On a day when the market gets crushed, Jim Cramer likes to take a look at some of his lessons learned over his years of managing portfolios on Wall Street.
So, he did some research to analyze the trades and see what worked—and what did not—in the past. After all, what better way to gain insight on the future than to evaluate your success and failures from the past?
While digging through years of research, the "Mad Money" host discovered a very strange trend: Sometimes, the best time to buy a stock is when the analysts cut the company's earnings estimates.
At first glance, the thesis may seem misguided, if not backward. After all, lower estimates are a sign that a company's profits may not be as robust as previously expected. But that's not the case, in Cramer's eyes.
Yes, that's right, sometimes when a stock hits bottom—that is a great investing opportunity.
"Calling bottoms yourself can be a dangerous activity, fraught with peril if you come in too early, as so often happens. But sometimes the market will pretty much call the bottom for you," Cramer added.
To get the most reliable sign that a stock is hitting bottom, just wait for a moment when the estimates are so low that they can finally be beaten.