Remember how Goldman profited big off Cramer’s fear? What it did was to call all the institutions that had previously expressed interest in the stocks Cramer wanted to sell. Good institutions have lists – and you should, too – of stocks they want to buy as soon as the price is right. (That price should be on the list as well.) Because these institutions were prepared, they all enjoyed a huge bargain at the expense of your favorite 63-year-old CNBC stock picker.
Be sure to do this at home. Have a list, have a shopping cart and use limit orders. You should always be doing homework on the stocks you’re interested in, and be ready to buy if the market throws you a sale, like it did earlier today. The list will help you decide what you want before the heat of battle. Take it from Cramer, the worst time to make a decision is during a rough trading day when you feel like you’re under the gun and your gut's telling you the sky is falling.
Here’s a perfect example: Cramer likes AT&T for the exclusivity to Apple’s new iPhone service and for its sane approach to the triple play – phone, TV, internet – business. Even better, it pays out a 4% dividend, which, after taxes, is better than you’d get from a Treasury. If AT&T were on your list, you would have been ready to buy when the stock dipped to $35.75, a buck and a half below its close yesterday.
Bottom Line: Don’t be the prey, be the predator. In a panicked, volatile market, you can profit from other people’s fear. Find high-quality stocks with big dividends that never go out of style and use the panic to buy them on the cheap. Don’t be scared, be prepared.
Jim’s charitable trust owns Goldman Sachs.