Cramer's Lesson In Finding Buying Opportunities
Stocks sometimes sell off for the wrong reasons, Cramer said Monday, creating a buying opportunity for investors.
Take Fossil, for example. On February 15, it reported an 11 cent earnings beat on a $1.35 basis on stronger-than-expected revenues that rose 32.8 percent year-over-year. Meanwhile, its same-store sales climbed by 20.3 percent.
While the news seemed positive, Fossil's stock was pummeled and fell by 6 percent in a single day, Cramer said. A week later, it was down 11 percent. Investors didn't like that Fossil planned to increase its investments, which would likely take its operating margin down to 17 percent from the 18.5 percent achieved in 2010.
"But this wasn't a case where the margins are getting squeezed. Just the opposite," Cramer argued. "Fossil was choosing to spend more of its cash on investments that would grow the business in the future. I think it was a very smart move, but the market punished Fossil at first."
The sell off turned out to be a great buying opportunity, Cramer continued. Fossil shares have soared 12 percent higher than where it was before having reported on February 15.
What's the lesson here?
"When a company with a good track record and stellar management, like Fossil, tells you that it will be increasing investments, that's a good thing," Cramer said. "If the stock sells off as a result, it's a buying opportunity."
Call Cramer: 1-800-743-CNBC
Questions for Cramer? email@example.com
Questions, comments, suggestions for the Mad Money website? firstname.lastname@example.org