Jim Cramer's Mad Money Stock Recap Nov. 20th
On Tuesday's show Cramer gave out 5 rules for investing in the stock market. His first rule is that there is a market for everything, including the stocks themselves. He said an example was how ethanol stocks were very hot about a year ago, and then several IPOs came on the market, so there was an oversupply of ethanol stocks on the market and the entire sector went down. So the ethanol business and news didn't matter because there were too many ethanol stocks available. Cramer said another example was his recommendation of Sealy (ZZ) at its IPO where he liked the stock, but didn't realize that there was a glut of IPOs, so the IPO market was saturated and the stock tanked.
Cramer took soma calls. The first caller asked how you can know whether an IPO is a good investment or not, and Cramer said that the key is the offering price for the shares. Another caller asked if there are any sectors that Wall Street overlooks, and Cramer said that you should look for a sector that used to have 10 analysts and only has 1 or 2 now and consider that sector for a turnaround. The next caller asked about the Vonage (VG) IPO, and Cramer said that this IPO was overhyped and that they should not have let the company sell stock to its customers.
Cramer's second rule is to know what you own. Sectors don't always matter since stocks within a sector can rally without others. Industries within a sector are the key to rallies, not the sector itself. An example occurred a couple years ago when he called for a tech rally and recommended Cisco (CSCO) and Microsoft (MSFT) because they were the big tech stocks, and he should have been thinking more specifically about the gadget industry within tech, since stocks like Apple (AAPL) were up big. He also said that he wants you to do at least 1 hour of homework each week for each stock you own. He thinks you should give your money to a mutual fund if you don't have enough time.
A caller asked why you don't see big rallies in the biotech sector, and Cramer explained that biotech stocks are moved by FDA rulings, not broader industry moves. The next caller asked how to find the pin action within a sector that Cramer talks about, and he used an example where Boeing (BA) reported a great quarter, and you should look to see who makes the components of the planes they make, since their sales will rise with Boeing's. The next caller asked how to predict performance if a sector is split, like Internet search with Yahoo! (YHOO) and Google (GOOG), and Cramer said that you need to look at management and other company specific factors in that case.
Cramer's third rule is that Latin America should always be treated as a shorter term trade since Wall Street has preconceived notions about the region that prevent it from being a long term investment, and they are the ones who move the market. You should always take profits as a Latin American stock moves up so you don't get caught when the big investors move out of their trade. A caller asked how important our economy is to Chinese stocks, and Cramer said that he doesn't like to recommend Chinese stocks because he doesn't trust their economy. The other caller asked about stocks like Wal-mart (WMT) and Starbucks (SBUX) that are expanding in China, and Cramer said that Starbucks could be the next Yum! Brands (YUM) which doubled their stock price after they doubled their stores in China.
Cramer's next rule is that being a lemming is ok, but he still wants you to go your homework, but if you agree with the moves that big investors are making, then it's good to go with the momentum.
His last rule was to not be afraid to say that something is too difficult to invest or trade on. His example is restaurant same store sales, which he has been crushed on in the past since there are so many factors that contribute to the number and the reaction. He said you aren't being weak, but smart by focusing your time someplace where you can make money.
Cramer took soma calls. The first caller asked how you can know whether an IPO is a good investment or not, and Cramer said that the key is the offering price for the shares. Another caller asked if there are any sectors that Wall Street overlooks, and Cramer said that you should look for a sector that used to have 10 analysts and only has 1 or 2 now and consider that sector for a turnaround. The next caller asked about the Vonage (VG) IPO, and Cramer said that this IPO was overhyped and that they should not have let the company sell stock to its customers.
Cramer's second rule is to know what you own. Sectors don't always matter since stocks within a sector can rally without others. Industries within a sector are the key to rallies, not the sector itself. An example occurred a couple years ago when he called for a tech rally and recommended Cisco (CSCO) and Microsoft (MSFT) because they were the big tech stocks, and he should have been thinking more specifically about the gadget industry within tech, since stocks like Apple (AAPL) were up big. He also said that he wants you to do at least 1 hour of homework each week for each stock you own. He thinks you should give your money to a mutual fund if you don't have enough time.
A caller asked why you don't see big rallies in the biotech sector, and Cramer explained that biotech stocks are moved by FDA rulings, not broader industry moves. The next caller asked how to find the pin action within a sector that Cramer talks about, and he used an example where Boeing (BA) reported a great quarter, and you should look to see who makes the components of the planes they make, since their sales will rise with Boeing's. The next caller asked how to predict performance if a sector is split, like Internet search with Yahoo! (YHOO) and Google (GOOG), and Cramer said that you need to look at management and other company specific factors in that case.
Cramer's third rule is that Latin America should always be treated as a shorter term trade since Wall Street has preconceived notions about the region that prevent it from being a long term investment, and they are the ones who move the market. You should always take profits as a Latin American stock moves up so you don't get caught when the big investors move out of their trade. A caller asked how important our economy is to Chinese stocks, and Cramer said that he doesn't like to recommend Chinese stocks because he doesn't trust their economy. The other caller asked about stocks like Wal-mart (WMT) and Starbucks (SBUX) that are expanding in China, and Cramer said that Starbucks could be the next Yum! Brands (YUM) which doubled their stock price after they doubled their stores in China.
Cramer's next rule is that being a lemming is ok, but he still wants you to go your homework, but if you agree with the moves that big investors are making, then it's good to go with the momentum.
His last rule was to not be afraid to say that something is too difficult to invest or trade on. His example is restaurant same store sales, which he has been crushed on in the past since there are so many factors that contribute to the number and the reaction. He said you aren't being weak, but smart by focusing your time someplace where you can make money.
Labels: AAPL, BA, CHINA, CSCO, GOOG, IPO, Jim Cramer, Lightning Round, Mad Money, Mad Money Lightning Round, Mad MOney Recap, MSFT, SBUX, VG, WMT, YHOO, YUM, ZZ
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