Thinking about evaluation. On a roller coaster day where the dow dropped 81 points. The s p declined 4. 5 its worth trying to understand how some stocks seem to be undervalued for a whole other reason. Namely that people cant think big enough about what a Company Might be worth. They have a failure to imagine what might happen. They have a literal and linear sense of things. Taught at Business Schools and honed at Traditional Research houses. These evaluations are a product of that upbringing. They can cause instant soloffs like we saw from norfolk southern. They often dont leave room for potentially huge gains from companies that areubeiquitous. You could still be valued incorrectly. Tonight i want to show you how to think in an alternative way, one that can help you predict rare blakereakout moves. I want to free you of traditional thinking. I want you to understand market captization analysis. For most of my investing life i spent 55 of my life doing this stuff i have been conare strained by what i call the four walls of the spreadsheet canvas. I have let the straight jacket of evaluation dictate my analysis analysis. Using only a small percentage of what we might have called the mad money portion of my Hedge Fund Portfolio had i had the show then. I have allowed myself the luxury of thinking bigger. Which is the stock market equivalent of abtract expressionism versus real. I believe you should allow yourself a similar luxury now and then. Even if it means sometimes accepting a level risk you wouldnt tolerate. Its okay as long as you consider the abstract expressionist wing as one of many in a diversified museum of stocks. Without further ado, what am i talking about . Netflix. Which was up 20 today even on a down day. One more upgrade from a major investment house. Lets begin with the premise there are two evaluations for companies, the public evaluations which puts net flict at 20 billion and the private, meaning what another Company Might pay for the business. In an acquisition. These two types off evaluations different t. Netflix out of nowhere has become the de facto way that a lot of people consume entertainment. For a small fee they put a huge library of content. They have brand loyalty because it develops its own programming, which tends to be loved. In part because you dont have to pay for it each time you use it. That makes it perfect for bisque viewing. A term we never heard of until netflix pioneered it. Lets talk about advantages. We dont have to wade through 40 to 400 cable channels most of us dont even want in order to get the netflix channel. We would rather pay for what we do want. Fact of life. Even as its difficult for some people admit. Sometimes we would pay to make it if we hit the wrong channel on the clicker, we didnt have to see the totally Unwanted Program flash on our screen until we could regain composure and change the channel again. If netflix were a private company, i dont think you would be prescribed by the boundaries it will be reported as. As a private Company Netflix would be thought of asworld wide entertainment. If were up for financing right now, i think it could be double its current public evaluation. Given the 40 billion evaluation investors are willing to give to uber, how about the 10s of thousands they give to ab b or dropbox. Or the 8 billion we learned today spotify is being valued at. Why should netflix which has changed the way we live is worth more than its currently trading for. I say much more not 29 billion, im talking about 50 billion. Lets use the same open mind. How could netflix be valued at the price of vodka. How can its public worth rank below cbs. How can it be worth only a few billion dollars. Are those dominant world wide enterprised . Would you pay 5 for their content. At least cbs has the nfl. Whats discovery got thats indispensable . Vi vicom, after six years, forgive jon stewart. Some people are trapped by the price where the stock of netflix use today trade. They know it was worth less in the past. They say its ridiculous to pay the current price. Imagine how that would have done you on andy war hol and should be worth 6. Lets look at how much netflix was worth back then. Management screwed up and they didnt think big. All Companies Get revalued quarterly. Who knows if this is the quarter that takes netflix down the road to its much more highly valued private evaluation. I can say is the fact that google or facebook or microsoft or yahoo havent showed a dramatic failure of the imagination on the part of those companies. Netflix is a world wide institution. It should be valued. Accordingly. One day it will be. Thats why any short fall or decline from this number we see this week and if there is we never kno. When the stock gets hiked going into a quarter, that decline is considered a gift. A gift for those who have failed to figure out a rothko might be more val valuable valuable. Twitter, all theeds companies should have taken to. I can say it for reseptose, weve had them on. Its a drug thats like botox. Its a pipe line within a product that can tweet ulcerative colitis, lupus. How the heck can that company be wort than less than 5 billion. That doesnt make sense. How about home away for 3 billion . They give a couple kids from cal tech. As ive said none of this will happen overnight. There are always heavy doubters of these private evaluations. Theyre viewed as accidents waiting to happen. Oh yeah the next groupon. Web van. The etoys of another generation. The bottom line is that its okay to dream big for one slot in your mad money portfolio. Letton index fund define the bulk of your stock. Im cool with that. Pick some individual stocks for your discretionary portfolio. Dont forget to guess of the current era. Mike in illinois mike. Caller booyah from chicago. All right. Man whats shaking . Caller last friday general lecric was up 10 and it was selling its financial and other property assets. This news benefitted the black stone group, bx and black stone mortgage trust, in particular which was also up 10 friday and 3 today. Could you comment on the future pospects for those . I want you in that for as much as you can get. Black stone i liked it forever. People were saying come on cramer when are you going to get off the black stone train. And general lecric i think its terrific. Congratulations were going for our plan. What was our plan . To say get out of here finance. Were an industrial company. Finally stock goes higher. How about we go to austin in virginia. Caller hey calling here from virginia tech. Shoutout to brian who does a lot of alumni work. Caller i had a question about pvh corp. I was curious what you thought about that . I think pvh has bottomed. Okay. And i think that the ceo that stock did dip underneath 100 and it was such an buy buy buy opportunity. Did i tell people . No, it got lost to the shuffle. It goes back there again and i want you to buy buy buy. Dave in california. Caller hey booyah, jim from southern california. Love it wish i were there but we had our first nice day here. Caller i got to ask you. Biotechhad a huge run. I have a position there h whats your short term long term idea . I like abbv. My friend who runs it they were still buddies. She loves the calm boempt shes going to be right. Tomorrow is j and j. Wellary hear what they have to say. I think theyre okay in abbv. Stocks are trapped because people cant think big enough about what a Company Might be worth. You know what . Its time to think bigger. Mad money tonight. We had a nice run over the past year. I have a under the radar play thats up more. Ill reveal t. Qualcomm and apple look like theyre on the outs. Is all hope lost for qualcomm . Is the deal making on wall street just Getting Started . Ill tell you what other stocks i think might be in the cross hairs. Why dont you stick with cramer. Dont miss a second of mad money. Follow twit twit have a question . Madmoney cnbc. Com or give us a call at 1800743cnbc. Miss something inhead to madmoney dot cnbc. Com. Excellent looking below the surface, researching a hunch. And making a decision you are type e. Time for a change of menu. Research and invest from any website. With e trades browser trading. E trade. Opportunity is everywhere. At mfs, we believe in the power of active management. Our teams collaborate around the world, which leads to better decisions for our clients. Put our global active management expertise to work for you. Mfs. There is no expertise without collaboration. Boy once upon a time, there was a nice house that lived with a family. One day, it started to rain and rain. Water got inside and ruined everybodys everythings. The house thought she let the family down. But the family just didnt think a flood could ever happen. The reality is floods do happen. Protect what matters. Call the number on your screen or visit the website to learn more. Introducing the new canam spyder f3. With a cruising riding position and the most advanced vehicle stability system in the industry. Youll ride with a feeling of complete freedom and confidence. Visit your canam dealer and test drive the spyder f3 today. When you consider the strength and the Athletic Apparel stocks it makes me think this whole group could be in the sweet spot. I would like you to look at this Company Called performance sports group. Psg. They make Sports Equipment for hockey baseball. If your kids may sports you might recognize there are many brands. Now psg has a storaed history. This is the company that developed the first ice skate when the blade was attached to the boot. The business was owned by nike for a decade before being sold in 2008. Last year after acquiring the easton baseball and softball business for 330 million. The Company Changed the name to psg. Now, the company just reported after the close today and they delivered a strong quarter. They had higher than expected revenues. So lets check on the kevin davis, the president. Welcome to mad money. Good to see you. You made this aquaition last year. Easton. I know you had to take down debt it was the home run. No question about it t. Easton is a fact company. Great people there, great invasion. Really bringing compelling products to the sport. Were excited to have it as part of the team. We are Big Technology in sports believers. We knew he was merging technology and sports. Nike did that. How Much Technology and invasion are you allowed to bring to softball and baseball . The latest bat easton brought is the mako torque. It has a rotating handle. For traditional players to think that the handle moves, it allows youz to be in the position longer in the sweet spot. It is approved for all levels of play. It did seem to me that the more than 100 of the companies have come from baseball. Well q 3 is a low quarter for hockey business. So this canwas a Perfect Company to bring in. When i look at the chart of how youre going to make your money from now on it looks like there can be the slope that we like. For sure. I want to ask you about a sport. Im from new jersey. We are the lacrosse capital in the world. I keep thing when are week going to the actual Lacrosse League now that Major League Soccer is making money. I look at what youve got. I know youre the primo. When will we each have franchises . Its the most exciting game in the world. Is it coming on strong or not going to happen . Its coming on strong. Its the fastest team sport in north america. Espn is adding games. We are bullish on the sport. Were bringing invasion to that sport. So for a core lacrosse players, if you look at the head its made out of the same material for a long time. Hockey laces are a key component in your pocket. We think of the kind of money we invest. We have a 100 engineers, we can bring better quality materials for athletes who need to play in all kinds of weather conditions. We are excited about that sport. Do you see a ten city league developing i know theyve tried before. This thing is really come on. Its going to be so big if for your business. Absolutely. Its taking off and doingerally well. I think it will build. At the collegiate level keep building programs. Its a fantastic title nine sport. You have a lot of womens teams. Will there come a point where youll be worried because youre a good guy, that the stuff gets too expensive for the average family . One of the things we do we put invasion in every single product line. We talk about the high end skate and helmet. We were the First Company in hockey to bring an entry level price point composite stick to the market. We put as much work into a stick everywhere can use. Do you think it was a big deal i dont know if you caught the masters. Underarmor did a good thing. Maybe i should get behind a lacrosse team. We have a lot of great teams we support in the colleges. Harder to support one individual player in College Given how the dynamics are. The league is opening up. We can have better sponsorship opportunities. Very exciting company. I know i emphasize lacrosse was not as big as the others. I want to look in the future and i know you think three five years out. Big performance for the quarter. Fantastic. Thats the president and ceo of the performance group. It does trade very thin. Wow, real vision. I like it. Mad money is back after the great. Coming up, what a deal. Wall streets been abusiness with big buyouts. These deals could just be Getting Started. Cramer reveals which stocks could be in the cross hairs right now. Qualcomm didnt get the key apple contract for the next iphone. Its stock went down. It was a bad loss. Maybe they can get it back another time. None the less the contract didnt go their way which means the stock should be sold and another stock should be bought. Or at least thats what this news used to mean. Not anymore. Now this kind of disappointment means someone comes knocking. Qualcomms case janet partners. To say it was never the apple contract that mattered to the stock anyway. Its the Corporate Structure. If you fix the Corporate Structure you get more value so qualcomm may be worth than they think. There are two remarkable things. The first is apple had given qualcomm the krangtcontract they would be out of business. The second is janet didnt just say, look this isnt worth the effort. I want to go with a winner not a loser and with the guys who had the smarts to win the contract. Instead of losing into an actual rival, not just of itself but also apple. Thats not how the nude world of acive investing works. There are no real losers in the world. There are others with lots of good cash who wins good business. They areerant able to figure out the value of their enterprise. And buying back stock, you do it. The concept of dumping the stock on the market and giving up and saying forget it, is totally alien to this group. The notion management hasnt seen this idea already or hasnt thought about it totally absent. The old take your bat and your ball go hope scenario has left the building. The new vision thing is alive and well. Jns dup some fabulous vision work. Including work in walgreens mcgros hill and so many others. Ill say that the does make the game awfully intriguing. Al they made it better for everyone else who owns qualcomm. When i say wrong they didnt own a better performing like nxpr they should have owned those. Though owned the wrung semi the one that blew it. I think qualcomms management will have to exceed to. They would have it go hard. Win win for jim. Why dont more actives do what they dont . Why doesnt everybody do it . When a company screws up stock picking managers say i was wrong. Many hedge funds try to act like a fund. And call it a day. They recognize losers and they move on. Never even dreaming of them as potential winners. And in other words it is as much about refusing to be a foek index fun. Meaning the might of the balance sheet. I think in terms of the old style, its good because it drives the stock higher. By the way qualcomm was up 2. 74 before it sold off as the day progressed. As a commentator i have no choice than to go with it. You got to t. Heres the bottom line. You dont have to wait for apple for qualcomm stock to rise. I think theyll do it for you jana, after they take a bite its worth following them. Why dont we go to rob in florida. Caller yes boss. Since du pont got ed breen on the board now and hes the master of breakups. Do you think theyre intending to break up du pont and make it oh, i dont know get rid of the ludsers and break it up or split it up . I got to tell you i agree with you about breen. If he finds way to bring out value. I think coleman will listen to them. I know there is bad blood between both sides. I happen to like both groups. I sure wish something could be done. I wish that maybe lets say breen led the board and fact finding what to do and they invited belts into that. I dont like what is happening there. I think du pont can go up over time. Im concerned about their quarter now. Barbara. Caller hello jim. Buy a stock a own . I like vip shop not the badu. Chinese market is going crazy. I dont get it. It looks bad to me. It probably goes higher. Cookie in new jersey. Caller yeah, how you doing, jim . Cookie i dont know im losing my voice im going to talk to you. Caller are you . I want to know your opinion on nxti semi conductors. Jack moore who is the researcher introduced my to nxti before it had a big run. Weve been pushing it before and after. Why . Because its not going higher. I like it really a great deal. Qualcomm didnt get apple but it got jana. Its still going to find a way to be winner. If only more firms could do what jana did. The stocks i could be taken out next, i have the list. Al an online letter that eliminates your bank from the equation. All your calls on the lightning round. Tonight i need to tell you about a major deal. It seems its gotten lost among the many huge acquisitions weve seen. With world dutch making a big jump. Fed x snapping up t and t. We learned that the Enterprise Software provider is being taken private by canadas vestment board. It was a buyout that kind of happened, no one cared. Why do i think its so important . Because this is only the latest and long line of deals involving Enterprise Software infrastructure being taken private. Buy investors who love to Push Companies to put t