Jim Cramer's Mad Money In-Depth Stock Picks 08/04

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Friday August 4. Click on a stock ticker for more analysis:

The following is a re-broadcast of a "Mad Money" program that originally aired on July 5, 2005. There is no lightning round.

Selling Sense: Johnson & Johnson (JNJ), Nortel (NT), Time Warner (TWX)

The secret to succeeding in the market, accroding to Cramer, is to predict the next big trend, and to do research using the Investor's Business Daily and the Nasdaq percentage-gainer list, instead of the S&P 500 and much of the financial press, which tends to report "old news." Knowing when to sell is more essential than knowing when to buy, advised Cramer, who gives some tips on figuring out when a stock is topping out. First, competition causes 70% of all stock "tops," and Cramer gave the example of U.S. Surgical, which dominated the medical sector in the 90s, and fell from 120 to 30 when Johnson & Johnson introduced similar products. If a company has accounting problems, Cramer suggests getting out immediately, and he recalls the consequences of not having dropped Nortel quickly enough. If a company talks about "integration problems" this is a red flag, as it was with the old Time Warner.

Ten Portfolio-Building Tips: Intel (INTC), Dow Chemical (DOW), Deere (DE), Caterpillar (CAT), Boeing (BA), Procter & Gamble (PG) Kellogg (K), Johnson & Johnson (JNJ), Commerce Bancorp (CBH)

10. Buy a stock for the future.
9. Choose a retailer; try a regional company with plenty of room to grow.
8. Own at least one tech, like INTC
7. Have a cyclical stock like Dow, Deere, Catepillar or Boeing
6. Own a secular stock like PG, K, or JNJ
5. Get speculative play, but do your homework first.
4. Include a financial, especially your local bank; Cramer has CBH as part of his portfolio.
3. Get a brand-name blue chip
2. Pick one of the oils, which perform consistently and give high yields.
1. Go with a stock you know. Perhaps you have some information that others do not.

Cramer's other tips include not investing with retirement or borrowed money, and paying attention to your stock's sector ("Fifty-percent of how a stock moves depends on the performance of the sector it's in."). He outlined the difference between cyclicals (airlines, cars, raw materials, large equipment) which perform well in a strong economy, and seculars, such as consumer staples, which thrive even in slow times. Cramer described a counterintuitive strategy of buying cyclicals when their price-to-earnings ratios are at a high point, because this is a good indication that the stocks will not fall further; "When these companies are at their most expensive at the bottom of the cycle, that's when you have to buy."

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.

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