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Cramer: Have stocks become new commodities?

(Click for video linked to a searchable transcript of this Mad Money segment)

All too often, Jim Cramer hears that stocks have become commoditized. That is, they trade as a unit, just like corn and wheat.

Cramer just doesn't understand that kind of thinking.

"This kind of analysis diminishes the value of so much of what happens at companies. It is ridiculous to think that they are commodity-like," he said on Monday's "Mad Money."

And rather than view stocks only in terms of the Dow Jones industrial average or S&P 500, Cramer advocates viewing each and every stock individually as well, with a company's unique characteristics always at the forefront of all investment decisions.

Image Source | Getty Images

For example, viewing stocks as a commodity would have obscured the true value of Pinnacle Foods, now being taken over by Hillshire Brands.

"I like this example because its shows you that even foodstuffs aren't homogenized," Cramer said. That is, shareholders were rewarded with a 20 percent premium because Pinnacle offered values that rival could not match. In turn, Hillshire attracted not one but two buyers also willing to pay premiums, again, because of the unique appeal of the company.

And Cramer said the phenomenon is hardly limited to circumstances involving mergers and acquisitions.

Investors who view stocks as commodities probably missed reports that Starboard, an activist firm, is actively trying to unlock value in MeadWestvaco, in part by establishing a 5.6 percent ownership stake in the company.

"We believe that the combined value of MeadWestvaco's assets far exceeds the company's current share price, and this value is being obscured by MeadWestvaco's excessive corporate overhead and conglomerate structure," said the hedge fund.

Whatever you think about the market, Cramer says, MeadWestvaco is a buy. "Someone with firepower has bought enough stock to issue a serious challenge to management and begin the process of unlocking value."

Cramer pointed to Clorox as another example. "Shares have advanced 40 percent since 2011, if you include dividends, as the company actively brought out value."

Cramer also cited Dean Foods, WhiteWave, Apple, Broadcom and Allergan as other companies with stocks that generated significant profits for investors who realized they, too, should not be lumped together with peers.

All told, Cramer hopes these individual stocks, and their specific stories, dissuade you from viewing stocks as a commodity.

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Cramer knows that some pros will tell you that 70 percent of the market trades in tandem with the S&P 500. However, Cramer thinks the key to profiting from the stock market is digging down and identifying five to 10 individual stocks of good companies with exceptional leadership, strong balance sheets, powerful catalysts, and competitive positions, and then buying and selling shares strategically.

"I find it moronic to view stocks as commodities. Yet professionals who trade do just that, every day. It's a costly mistake," Cramer said.

Call Cramer: 1-800-743-CNBC

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