Beating the Pros

After years of doing homework for school, no one wants to do it for stocks. But as Cramer pointed out on Thursday’s "Mad Money," the extra time spent researching a company can give you an edge on other investors.

A lot of people might say that any number of factors can separate a stock from its underlying company—cash-rich hedge funds, perhaps—and therefore there’s little point in emphasizing the fundamentals. Then there are those who say that all the information on a company is public, so it’s already priced into the stock. What these theories are missing, though, is the ability of homework to cut through the ups and downs of a very capricious market.

Study your stocks well, and you’ll know the range in which a company is supposed to trade. That’s important because, short-term fluctuations or not, stocks tend to drift back to their true value, which is based on how the underlying companies are performing. Also, homework will tell you when to cut your losses if a stock isn’t working, and it will give you the conviction to stick with a company even if the market doesn’t like it.

All of this is crucial to getting back to even, Cramer said, because due diligence helps you balance the need to protect your money with the need to risk capital in order to make more. And not to mention, often times even the most venerable Wall Street professionals don’t know their portfolios as well as you will if you do the homework.

“And if that’s not an edge,” Cramer said, “I don’t know what an edge is.”

Call Cramer: 1-800-743-CNBC

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