Cramer on Tuesday noted there are striking similarities between the stock market and talent competitions, like NBC's "The Voice," FOX's "American Idol" or "The X Factor."
In these singing competitions, there might be several strong, equally talented individuals on-stage, but for whatever reason that one singer has that special talent to propel his or herself to the top. That singer has the "x factor" — a certain characteristic that draws viewers to that particular entertainer. Winning stocks can have the "x factor," too.
"There's something that can't be quantified that makes us want to pick this or that stock no matter what and keep paying up for it," Cramer said, adding that some of the selection process has to do with beating earnings estimates. "Good numbers ensure that a stock will be able to be voted on, it puts it in the inner buy circle, so to speak, but then the "x factor" takes over and powers some stocks dramatically higher than you and I would expect."
The "x factor" is at work in the stock market every day, Cramer said. Nothing happened with Amazon.com , but its stock rallied 1.6 percent to an all-time high of $203.94 on Tuesday. Cramer thinks its rally is due to the "x factor" — a "special coolness" that continues to draw investors to the stock weeks after it reported accelerating revenue growth.
If the "x factor" is ethereal, how do you measure the immeasurable. It is possible, Cramer said. Home gamers can get a handle on the "x factor" not through Wall Street research, but by channel surfing. Many of the winning stocks Cramer's got behind used this methodology.
Cramer recommended Deckers after Oprah endorsed UGGs years ago. He picked Domino's when its website allowed customers to craft their own pizzas. The stock has since soared. Of course, Cramer didn't recommend these stocks on their "x factor" alone. But in each case, the "x factor" was what first caught his attention and lead him to do his homework on the stock.
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