A lot of people aren’t doing their homework, Cramer said Wednesday, and those people are losing money.
The “Mad Money” host said homework is not just reading the headlines or seeing what a company reported versus expectations. To Cramer, homework means actually listening to the earnings conference call, reading the transcript, comparing it versus the notes and recognizing how wrong headlines can be.
“To beat the football analogy to death, some of these headlines seem like they are almost classic misdirection deals,” Cramer said. “Play action fakes designed to get you to bite on a pass when the give is to a running back.”
Take Johnson & Johnson , for example. On Tuesday, it reported strong quarterly results that came in at $1.24 versus $1.21 for a considerable beat. JNJ got hammered on Wednesday, though, because it turned out the company didn’t beat earnings estimates at all. In fact, it was a miss, Cramer said. The quarter had one-time gains, income from divestitures. To make matters worse, executives on the conference calls said the company is losing share to private labels, like Perrigo .
“You can make real money if you actually do more than read the headlines because if you listened to the calls in all of these stocks and so many others, you cleaned up,” Cramer said. “The only problem? Just like school, you have to do that homework.”