Move over FANG, Jim Cramer has officially crowned FAAA as the new acronym for red-hot growth plays in the market.
"We have to talk about how these FAAA stocks got their groove back in order to figure out what it means for them going forward as we head into the fourth quarter," the "Mad Money" host said.
On Tuesday, JPMorgan raised its 2017 year-end price targets for FANG stocks, noting that investors have returned to the group in search of growth. While many investors may question why they should care about 2017 year-end targets when it's not even the end of 2016 yet, Cramer clarified why it's important for those seeking growth.
"Real growth investors don't particularly care about this year's numbers because classic high-growth stocks always look expensive on the near-term estimates. But if things go right, they will turn out to be very cheap once we get to the out-years," Cramer said.
Alphabet currently sells for 19 times next year's earnings estimates, the same earnings multiple of the average stock in the . Considering the company's rapid growth, Cramer found the earnings multiple insanely cheap.
Facebook was even cheaper. Its growth rate is more than 30 percent, yet it only sells for 25-times earnings.
Amazon and Netflix were more problematic for Cramer. JPMorgan came up with a blended formula that takes into account Amazon's Web Services to get to its $1,000 price target. The analyst got to the Netflix valuation by trying to value the company's international revenue and streaming earnings before interest, taxes, depreciation and amortization (EBITDA).
Cramer explained why he booted Netflix from FANG, stating "I just can't trust Netflix after two consecutive missed quarters until I see some acceleration in domestic sign-ups."
While JPMorgan did not formally cover Alibaba, it still valued the stock at $135 on the sum of parts basis, up from $108 on Tuesday.
So, when Cramer heard CNBC's "Halftime Report" discussing FANG on Tuesday, he decided to make a surprise appearance on the show to present FAAA.
"I made my case that FAAA has a long, long way to run, just like the 'Sound of Music,' but I stood my ground about Netflix concerns, point blank saying that Amazon is now disrupting them," Cramer said.
Some of the move behind these stocks on Tuesday was simply because of scarcity of value, too. There aren't many consistent high-growth stocks out there right now.
Many have also asked Cramer why he has not included Apple in the FAAA acronym. But after two down quarters, Apple no longer looked like a classic growth story to Cramer.
"I think these companies have the ability to grow for years. With the exception of Alphabet's rumored interest in acquiring Twitter, FAAA represents the complete package," Cramer said.
Cramer said the market is once again in fast-growth mode, thanks to the Federal Reserve admitting that the economy has slowed. Cramer's charitable trust owns Facebook and Alphabet. He thinks Amazon is too expensive currently, and he said he missed Alibaba.
With a positive outlook for the future on this group, Cramer recommended investors to own one or two of FAAA in their portfolio.