Wall Street’s Holy Grail - Mad Cap Recap

FEATURED SLIDESHOW

  Who Is The Worst CEO?
Mad Money needed new inductees for its
Wall of Shame, so we asked viewers for
  nominations.

RECENT POSTS

Get stock and market information from Mad Money's Jim Cramer sent to your mobile phone.

Road Rules

Investing can be confusing. Luckily, Cramer has mapped out some road rules for all you Home Gamers trying to navigate the jungle that is Wall Street. Think of it as "Mad Money 101" –- some fundamental advice to keep in mind as you play the market. Whether you're a first time investor or a seasoned financier, it's always good to remember the basics.

Watch the Videos

Text Size

Sep.01

6:27 PM ET

Tuesday, 1 Sep 2009

Wall Street’s Holy Grail

Topics:Investment Strategy | Stock Picks | Stock Market

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 investors instead can try to anticipate spending cycles. The airlines have an incredibly predictable spending cycle, Cramer said. When Boeing [BA Loading... () ] is getting lots of orders, investors should buy the stocks of Boeing’s suppliers: Fairchild [FCS Loading... () ], BEA Systems [BEAS Loading... () ] and Honeywell [HON Loading... () ]. Then as soon as analysts start loving these stocks, Cramer recommended cashing 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 Loading... () ], KLA-Tencor [KLAC Loading... () ], Kullicke & Soffa [KLIC Loading... () ], Novellus [NVLS Loading... () ]. Telephone companies are no different, so follow the same strategy – buy their suppliers then bail when the analysts get onboard, Cramer said.

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," Cramer said, "but he’s got the best view."

Call Cramer: 1-800-743-CNBC

Questions for Cramer?

Questions, comments, suggestions for the Mad Money website?

Tools:

Print Email

Previous Post Back to Main Page

ADD COMMENTS