You know, if you've read this blog, that we consider investing themes more important than the individual stock picks that illustrate those themes on Mad Money.
This week, in our 11p ET broadcasts, we've been running a series on the stocks that came out of earnings season with the biggest quarterly beats. But the theme we're trying to illustrate is not that stocks like Jones Apparel, Tyco, Orbital Systems or Ralph Lauren, which have blown out the numbers in their most recent quarters, will tend to outperform the rest of the market.
The theme of this series is the shopping list, and it's something that has implicitly been a part of every single stock recommendation Jim has ever made on the show. The idea is a simple one, although it's so often ignored by investors: price matters. It matters more than the quality of an idea or the stock pick that idea inspires.
For every company we highlight in this series, Jim has or will explicitly say the price at which he would buy the stock. Big deal, right?
Well, what's notable about this is that in every instance, the price where Jim likes the stock as a buy is substantially lower than the stock's closing price on the night of the recommendation. Jones Apparel closed at $18.74 on Monday, but Jim said he wouldn't pay more than $17 for it. That's 9.6% less than the closing price. On Tuesday, Tyco closed at $44.57, but Jim said he'd pay no more than $42, 5.7% below that days closing price. Orbital Systems, Wednesday's pick, closed 10.4% higher than the price where Jim thinks it makes sense to pull the trigger, and on Thursday Ralph Lauren's stock closed 10.6% above Jim's $66 entry point.
Frankly, I was surprised by how large the differences between the current prices and what I think of as the shopping-list prices were, but I think that's the point. We've got a market that throws out a lot of intraday volatility and is still vulnerable to big sell-offs and bear raids. If you wait, you may be able to get these stocks at Jim's prices.
But the larger point, the one that's going to be true in any market, is that often you'll have to wait a long time between when you come up with a good investment idea, and when you can realistically buy the stock at a price that will make the investment worthwhile. Fools rush in. Good investors pick their price and wait, and that's the theme of our preempted 11PM show this week.
Cliff Mason is the Senior Writer of CNBC's Mad Money w/Jim Cramer, and has been that program's primary writer, in cooperation with and under the supervision of Jim Cramer, since he began at CNBC as an intern during the summer of 2005. Mason was the author of a column at TheStreet.com during 2007, which he describes as "hilarious, if short-lived." He graduated from Harvard College in 2007. It was at Harvard that Mason learned to multi-task, mastering the art of seeming to pay attention to professors while writing scripts for Mad Money. Mason has co-written two books with Jim Cramer: Jim Cramer's Mad Money: Watch TV, Get Richand Stay Mad For Life: Get Rich, Stay Rich (Make Your Kids Even Richer). He is 100% responsible for any parts of either book that you did not like.
Mason has also had a fruitful relationship with Jim Cramer as his nephew for the last 23 years and will hopefully continue to hold that position for many more as long as he doesn't do anything to get himself kicked out of the family.
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