Cramer Remix: Why Facebook is beating Snapchat
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As stock valuations rise each day, Jim Cramer says investors need to figure out what they can handle in the market. He compared Amazon ,Facebook and Microsoft to explain the concept of risk and reward amid elevated prices. "As we go higher and higher, the risks grow and you need to know not just the rewards but what can go wrong after this historic run," the "Mad Money" host said. Cramer chose these three stocks because they are well-known, and provide insight on the different ways that stocks can be valued in an overheated market. Facebook hit an all-time high on Wednesday when it confirmed that its messenger service now has 1 billion users, with 200 million new users since the beginning of the year. "That's a pretty monumental refutation to those who believe the world's abandoning Facebook in favor of competitor Snapchat," Cramer said.

The stock seemed expensive to Cramer at 31 times earnings, but he thinks the growth rate is actually accelerating, even with a 31 percent monster growth rate. That actually makes it cheap in Cramer's perspective, because growth stocks tend to trade between one or two times their growth rates and Facebook is at the bottom of the range. "I pronounce Facebook as being relatively inexpensive versus a ton of other growth stocks in this market, suitable for those individuals willing to take on some risk in order to get a lot more reward than stock like Microsoft can offer," Cramer said.

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After the monster run that the stock market has had recently, Cramer estimates that the average stock in the now sells at an expensive 20 times earnings. However, he is still seeing signals that there is no major correction in sight. There are only two ways to get out of the overheated position the market is in right now, Cramer said. First, the market comes down to make it cheaper. Or, companies in the S&P start earning more than Wall Street expects because things are actually getting better than they expect. "I believe the latter is happening, that the S&P will turn out to be cheaper than we thought and thus valuations will turn out to be less expensive, allowing us to get out of this period without a major correction to lower levels," Cramer said. Microsoft , Illinois Tool Works and Cintas all skyrocketed higher on Wednesday after reporting better-than-expected numbers. Those numbers signaled more robust growth than anticipated. Regardless if the market heads higher or lower, Cramer has noticed a red-hot group that consistently has money pouring into it—pets. Between 2001 and 2015, Cramer noted that the amount of money spent taking care of animals has more than doubled, rising to $60.3 billion a year. "This theme is here to stay, a fabulous place to invest on any scare, whether it be from the Fed or overseas or certainly from the madness of the upcoming presidential election," Cramer said. On Tuesday, Cramer identified his top pet care plays as VCA or IDEXX Laboratories on the next big pullback. He continued that analysis on Wednesday by comparing Blue Buffalo Pet Products , Freshpet , J.M. Smucker , Henry Schein and Central Garden and Pet . Ultimately Cramer advised that for investors who want to invest in the animal group, to either go with IDEXX and VCA that he previously recommended, or invest in Blue Buffalo for pet food. He also recommended J.M. Smucker and Henry Schein on a pullback for non-pure plays that still have strong animal exposure.



Republican U.S. Presidential candidate Donald Trump speaks at a campaign rally at Gilley's in Dallas, Texas, June 16, 2016. Brandon Wade | Reuters