Jim Cramer sees one crucial element of an investor's portfolio that is often underestimated—execution. At the end of the day, it cannot be overlooked. Good leadership is what drives both the company and the stock. And, unfortunately, Cramer is seeing this element disregarded more and more each day.
"We don't have enough respect for execution. Nobody talks about it, about the sheer power of execution, of a management team fulfilling unmet needs or changing course during changing times. Yet, it's a huge part of this terrific, long-term rally," the "Mad Money" host said.
For example, there is a misperception that stocks are too expensive right now. Cramer was surprised to see various articles released by financial news outlets expressing concern on Wednesday that Costco would disappoint, citing it was too "richly valued."
Well, Costco released earnings early on Thursday morning and reported an amazing 8 percent same-store-sales growth for the quarter and a 4 percent gain in February. In fact, considering how strong CEO Craig Jelinek and his team are, Cramer considers this stock to be both undervalued and underestimated.
"Many of these stocks belong to companies that are managed by people who are capable of going well outside what's expected them, rendering their stocks cheap, even as they seemed very expensive," Cramer added.
So while many companies might look expensive on paper, Cramer keeps his eye on the leadership of a company. All it takes is one takeover bid or release of terrific results to shed entirely different results on to a stock.