Cramer: We've Seen the Lows for the Year

Wednesday, 12 Oct 2011 | 8:21 PM ET
Cramer Explains Margin Expansion
Mad Money host Jim Cramer explains how the raw cost for many products are at last showing weakness and that could lead to the holy land of margin expansion - not contraction, and that's good for consumers and stocks.

We have seen the lows for the year, Cramer said Thursday, adding the S&P 500 will stay in the upper-end of its range.

The "Mad Money" host came to this conclusion after "building a thesis," a process he said is critical to investing. He took data from various places, compared the information and linked it to the prospects of individual companies.

"Right now I'm seeing an incredible confluence of events that benefit consumers of every kind of commodity," Cramer said, adding that aluminum, grains, plastics, steel, natural gas and gasoline prices are all in decline.

In turn, he thinks we could soon see an end to inflation in China. The People's Republic has been a tremendous engine of growth for the world's economy, so if things start to pick up there, it could have a ripple effect.

Meanwhile, packaged goods companies that had to raise prices due to higher raw costs will now experience terrific margin expansion should raw costs continue to decline. The automakers stand to benefit the most from lower raw costs, Cramer said. With raw costs down and the consumer feeling more confident, it would be a good time to buy a carmaker, like Ford .

Bottom line: Despite the real worries over Europe's debt crisis, the outlook for many U.S. companies has changed, as raw costs continue their decline.

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