Jim Cramer isn't afraid to go out on limbs, though there were probably more than a few viewers of Mad Money nodding their heads last week as he ripped into Chinese Internet IPOs.

Making the most of Monday being Halloween, financial television's biggest rock star went on a six-minute rant that played up Chinese dot-coms as costumed imposters on the hunt for candy.

He's right about the disguises. I warned last month about falling for the blank of blank trap. When it comes to overseas issues, it's easy to be lulled into a false sense of security in believing that an international company is the spitting image of a stateside darling.

  • Renren (NYSE: RENN) may be the country's largest social networking site, but it's not the Facebook of China. It doesn't command Facebook's market share dominance, and this also happens to be one of the many Web 2.0 niches that Chinese regulators are starting to crack down on.
  • Youku.com (NYSE: YOKU) is not the YouTube of China. It's the top dog, but not the undisputed champ of video streaming in the world's most populous nation. There are plenty of well-trafficked rivals battling it out here. It's also not fair to tag Youku as YouTube based on its model. Youku relies more on licensed content than user uploads. In other words, it's more like the Hulu of China, but even that match is a bit of a stretch.
  • Dangdang (NYSE: DANG) is not the Amazon.com of China. Its razor-thin margins and emphasis on books may make it a close match to what Amazon was over a dozen years ago, but it's not a match to where Amazon is today. China's 360buy is much larger and more diversified than Dangdang, and it could raise billions in an IPO next year.

So far, so good.

However, Cramer is making more than a few generalizations elsewhere. In some cases, he's just flat out off the mark.

Beyond Baidu
"The only Chinese stock I'm willing to get behind is Baidu," Cramer said at the beginning of the segment, largely because Baidu.com (Nasdaq: BIDU) has a "proven track record of excellence" and it really is the Google (Nasdaq: GOOG) of China. It serves up the lion's share of Chinese search queries, and there's no one even close.

Baidu rocks. I'm not going to disagree with Cramer on that. I recommended China's top search engine to Rule Breakers newsletter subscribers at a split-adjusted price of $8.34. It's up 1,617% since then.

Unfortunately, Cramer also chose to talk down other stocks including online portal Sohu.com (Nasdaq: SOHU) and dating website Jiayuan (Nasdaq: DATE). They also happen to be Rule Breakers recommendations, but that's not the reason why I disagree with CNBC's goateed ratings magnet on these two companies.

Cramer compares Jiayuan to Match.com and Jdate. There are plenty of dating websites in both China and the United States, but Jiayuan does stand out in its country. Unlike smaller subscription-based sites, Jiayuan offers free registrations. Users simply pay whenever they want to communicate with someone on the site.

Online dating is a bigger potential market in China than it is here, given the citizenry's limited opportunities for social interaction outside of school, work, and immediate neighborhoods. If China decides to tighten the clamps on self-publishing social speedsters including Renren and Weibo, it will only send more people scrambling to Jiayuan.

Jiayuan is a speedster. Revenue soared 121% in its most recent quarter as it added another 5.3 million registered soul-mate seekers to its growing rolls. Unlike Renren, Youku, and Dangdang, Jiayuan is also currently profitable. Analysts see Jiayuan earning $0.32 a share this year and $0.51 a share in 2012. In other words, it's fetching just 17 times next year's projected profitability.

Not-so-red China
"All of these stocks have been taken to the woodshed, but they still have sky-high valuations," Cramer says.

Really? Jiayuan at just 17 times forward earnings doesn't seem "sky-high" for a company growing a lot faster than that. Sohu is even cheaper.

Cramer calls Sohu the eBay of China, and that's sorely off the mark. I would argue that he simply misspoke, but there was an actual eBay logo graphic used in the segment when he brought up the company. Alibaba.com is really the eBay of China. Sohu is a more conventional portal, backed by some online gaming, streaming video, and search engine sizzle.

Revenue at Sohu grew 42% in its latest quarter, and that's certainly not too shabby for a stock trading for less than 11 times next year's profit target.

In a theatrical attempt to paint all Chinese dot-coms outside of Baidu in broad strokes, Cramer did miss the mark.

Few investors on either side of this argument boil things down to the real threats and opportunities. Cramer did mention China's oppressive government, but there's also the ceiling of China itself. Unlike Facebook or Google that have evolved into global juggernauts, Chinese Internet companies have been territorially restricted in their growth. Even well-deserved darling Baidu has largely flopped with its Japanese-language search engine.

That's the bad news. The good news is that China is still early in its infancy when it comes to cyberspace migration. The potent combination of low corporate taxation and lean operating structures is creating ridiculous margins that stateside leaders can't match. If you think Google's 27% net profit margins are impressive, you'll love Baidu at 46%.

So let's get the Chinese Internet story right. There are some masquerading marauders out there, and Cramer did single some of them out. Avoid them. However, Baidu isn't the only company winning in China. There are tricks and treats here. Learn the difference.

If you want to follow the tricks and the treats, consider adding them to My Watchlist: