Cramer's technique for beating the pros

(Click for video linked to a searchable transcript of this Mad Money segment)

If you're an individual investor chances are you think the big money pros have an edge.

After all the pros have access to state of the art computers that deliver up to the minute developments in the stock market. Those same pros have sophisticated tools that can chart patterns for so-called technical analysis. They can even commission algorithms that trigger trades based on statistics.

Usually, Individual investors have none of that. And yet, Cramer firmly believes individual investors can do better than their slick Street counterparts.

How so?

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Cramer believes the secret to investing success lies with homework .

"Just by following my standard homework regimen, you should have an edge over most of the other people who trade the stocks professionally."

How's that possible? After all, homework involves looking at public information such as earnings reports, government documents and newspaper stories. "Anyone can check that out," Cramer admitted. "The very fact that the information is out there means it should already be "baked in" the stock – that is, share price should reflect the research."

However, Wall Street has a dirty little secret.

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"Lots of pros are lazy," he explained. "Lots of money managers are technicians, meaning they look at the charts and dismiss the fundamentals. Also there are so-called quants or mathematical traders who don't get down into the nitty-gritty of a quarterly earnings conference call," Cramer said. "Others are closet indexers."

These pros make their investment decisions based on factors other than fundamentals. And at the end of the day Cramer believes nothing matters more than fundamentals.

Therefore, if a company has attractive growth prospects, if it's managed well, if it's winning market share and/or if it's profit margins are strong – Cramer believes it will ultimately attract investors.


At the end of the day, Cramer says fundamentals are the only reason that a stock will command a premium over the long-term.

"If you keep up with this kind information, I promise that you will know more about a stock than many of the professionals do," said Cramer. "And if that's not an edge, I don't know what is."

Call Cramer: 1-800-743-CNBC

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