Janet Yellen stated that a lot of stocks are overpriced and this hit a lot of stocks, mostly Biotech stocks. Jim Cramer of CNBC discussed this and he was not impressed by her statement. He spoke about stocks such as Gilead Sciences, Inc. (NASDAQ:GILD), Twitter Inc (NYSE:TWTR) and Apple Inc. (NASDAQ:AAPL) and he said that one doesn’t know what each of these stocks have a pleasant surprise on offer.
He said that the comment by Yellen stating biotech stocks such as Gilead Sciences, Inc. (NASDAQ:GILD) and social stocks such as Twitter Inc (NYSE:TWTR) are overpriced is not correct because no one knows what is in store in the future.
“This seemed like some sort of lame attempt by Yellen to get tough to show she understands that there is indeed some risky inflation out there, “Somewhere”. “ Cramer said
He said that the stocks such as biotech stocks and social stocks have huge expectations, which makes them look inflated if nothing magical happens from time to time to justify the valuations. He mentioned how Facebook Inc (NASDAQ:FB) looked overvalued as soon as it came public due to no reliable mobile strategy and it became undervalued after developing a brilliant mobile strategy.
“How does Yellen know that today’s overvalued social media company won’t become tomorrow’s Facebook? How does she know that today’s small biotech doesn’t have the next incredibly promising blockbuster drug in development?” Cramer said.
Gilead Sciences, Inc. (NASDAQ:GILD) bought Pharmasset, Inc. for $11 billion three years ago and with 89% premium which looked overpaid because the company had handful of assets with no real sales. However the deal added over 5 times to Gliead’s market cap because of the amazing Hepatitis – C cure prepared by Pharmasset, Inc.
Cramer said that he likes stocks such as Apple Inc. (NASDAQ:AAPL) even after the big run because it’s the cheapest large cap stock he likes to follow. He mentioned about the deal with International Business Machines Corp. (NYSE:IBM) where IBM would place the iPhone maker’s products in the high end enterprise market that didn’t use its products so far and it would help both companies in a way where Apple gets enterprise customers and IBM gains due to the deal.
Apple Inc. (NASDAQ:AAPL) is up 19% so far this year and looking solid in the second half with the list of products to be released. So it definitely looks good for the company and doesn’t look overvalued at all.
“Good things ten to happen to good companies and good stocks that are both solid and inexpensive” Cramer stated about Apple Inc. (NASDAQ:AAPL)’s performance.
So the biotech and social media stocks which look over priced and overvalued to Yellen actually look perfect to Cramer and he feels that they are just a miraculous breakthrough away from being undervalued at the current price.
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