Cramer: What It Takes to Pick Winning Stocks
Investors are capable of picking winning stocks, Cramer said Friday, but it's going to take work. To start, the "Mad Money" host said home gamers need a little conviction.
It's important investors find stocks that inspire a high level of confidence, Cramer said. With thousands of publicly traded companies to choose from, he doesn't recommend investing in one you don't believe in.
Home gamers need to believe in the underlying company because the market will often test an investor's conviction, Cramer said. The investor should like the story enough to buy more shares if it gets knocked down. Moreover, investors should welcome declines because they provide buying opportunities. A pullback, Cramer said, is the market's way of throwing a sale.
Finding stocks worthy of this kind of trust can be challenging, Cramer admitted. He recommends long-term themes, like the global food shortage or power management.
As millions of people in the developing world migrate from rural to urban areas, they start buying electricity. What's more important than where we get our power, Cramer said, is how we use it. That's where power management comes in. After all, businesses will continue to have a strong desire to lower their electric bills and corporations will always need to protect the bottom line. In doing so, these businesses are going to do anything to save money and Cramer said energy conservation is a great way to do it.
To play the power management theme, Cramer likes the power control names and energy efficiency heating, ventilation and air conditioning makers. As regulators around the world continue to push for minimum energy efficiency standards and companies seeks to reduce their electric bills, they are installing more efficient HVAC systems, as made by Ingersoll-Rand , Johnson Controls and Watsco .
Cramer also likes Honeywell , which makes automation and control systems that are energy efficient. Its process controls, building energy management and security systems and smart grid demand response technologies help reduce energy consumption at peak hours.
Emerson Electric is another play on power management, Cramer said. The company produces power management and industrial automation gear. Emerson also has a terrific HVAC business, where it's the market leader in energy efficient scroll compressor technology—the heart of both residential and commercial HVAC systems, Cramer said. It is also the main player in power management for data centers, which Cramer said are big "energy hogs."
Eaton has started competing with Emerson in providing power management for data centers. It makes electrical control products, fuel efficient transmissions and hybrid engines for trucks, as well as fluid power systems and aerospace hydraulic systems that enable large aircraft to burn less fuel.
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