Jim Cramer Has Great Faith in This CEO

Part of investing involves identifying a good CEO who knows how to maximize shareholder value.

And Jim Cramer says this guy is good - real good.

The Mad Money host was talking about Bob Iger, the CEO of the Walt Disney Company.

"While I am a total numbers guy, I also believe there is a CEO quotient that always has to be considered," said the Mad Money host. "I apply that CEO quotient to the price-to-earnings multiple. And Iger has about the highest faith to stock price ratio I know."

Those investors who applied Cramer's theory in late 2012, when Disney reported earnings last time, probably have a smile on their face as wide as Disney's Cheshire Cat.

That's because they likely hit the buy button when shares declined on a revenue miss reported in November.

"The last time when Disney reported, the company delivered a good looking quarter, but not perfect. They didn't provide the blueprint that people were looking for with the purchase of Lucas Films for $4 billion. Plus there were worries when it came to the future of ESPN," Cramer explained.

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At the time Disney said revenue had increased 3.2 percent to $10.78 billion from $10.43 billion a year ago, but fell short of the $10.92 billion analysts had expected.

Consequently, the stock, which had traded as high as $53 before earnings, plummeted to $47.

"I thought the whole sell-off was insulting to Iger," said Cramer. "I thought most analysts, traders and investors showed a remarkable lack of faith."

However, those investors who kept the faith and bought were ultimately rewarded.

Bambu Productions | Stone | Getty Images

Fast forward to Disney's latest earnings reportdelivered on Tuesday.

"Iger delivered a quarter that literally answered every objection and then some. First, he laid out a multi-year vision for Lucasfilms, including multiple Star Wars iterations plus other Star Wars derived movies and entertainment properties that nobody really counted on," said Cramer.

Also, ESPN looked well set-up for terrific growth in 2013 and Disney had some terrific upside in theme parks courtesy new rides that always attract repeat customers."

On the news shares spiked higher – above $54.

What's the bottom line?

If you identify a CEO who does good work and gets the job done, you may want to give him or her the benefit of the doubt and buy shares of their company on an earnings disappointment.

Had you done that with Disney back in November, and bought around $47 after lackluster earnings, you'd have a gain of more than 10% in three months.

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