Jim Cramer's Mad Money In-Depth Stock Picks 5/26

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Friday May 26. Click on a stock ticker for more analysis:

*Note: This program is a rebroadcast of a Mad Money program that first aired on July 5, 2005. There was no Ligtning Round on May 26, 2006.

Investment Strategies: Beating the Market

Cramer recommends being ahead of the game and buying stocks that are yet-to-be touted, rather than buying hot stocks or employing a buy and hold strategy. "If you're only willing to buy and hold, then you're too lazy to be in this game," Cramer said. He prefers looking for potential winners in message boards, Investor's Business Daily, and the Nasdaq percentage gainer list to relying on the S&P 500 or the financial press. "Once you're in, if you're right, the soon-to-be-hot sector will start getting coverage. Brokers will promote this garbage and then it will soar."

Portfolio Tips

Cramer outlined his ten tips for creating a solid porfolio with proper diversification and effective use of discretionary funds. He cautions against using money that you need, including retirement funds. Cramer recommends:

No. 10: A stock that has a future. "Call it your nontech hope stock," he said.

No. 9: A regional retailer with good growth potential.

No. 8: A technology stock. Cramer suggests Intel (INTC) to start.

No. 7: A cyclical name: Dow Chemical (DOW), Deere (DE), Caterpillar (CAT), and Boeing (BA).

No. 6: A secular, soft-goods stock: a Procter & Gamble (PG), Kellogg (K) or a Johnson & Johnson (JNJ).

No. 5: A speculative stock. Cramer suggests doing some research to find a good one.

No. 4: A financial. "Own your local bank," suggest Cramer, who owns stock in Commerce Bancorp (CBH), a regional bank located near his home.

No. 3: A brand-name blue chip

No. 2: Oils. "A must-have. They're consistent performers," says Cramer,"and they have high yields."

No. 1: A company that you know. Local knowledge is invaluable.

Cyclical vs. Secular

Cramer gave a brief description of how different stocks perform in various cycles."Fifty-percent of how a stock moves depends on the performance of the sector it's in," Cramer noted. Cyclicals, such as airlines, autos, raw materials, and heavy equipment do well when the economy is strong, whereas secular stocks in consumer staples thrive even in an economic downturn.

Cramer suggests buying cyclical stocks when their price-to-earnings ratio are at their highest, because the rise in price reflects the analysts' desperation to lower earning estimates. This usually happens when they have hit bottom. "When these companies are at their most expensive at the bottom of the cycle, that's when you have to buy," he says.

Seeking Alpha publishes a summary of Jim Cramer's stock picks every day including: Mad Money Recap, Lightening Round, Stop Trading and his Radio Show.