this deal was so important?
"Because this is only the latest in a long line of deals involving enterprise software infrastructure plays being taken private, in many cases with the aid of activist investors who love to push these companies to put themselves up for sale, and I bet it won't be the last," said the "Mad Money" host.
Given that interest rates are at historic lows, Cramer thinks this is the perfect time for an LBO to occur. Once the Fed tightens up, the window for cheap borrowing could close.
That means there could be boatloads of LBOs coming soon.
Read More Cramer: Boatloads of buyouts coming soon
Sometimes, in order to get the inside scoop on a rapidly growing industry, Cramer has to go off the tape to check in with a privately held company that is a leader in the industry.
That is why he spoke with Avant CEO Al Goldstein. Avant is the second largest player in the online lending space and uses big data and proprietary machine learning algorithms to quickly determine if someone has the credit to be a potential borrower.
The company lends to qualified customers anywhere from $1,000 to $35,000 with the money received as soon as the next day. And because the entire process is online, Avant charges higher interest rates that range from 9.95 percent to 39.95 percent.
"We started about two and a half years ago with a simple mission: to lower the cost and barriers in borrowing for middle-class consumers. I think middle-class consumers have been left out in the cold through the financial crisis cycle," Goldstein said.
In the Lightning Round, Cramer gave his take on a few caller favorite stocks:
Statoil: "Not that crazy about STO. I like as a growth oil EOG, and I've been bottom fishing with that Royal Dutch...Nothing happened with that deal, but maybe they can get in on that Petrobras? But STO, no thank you."
TG Therapeutics: "Why don't we buy more? I thought Mike Weiss was very convincing when we had him on. I think that company is good, and I say this is an opportunity."