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There are a couple of ways to spot changes in earnings, Cramer said. Investors can start at the bottom – visiting stores, watching cash registers, counting transactions and as many stores as possible. Then when something is flying off the shelves at a pace that isn’t reflected by the earnings estimates, buy the stock of whomever makes it.
This requires more time than most people have, so instead investors can try to anticipate spending cycles. The airlines have an incredibly predictable spending cycle, Cramer said. When Boeing [BA
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] is getting lots of orders, investors should buy the stocks of Boeing’s suppliers: Fairchild [FCS
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], BEA Systems [BEAS
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], Honeywell [HON
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]. Then as soon as analysts start loving these stocks, Cramer recommends getting out.
The same goes for semiconductors. These companies like to raise money to buy equipment when they’re doing well. So when this happens, load up on their suppliers: Applied Material [AMAT
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], KLA-Tencor [KLAC
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], Kullicke & Soffa [KLIC
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], Novellus [NVLS
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]. Telephone companies are no different, so follow the same strategy – buy their suppliers then bail when the analysts get onboard, Cramer said.
Bottom Line: Investors should watch the indicators, stay disciplined, and the rest of the market will follow them, Cramer said. That's the situation they want to be in. The lead dog might feel lonely, but he’s got the best view.
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