If Mad Money’s message could be summed up in one sentence, it would be this: You can – and should – manage your own portfolio.
Cramer firmly believes that his viewers can do just as good a job – or better – buying and selling stocks than if they’d dumped their cash into a passive index fund or (worse) bonds. All that is required is the willingness to put in five to 10 hours a week of research.
In fact, Cramer went so far as to say that constantly watching on your money is essential to your financial health. Certainly, the crash of 2008 proved that. The last place investors wanted to be was in an index fund that mimicked the market as the Dow dropped from over 11,000 to about 6,500. And there’s little chance that the same fund will generate enough of a return to get these investors back to even.
“The only way to do that,” Cramer said, “is by picking your own stocks and actively managing your portfolio.”
So where do you start? Cramer always looks at the new-high list. (Boeing , Bristol-Myers Squibb , Dominion Resources , McDonald’s and Time Warner are just a few that posted their best 52-week numbers today.) The stocks that make this list are there for good reason, whether they’re a part of a bull market or the companies themselves are hot, and they often keep going higher. Such was the case in 2009 when share prices peaked again and again, carrying the markets up from their early March lows.
Of course, last year’s rally was an exception not the rule, but Cramer said that, for the most part, the stocks that have been working will continue to work. That’s because there’s more continuity than change in the markets, Cramer said. Things pretty much keep going the way they were going until something major shifts, and then it’s time to reevaluate. The shifts can be drastic, though, which, again, is why he recommends being proactive about your investments.
The onus then on you. You must read the SEC filings, review the quarterly reports and listen to company conference calls to make sure a company’s fundamentals are still sound. If they are, only then can you buy – on a pullback. Cramer said that you always want to try to buy the new-high list at a discount. That way you get a cheaper entry point on a stock that's a proven winner.
The caveat here is that you want to make sure the pullback is the result of profit taking or some general panic in the market, not a change in the company’s fundamentals. Because if they have, the stock isn’t worth buying.
“The story has to be intact,” Cramer said, “or the method will not help you one bit.”
When this story published, Cramer's charitable trust owned McDonald's.
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