Cramer's 'Mad Money' Recap: Get Out of HP, Best Buy Now
He reminded investors one of the time-honored investing mistakes and the biggest personal portfolio management errors they can make is to believe in a turnaround or takeover.
Cramer said investors may be tempted to buy into these companies because they're both household names. Surely they'll be able to resurrect themselves, many may think, but in reality both stocks are total disasters.
Tuesday, HP announced a $5.5 billion write-down for its purchase last year of the U.K.-based Autonomy. According to the company there was widespread accounting errors and misrepresentations at Autonomy, which caused HP to lose nearly $8.8 billion of its $11 billion investment.
Cramer said the problem with HP is it's no longer an innovator but an assembler of products that are in decline. PCs are losing out to tablets while margins are shrinking in the printer business. Meanwhile, rivals are eating HP's lunch in the consulting business. Cramer said it's not too late to sell this stock, which has already lost 55% of its value this year.
Then there's Best Buy, which reported more disappointing results Tuesday and continues to hope that someone, perhaps its founder, will swoop in and take over the company.
Cramer reminded investors the tech world is littered with turnarounds and takeovers that never happened. Remember Circuit City? How about Radio Shack (RSH) ? That company is on death's door.
In all of these cases the fundamentals are in decline and management may be able to do little to stem the losses.
Up in the Cloud
In the "Executive Decision" segment, Cramer once again spoke with Marc Benioff, chairman and CEO of Salesforce.com (CRM) , the cloud-computing giant that delivered a penny-a-share earnings beat on a 35% year-over-year rise in revenue.
Benioff said Salesforce once again had a terrific quarter, despite Hurricane Sandy shutting much of the Northeast and the final cliff looming ever larger. He said this quarter was the company's fifth straight with over $100 million in operating cash flow.
Europe was also strong for Salesforce since times of distress often mean that companies forego buying hardware and turn to the cloud for rapid, cost-effective IT solutions. The cloud grows faster when things are bad, he noted. Benioff said Salesforce is focused on revenue and market share and not necessarily on making a profit.