Cold lesson from snowmobile biz: Cramer

Polaris worth buying into weakness: Cramer

(Click for video linked to a searchable transcript of this Mad Money segment)

No matter where you might put money to work in this market, the snowmobile business offers an important and potentially portfolio saving lesson for all investors.

"Good management makes an enormous difference in the performance of a stock," said Cramer.

As the quintessential example Cramer pointed to the recent earnings from Polaris Industries and Arctic Cat, two manufacturers of snowmobiles and other off-road vehicles.

Largely the Street treated both stocks similarly, as bullish bets on the stronger consumer. However after their reports, sentiment shifted rather significantly.

" produced an awful quarter while rival , "delivered a 3-cent earnings beat with higher than expected revenues," Cramer noted.

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Digging down into earnings, the Street quickly realized that sales were very different at the two companies – though products were perceived to be relatively similar.

For example, "Polaris experienced a 25% increase in off-road vehicles. At Arctic Cat they were up just 4.3%," Cramer said.

Other metrics painted a similar picture; Arctic Cat's management just wasn't able to execute as effectively as the management team at Polaris.

Ultimately, shares of Arctic Cat tumbled – more than 10% in 5 days.

Cramer thinks the lesson is clear.

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The market is looking at execution closely – rewarding stocks of companies that execute well and punishing stocks of companies that execute poorly.

"Polaris has a 16% long-term growth rate and it trades at over 20 times next year's earnings estimates. Rival Arctic Cat has a 20% growth rate but trades at just 14 times earnings," Cramer said.

"The Street simply isn't willing to assign the same multiple," Cramer noted.

That's significant because for much of the year, S&P stocks have been advancing in lockstep.

However, the divergence between Polaris and Arctic Cat suggests a rising tide will no longer lift all boats. "This is becoming a stock picker's market," Cramer noted. "And management's execution makes a big difference in this environment."

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