Jim Cramer Put These 14 Stocks Under the Microscope

10. ADT Inc. (NYSE:ADT)

Number of Hedge Fund Holders: 36

Cramer said that he is avoiding ADT Inc. (NYSE:ADT) stock despite its strengths because Apollo Global Management’s large and ongoing share sell-offs can become a major risk.

“The majority of ADT’s revenue comes from their monitoring and related services, which primarily consists of recurring revenue that’s generated from providing monthly monitoring and other services. I always like to see some recurring revenue… Look, ADT’s done a good job of coming up with new products that make customers’ homes more secure, including a partnership with Google on its Nest devices… Despite what seemed like a solid quarter in April and the progress the company’s making in new offerings, there is something not great here. A major overhang that prevents me from even considering ADT right now. See, Apollo Management, the private equity firm, is the company’s largest shareholder, nearly 30% ownership stake….

Now I’ve got nothing against private equity firms. Some of them are real great, including Apollo, they’ve done some good things, but it is always the threat when you have a private equity firm as a top shareholder because in theory they could start dumping the position at any moment…

Apollo’s been selling down its stake aggressively as of late. That includes a 50 million share sale earlier this month, which came just a couple of months after Apollo sold over 80 million shares in secondary offering in March, and the even worse news, Apollo still has roughly 229 million shares left. Okay, that’s potentially an artillery barrage of selling… That’s why I’m not even going to entertain the thought of ADT right now.”

ADT Inc. (NYSE:ADT) provides security and smart home products, including alarms, cameras, automation systems, and personal emergency response services. The company’s offerings enable customers to monitor and control their homes remotely through different devices and apps.