When momentum stocks blow up, they don’t come back, Cramer said Thursday on Mad Money. And that’s why it’s time to sell Crocs.
Crocs is down 20 points, or 30%, to about $48 since reporting an unimpressive quarter and dismal guidance last night. The stock's valuation could only be justified if Crocs beat estimates every time and continued to offer strong guidance. This time it didn’t. Now the momentum is gone, and so is the sole reason for owning this stock, Cramer said.
And Cramer doesn't think that momentum isn’t coming back. It never does – at least not any time soon. He rattled off a number of examples from market history to support his theory. Stocks like Buffalo Wild Wings , Nutrisystem , Reebok and Timberland missed earnings and then never recovered. Sometimes a stock will climb back up when believers continue to buy, but once the next earnings miss happens, the share price plummets.
Momentum stocks are a dangerous and risky game, and investors who can’t handle it should sell Deckers, too, Cramer said. Lululemon should top as well, and it’s not a good enough stock to risk being around when it does.
Under Armour might also be a sell, Cramer said. He thinks it could be the next Nike. The problem is that with that potential comes the risk that UA could be the Crocs.
The lesson to learn here: Trim profits as these momentum stocks go higher, Cramer said. That way you still make money if they top before you have a chance to cash out.
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