Jim Cramer's Mad Money In-Depth Stock Picks, Aug. 31

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Thursday August 31. Click on a stock ticker for more analysis:

Thursday's program was a re-broadcast of an episode that orginally aired on Aug. 10, 2005.

Cramer's Guide to Speculation

Cramer dedicated this program to discussing speculation, and urged listeners to "speculate like you mean it." When asked about penny stocks, which have no earnings or which issue trading on Pink Sheets, a system that deals with small companies, Cramer suggested avoiding them as well as stocks that are traded on an over-the-counter Bulletin Board. He gives the "sweet spot" range of $2 to $10 for speculative stocks, and, concerning stocks above $10, he suggests using options to speculate. Anything under $2, Cramer comments, is a sign of a poorly run company. Money lost on speculation should be made up on good speculations, and Cramer cautioned never to use essential funds, particularly retirement money, for speculative plays. When a caller asked about foreign-exchange speculations, Cramer replied, "Have you ever seen a sheep before and after? Before and after they fleece it? That's what happens when you speculate in currencies." Speculative stocks require constant caution, since they tend to move in quick cycles, and they should be picked up while they are still relatively unknown. A good speculation option has solid fundamentals, a clear balance sheet and a small float, which is important because it indicates that the stock could move dramatically if one large investor starts buying. When it comes to getting out of a stock, Cramer says to pay attention to volume, and if it is spiking, to sell immediately. The most common mistakes unsuccessful speculators make are: getting rid of a stock too soon, staying with a company that continues to decline, believing media hype, not buying the best-of-breed stock, and counting on takeovers.

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