Mad Money

Cramer: Moron sellers skewing the valuation of these stocks

Cramer: When you see a stock tank, don't always believe the headlines

After watching the market on Thursday, it was blatantly obvious to Jim Cramer that information is simply not being valued accurately.

"When you see a stock that is down and then you read a headline that tells you why it is down, don't automatically presume that either the stock or the headline is right," the "Mad Money" host said.

Instead, go deeper, Cramer said. Read the reviews, find out what people are saying ahead of time, and listen to the company's conference call. That will automatically be far more homework than many other investors are doing.

It could be the difference between starting a good investment instead of dumping one.

PepsiCo reported a much better-than-expected quarter on Wednesday with strong growth, and then provided a forecast that mentioned obvious challenges of foreign exchange.

In response, the stock fell on stories about how PepsiCo cut its forecast on the expectation of weaker sales. Cramer was screaming at his computer about how wrong the sellers were.

"Moron sellers had their minds made up that somehow this was a true guide down based on slowing sales," Cramer said.

Sure enough, the stock reversed on Thursday when investors figured out that PepsiCo was merely adjusting its forecast because of the strong dollar, not because there was something wrong with sales.

Watch the entire segment here

Cramer: Moron sellers skewing the valuation of these stocks

The same pattern played out with 3M, which was crushed because of what headline writers described as a weak consumer products division with an unexpected decline. But declines don't mean weakness to Cramer. Weakness insinuates a failure to have the right product and flagging sales.

If investors had listened to the conference call they would have known that 3M's softness had to do with a particular retailer's troubles. CEO Inge Thulin has earned the benefit of the doubt from Cramer after making money for the company for years.

It finally dawned on the market that investors were wrong when the stock reversed its downward trajectory on Thursday.

Other examples of headline selling that Cramer cited were Cisco Systems, Chipotle, McDonald's and Micron.

"I wish the market weren't so darned stupid lately," Cramer said.

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