One of the tricks that Jim Cramer has learned over the years is that sometimes just taking a quick look at the goods that consumers are buying is the simplest way to make money in the stock market. For instance, Cramer saw that the stock of Regeneron has skyrocketed to $500 from $5, and thinks it has plenty more room to run.
That is why Cramer decided to take a look at the clues sprinkled all over the market that can help investors come up with solid investing ideas.
To find those clues, the "Mad Money" host revealed a methodology that he used to follow back when he was a hedge fund manager and needed to come up with creative new investments off the beaten path yet linked to major trends in the economy.
Cramer has had his eye on retail recently as a big trend, right in the epicenter of reporting. Most major retailers are reporting earnings right now, and Cramer wanted to find a way to leverage that.
"During this period I try to find what trends stand out as investible so I can pick stocks within those trends, and what companies are doing well versus the performance of their stocks," Cramer added.
The one retail stock that was the shining star was Home Depot. It crushed the quarter with better than expected earnings. Yet the stock has been hit hard as investors started taking profits. This got Cramer thinking—what major theme is driving this?
"I then hit up Stanley Black & Decker and I had an ah-ha moment," Cramer said.
This is one stock that dominates the tool business and has major European exposure, which is a good thing now that Europe is turning. Additionally on Tuesday, we learned that housing starts are at a seven-year high, and Home Depot confirmed that household formation is beginning to grow again.
He recommended that investors buy Stanley Black & Decker if it goes down on Wednesday, preferably before Lowe's conference call where it will spill the beans that tools are doing so well.