Investors who buy or sell stocks based on headlines about earnings alone are "begging to lose money," Cramer said Wednesday.
The "Mad Money" host thinks home gamers need to do more research. To illustrate his point, he highlighted two cautionary tales: what happened with Panera Bread and Amazon.com after the close Tuesday. Panera reported a modest upside surprise and small boost in their forecast, and the stock went up about $1.50. But Cramer said anyone who bought on the news did not do their homework. It turns out the national bakery-café will have some cost issues, and by Wednesday’s close, the stock was down.
Amazon, on the other hand, reported Tuesday that net income fell 33 percent in the latest quarter and the stock dropped about 4 points. What the traders missed, Cramer said, was the fact that the online retailer thought it was necessary to “spend money in order to make money” and invested back in their business. By Wednesday’s close, the stock was back up.
Cramer said the lesson here is that investors should avoid trading stocks solely based on headlines, as he thinks investing requires research.
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