Cramer's Mad Money - When the Facts Change...(6/25/09)

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday June 25.

When the Facts Change...

When critics berate Cramer for changing his mind, his frequent response is from the wisdom of John Maynard Keynes, "When the facts change, I change my mind. What do you do, sir?" Cramer gave the example of his calling a bottom in March when the Dow hit 6,500, and he reasoned that unless most of the Dow stocks went to zero, the index couldn't go much lower. Although he was widely criticized by those who were holding onto their bearish theses, the Dow has risen an additional 1,500 points since then. This demonstrates the rule that Investors need to be flexible and get rid of a thesis that isn't working.

The Price is Right: Bank of America (BAC), Sprint (S), Advanced MicroDevices (AMD)

At the right price, even an unattractive stock can be a buy, said Cramer, who cited the example of Bank of America and Sprint, which were both priced for bankruptcy. Those who bought these stocks precisely because they were so low have made a big profit. Cramer also told viewers to be on the lookout for secondary offerings, many of which are at a 10% discount to the actual stock price. Cramer said he is glad he changed his mind about Advanced MicroDevices, not because of improving fundamentals, but because of its falling stock price. The stock has doubled since Cramer recommended buying it just because it had gotten too cheap.

Be a Skeptic

Cramer urged viewers not to take what a particular company says at face value. He is skeptical about a company that tends to blame its problems on the general economic climate, even though things are tough. For every company that blames the economy for its poor performance, there is usually a competitor who is thriving in a challenging environment.

Upside Downsides and Apple

Upside surprises usually move stocks, but not all upsides created equal. Genuine upsides are created by companies like Apple (AAPL), which in spite of the recession, has constantly delivered new products and has increased sales. Upside surprises to beware of are those created by management through share buybacks, cost cuts, changing tax rates and other forms of number crunching. Upsides created by management are likely to fall right back down again if fundamentals don't support the move. Increased sales should be the main driving force for upside surprises.

Manipulation Works Both Ways

While many have criticized Cramer for his optimistic take on the markets, being negative does not necessarily equal credibility. While the pump and dump strategy is infamous (influential investors talking up a stock and then selling it into strength), hedge fund managers who are shorting stocks can do the same trick on the negative side, so there is no reason to have more faith in prophets of doom than in those who look on the bright side. Even if a hedge fund manager holds no shorts, he could still have a vested interest in talking down the markets if he feels he is underinvested and wants an entry point.

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

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

Get Cramer's Picks by email-- it's free and takes only a few seconds to sign up.

Seeking Alpha is not affiliated with Jim Cramer, CNBC or TheStreet.com

Comments

[WACG:]

Cramer permits his friends to "front run" price movements in many stocks he pumps or pans on his show.The disclosure that he "might" preannounce stocks discussed on his show scrolls by so fast that it is very hard to read the fine print. Cramer is a self-promting clown. Only market neophytes pay any attention to Cramer.

Jun 26 08:43 AM

[Michael Del...:]

And there is nothing wrong with being a neophyte. Cramer's books taught me what a PE ratio was, why growth is so important, how to buy a stock, etc. I am not a neophyte any longer, but I still pay attention to Cramer.

I do not buy stocks because Cramer likes them. Only a fool would buy something because somebody on television said to buy it. But only a fool would close his mind to new ideas and new ideas are what I take away from Mad Money. (and from Motley Fools, IBD, and Seeking Alpha).

If you do not like his personality, don't watch. But don't call me stupid because I do. And do you seriously think that Cramer has enough influence to move the price of RIG, BMY or AAPL? Really??

Jun 26 08:53 AM

[LSSJR:]

Translation, when Cramer gets it wrong, it was not his fault, the facts changed. Try that one with a client.

Jun 26 12:27 PM

[Happy4LA:]

Anyone watch Jon Stewart embarrass Jim Cramer on his show? Cramer is a con man. I could use many examples, but for one look at his touting of Sirius stock. He lost a lot of individual investors money if they listened to him. He kept touting the stock. And for what reason? It was below $5 and even with a large market cap should have been avoided by most neophyte individual investors even though they are drawn to these "cheap" stocks under $5. His portfolio was down over 40% in 2008. Listen to Jim Cramer and lose money. This from a former, but long time RealMoney subscriber from 1999-2009.

Jun 26 07:42 PM

[FloridaBoy2:]

I just subscribed to Real Money 'cause it was $129 after a free trial. I kept it but most likely will not renew at a higher rate. Vince Farrell's and Helen Meisler's comments on the overall market are worth $10 a month.

Cramer has had some good picks but you still have to do your own DD for any investment. No one has the market cornered on ideas.

It appears his demeanor has changed a bit after the Jon Stewart interview.

Nothing polarizes like a discussion about Cramer. :-)

Jun 27 09:38 AM