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Executive Decision: Diamond Foods CEO Mendes

Even 30-year Wall Street vet Jim Cramer breaks his own rules sometime. Despite always telling viewers not to fall victim to topically negative headlines, he did just that during the Oct. 7 “Lightning Round Overtime.”

When a caller asked about Diamond Foods , Cramer said to stay away after seeing headlines like this, “Diamond Foods Falls as 1Q Outlook Disappoints,” following the company’s Oct. 5 report. But a look deeper—and Cramer readily admitted this during Friday’s “Mad Money”—would have shown a stronger company than that one-liner let on.

The real killer, at least in the eyes of investors, was Diamond’s guidance of 58 cents to 62 cents a share for the next quarter. Hence the next-day sell-off worth 11 percent of the share price. But what these investors overlooked was that the company raised guidance for fiscal 2011.

They eventually caught on, though, and that’s why DMND has soared from its lows on Oct. 6, as investors rushed back in. As a further sign of confidence in the company, both the CEO and chief financial officer, and three other insiders, took advantage of the discounted stock price to buy over 365,000 shares.

Cramer thinks Diamonds brands—Emerald Nuts, Pop Secret, Kettle potato chips—are in good shape, and he’s once again bullish on the stock. But to get a thorough understanding of the company, so as to not panic the next time the Street does, he invited CEO Michael Mendes to the show. Watch the video to see the full interview

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