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Cramer: This 295% gain is a big reason to own stock

Cramer often says that if you do proper research, something he calls homework, you can prosper by holding a relatively small number of stocks.

"For ages I've told you to identify and invest in tremendous companies and then hold on to them for riches unattainable elsewhere," Cramer said.

Following are two real world examples of Cramer's philosophy at work:

Jim Cramer on Mad Money.
Adam Jeffery | CNBC
Jim Cramer on Mad Money.

PepsiCo

Cramer believes investors can benefit significantly by owning shares of a company whose CEO is committed to generating shareholder value. And Cramer believes few are more committed to shareholders than PepsiCo CEO Indra Nooyi, one of Cramer's bankable chief executives from his book, "Get Rich Carefully."

"Nooyi executes flawlessly, has implemented fabulous cost controls and manufactures food that's good tasting and occasionally even good for you," Cramer said.

In other words, Nooyi is exceptionally good at running PepsiCo. And Cramer thinks the Street knows it.

"Remember, portfolio managers need to own at least one consumer packaged goods name, because the sector is too big for them not to have any exposure. So they're going to buy the best one; that's PepsiCo."

On Wednesday, earnings confirmed the bullish outlook; PepsiCo reported higher than expected profits and it raised its full-year earnings-per-share growth forecast to 8 percent from 7 percent.

Had you done homework and put money behind Nooyi, you'd have gains of 10 percent in only six months; with 2 percent of the advance coming in a single day.

Puma Biotech

Cramer also advocates doing homework and then putting money to work in a higher risk stock that presents higher reward potential, something he calls a spec stock.

Puma Biotech is an example of why.

"The stock rocketed 295 percent higher today, to a valuation of $7 billion, well above its previous small-cap structure, after it revealed some astonishing results for a breast cancer treatment that few believed would be successful," Cramer said.

The "Mad Money" host has been a fan of the stock for quite some time, in large part for the pipeline.

"Sure enough, trials showed the compound, Neratinib, delayed the recurrence of cancer for many in a trial of more than 2000 women with early stage breast cancer."

Had you done the homework and identified the potential, Puma was well worth betting on.

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Although Cramer knows that picking winners isn't easy, he says that if you do research, find a good company with a strong balance sheet and solid prospects, and then hold the stock for the long-term, you won't be sorry.

He truly believes that maintaining a portfolio of 5 to 10 stocks and then managing it actively can lead to financial prosperity.

And had PepsiCo and Puma been two of your holdings for the last six months, Cramer says, you'd be well on your way.

(Click for video of this Mad Money segment)

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