- "The early bird is the one who knows you need to buy a stock before the underlying business turns around," CNBC's Jim Cramer says.
- "The executives at Texas Instruments aren't trying to help you time the semiconductor cycle. They're just trying to run the business, and that's a very different thing," the "Mad Money" host says.
- "If you wait for the cycle to actually turn, you will be way too late. Yet, lots of people were desperate for verification from management so they dumped the stock when they didn't get it. That's a huge mistake," he says.
The semiconductor manufacturer has posted slowing chip sales in recent quarters, and said Tuesday it does not expect demand for chips to improve in 2019. Meanwhile, its shares reached a 52-week high during the session after beating earnings estimates by 13 cents in the last quarter.
"The executives at Texas Instruments aren't trying to help you time the semiconductor cycle," the "Mad Money" host said. "They're just trying to run the business, and that's a very different thing."
When an investor waits until he or she gets the green light to pull the trigger, the easy money will have already been made by the time it comes.
Instead, the wise move would be to do some homework and get ahead on the stock while the share price is less expensive.
But it won't be necessary for the company to confirm that the slowdown has ended, Cramer said. On the Tuesday earnings call, Texas Instruments reported its second consecutive quarter of declining sales. The host said the chip cycle typically lasts as many as five quarters before turning around.
Tracking and trading Texas Instruments' stock outside of that cycle helped Cramer pay his share of rent one summer in the 1980s as he studied for the New York bar exam.
Following Texas Instruments' conference call, the stock rose $6 before giving up those gains and more after CFO Rafael Lizardi did not give that "all clear," Cramer said. He said that was a moment to buy call options on Texas Instruments, and he still thinks the stock is a steal at its closing price above $118 per share.
"If you wait for the cycle to actually turn, you will be way too late," he said. "Yet, lots of people were desperate for verification from management so they dumped the stock when they didn't get it. That's a huge mistake."
"Oh, and talk about the need to be ahead: Lam Research told you last quarter a bottom could be in hand for semiconductor equipment. It crushed the numbers tonight," he added.
Cramer said the same logic applied to Apple. The stock was sitting at about $140 in early January when the iPhone maker was laboring to transform itself into a subscription services business and its now-settled royalties dispute with Qualcomm was heating up.
Shares of Apple closed north of $207 on Wednesday after making steady gains throughout the year. A large chunk of the increase came before it reached an agreement with Qualcomm more than a week ago.
Cramer said investors had to be willing to take a chance and buy Apple before the deal was made in order to reap the profits, especially because Apple did not have a 5G plan without Qualcomm's chips.
"When the two companies reached a settlement last week, [Qualcomm stock] exploded higher — it's still going higher — but Apple's stock also rallied about 7 bucks," he said. "Now, if you had waited until after the settlement, you missed some incredible moves. The big money was made before you got the all clear."
Shares of Texas Instrument closed Wednesday at $118.43, up more than 25% from the start of the year.
"The early bird gets the worm, people," Cramer said. "And, in this case, the early bird is the one who knows you need to buy a stock before the underlying business turns around, while the other birds are still cowering in their nests waiting for the call that will always leave them late for dinner."
Disclosure: Cramer's charitable trust owns shares of Apple, Walt Disney, Home Depot, and Lam Research.