Harry Domash's Winning Investing


Cramer Can Help You Make Money

Titanium usage is on the rise because the airline industry is substituting it for steel to make their commercial aircraft lighter and more fuel efficient.

That astute observation came from Jim Cramer, the host of CNBC’s “Mad Money” stock market advice TV show, which airs at 6 pm and 9pm every market day.

Many of you who have watched Cramer’s show undoubtedly winced when I used the phrase “astute observation” in the same sentence with Cramer. That’s understandable.

Watching Mad Money is like a visit to the loony bin. Cramer screams, shouts, grunts and generally acts like someone who has consumed way too much caffeine. But, whatever you think about Cramer’s persona, he can help you make money in the market. Cramer was a hedge fund manager for many years, and he brings a world of in-the-trenches stock market experience to the table.

But to make best use of what Cramer has to offer, you must ignore his stock tips and pay attention to what he says that is really important. Here’s the best news. You can do that without having to watch him on TV. More on that in a minute, but first some background.

Most Do Watch For the Tips
Probably most viewers do watch Cramer’s TV show for his stock tips, which he furnishes in abundance and with great exuberance and clarity.

On each show, Cramer features one or two themes as diverse as the increasing demand for titanium mentioned earlier or how to capitalize on changes happening in Vietnam. Cramer always tells you which stocks he thinks you should buy to make money on those trends.

For example, to take advantage of increased titanium demand, Cramer advised buying shares of Alleghany Technologies, which have gained more than 20 percent, since he gave that advice more than one-month ago on December 19.

Cramer also answers e-mail questions about stocks, but the tips really come hot and heavy during the “lightning round” when Cramer answers viewers’ live call-in questions about specific stocks. Cramer’s answers are succinct and unambiguous.

For instance, when asked about restaurant chain Cheesecake Factory, Cramer answered, “I think it is one of the better restaurant concepts, but not the best, so swap out of Cheesecake get into Darden.”

Or when a viewer brought up airline company Jet Blue, Cramer replied, “All airlines are a House of Pain. Even the good ones. I think you need to sell this.”

Will Tips Make You Money?
How good are Cramer’s tips? He’s had some over-the-top successes. The last time I looked, viewers that heeded his August 17 admonition to load up on Apple Computer had enjoyed an 80% return. On the other hand, those who bought Capstone Turbine when he touted it last September are down around 35%.

The website Yourmoneywatch.com, tracks Cramer’s ‘buy’ tips and tabulates the performance of all of the stocks he has advised buying until he advises selling.

According to Yourmoneywatch.com, since it started tabulating on July 28, 2005, Cramer’s ‘buy’ rated stocks have averaged a 7% return compared to 5% or so for the Nasdaq, which is probably the most relevant index. However, the site calculates the returns starting with each stock’s closing price the day that Cramer advised buying. Since many of his picks open higher the next day, the first chance most investors would have to act on his advice, your actual returns would be lower.

So, while Cramer’s picks, on average, have beaten the market, the results won’t knock your socks off.

Cramer's Real Value
Which brings me back to the real value of Cramer’s rantings: his descriptions of overriding economic and market trends, and his explanations of how he picks the best player in each industry or market segment. 

That information is readily available without having to watch TV. TheStreet.com, the site that Cramer founded, carries Mad Money Recaps, which are detailed summaries of each of the Mad Money shows. The Recaps include everything: Cramer’s industry overviews, answers to viewer questions, and his interviews with company CEOs.

TheStreet.com archives the Recaps going back to July 2005. You’ll find it worthwhile to review the themes discussed on each show going back as far as you have time to read. I also find it valuable to read Cramer’s answers to viewer’s specific stock questions, even if you’re not interested in those particular stocks. If you read enough of them, over time, you’ll gain an understanding of how Cramer picks the best candidates in an industry.

Find the archives by selecting Mad Money Recap on theStreet.com’s homepage (www.thestreet.com), which displays the Recap for the most recent show. From there, select the archive link.

For the lightening rounds, the Recap simply lists the stocks that Cramer discussed and whether he was bullish or bearish on each stock. But you can see his complete comments on each stock by clicking on the link labeled “for more of Cramer's insights during the Lightning Round.” near the bottom of each Recap.

I find it useful to see what Cramer has had to say in the past, if anything, about stocks that I am researching or currently hold. You can do that by looking up the news for the stock on theStreet.com or on other stock market sites. Look for headlines with Mad Money in the title.

In the stock market, nobody gets it right all the time, including Jim Cramer. But Cramer, despite his rough edges, gives you the know how to make better decisions on your own.
published 1/22/06 & 1/29/06

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