The numbers generated by a few of these names are eye-popping: JDS Uniphase is up 407%, Cree 281%, F5 Networks 240%, Apple 164% and Akamai , the “laggard” here, has climbed 92%. So it’s almost a matter of principle that investors lock in gains while they can, especially with the dysfunction in Washington and the seemingly exhausted Dow unable to crack its January peak of 10,725.
As Cramer said, “I think it’s very risky to buy at these prices,” adding, “I think that ringing the register is the sound strategy, as this is a moment where you have to protect what you’ve made.”
But is there any difference between 2000 and 2010? Can investors trust the run-up in tech stocks?
Cramer thinks the answer is yes, and for one key reason: The companies that soared during the Internet bubble of a decade ago didn’t have the earnings necessary to justify the move. Dot-com share prices were based on pageviews and “eyeballs,” something no self-respecting investors would buy into now.
But these days there are three big themes driving the Naz – a faster Internet, could computing and smartphones – and they’re so important that they could turn expensive momentum stocks into cheap value plays, Cramer said. Because if these trends continue to grow at such an exaggerated rate, then the related companies’ earnings estimates will be way too low.
Cramer said the recent boom in these industries accounts lends legitimacy to those aforementioned returns. Whether it’s F5, Apple, or Akamai, business is good. And that’s fueling growth on the top line. The same goes for cloud-computing companies Salesforce.com , IBM , VMware and Oracle .
The takeaway here is this: The smart investor would take profits given how overextended the market seems. But, at the same time, stay open to opportunity.
“Don’t be so skeptical that you write off very big, very real trends,” Cramer said, “that I still think, even from these levels, could make you a lot of money.”
Cramer's charitable trust owns Apple.
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