Friday’s show was originally an episode of “Mad Money” that aired June 25, 2007.
Finding Stock Buying Opportunities
On Friday’s “Mad Money” TV show, Jim Cramer continued filling viewers in on the methods of his madness all the little tricks and tools he uses to pick stocks, to know when to buy and sell, and generally to be a great investor. He started off by giving people a “rainy day” tip for when the market is having a really bad, down day. “What you need to be looking for after a down day is buying opportunities,” Cramer said. “There is no better opportunity to buy than when you find a stock that’s been upgraded by some analyst on a down day.” Usually when a stock gets upgraded, it jumps higher immediately, he said. But not when that upgrade comes out on a bad day for the market. “On those days, a stock that gets upgraded isn’t going higher. In fact, there’s a good chance it will go lower depending on how awful the action is,” Cramer said. “And there is your opportunity the day after the selloff, when things have calmed down and are less negative,” he said. Another method to his madness, Cramer said, has to do with how he determines if an individual stock is truly undervalued. “People like to throw around terms like over- or undervalued,” but Cramer said he has his own rule of thumb for figuring it out. “If a stock has a price-to-earnings multiple — remember E (the earnings) times M (the multiple) equals P (the price) — that’s lower than its growth rate, then that stock is cheap,” Cramer said. “If a company has 10% growth but trades at eight times earnings, this rule says it’s cheap. If it has 10% growth and trades at 10 times earnings, it’s still dirt cheap. However, a stock with 10% growth and a 20 multiple is a stock that market players should take profits in, he said. Any stock with a multiple that’s more than twice its growth rate is too expensive. At the same time, Cramer warned viewers that like any of his methods, this one is a rough approximation. “It’s useful, but it’s not always right,” he said. “A lot of times a stock will get cheap, based on its earnings estimates, because those estimates need to be cut.” “Plenty of inexpensive-looking stocks are actually quite pricey if the fundamentals are declining, and the earnings are going to miss the estimates,” Cramer explained. “It’s the same at the top of the price range, but less dangerous: A stock that’s trading with a multiple that’s twice its growth rate looks expensive, but if its earnings need to be revised higher, its multiple will come down, and it has more room to run,” he said. While the market is “too dynamic” for there to be any hard and fast rules to define how the growth affects a stock’s price, there are some important points that come out of the connection, he continued. “The most important is that stocks with accelerating growth, be it sales growth or earnings growth, are worth more than stocks with decelerating growth.”
Sell A Stock On Slow Growth
Wall Street doesn’t like decelerating growth, and growth funds tend to lighten up their positions when they see growth decelerating. “When you see the growth start to slow, you should sell,” Cramer said. “Even if you think the stock goes higher after the decline brought about by the deceleration, you should still sell beforehand and buy back shares later to sidestep the pain,” he said. The next method Cramer talked about was buying with “wide scales” on the way down. This method, he explained, is what he used at his hedge fund to buy declining stocks that he thought were nearing their bottoms. Because it’s “nearly impossible” to call an actual bottom in an individual stock, “the smart move is to buy incrementally on the way down,” Cramer said. With wide scales, people buy larger and larger positions as the stock goes lower, and “when it’s so low you can hardly believe how poorly the stock is trading, you double down,” he said. But, he said, “be sure to leave yourself room, because when the stock bottoms, you’re going to want to pour your money in.” While it’s nearly impossible to call an actual bottom in a stock, there are signs that can help people know when the time is right to really “bulk up” a position, Cramer said.
When To Double Down On Stocks
First, most, if not all, of the analysts who follow the stock have to downgrade it to sell, even though it’s already been through a “sickening” decline. Also, when a company gets hit with bad news or a negative rumor and the stock doesn’t actually go down, it’s a great sign that the stock has bottomed and that it’s time to double down, he stated. Plus, significant insider buying after a huge decline is a “sure sign” that people should buy more. At the same time, Cramer warned viewers that these things are difficult to bet on and that they don’t always happen at the bottom. “That’s why my best advice is still that you shouldn’t try to call bottoms in individual stocks,” he said. “Instead just use wide scales as the stock falls, buying in larger and larger increments as the stock declines,” he said. Furthermore, Cramer urged viewers to look for broken stocks, not broken companies. “When we get hit with a decline of sufficient magnitude, almost everything gets knocked down, every stock gets punished,” he said. “But not every stock deserves the beating.” People tend to assume that when a stock gets knocked down, the company deserves it, but this is wrong. “Plenty of great companies are unfairly sold off by investors who simply don’t get it,” Cramer said. This is why investors must do their homework, he stressed. “It’s not hard to tell the difference between a damaged stock and damaged goods if you’ve listened to the conference calls and read all the findings.” Suppose “the market is getting hammered and Cramer’s nowhere to be seen,” he said. At this time, the “discipline” or method that will let people take advantage of all the stocks that the market’s breaking in spite of the fact that they belong to great companies is “the shopping list.” “While the selloff is happening, you put together a shopping list of stocks you like that are going down,” Cramer said. “These are the stocks you’ve done the homework on and know belong to strong companies.” Keep an eye on these stocks as they decline, he advised. But “don’t look for the biggest decliners and assume they’re the cheapest and that they should be bought,” Cramer said. “Most of those companies are damaged goods, and you don’t want to waste your time.” In addition, don’t put alleged “blue chip” names on the shopping list under the assumption that they couldn’t possibly be broken companies, he pleaded. “There’s no such thing as a blue chip,” Cramer said. Once people have done their homework on the stocks, differentiating between the broken stocks and the broken companies, and feel the bottom is close, “that’s when you start putting on your positions in your unbroken shopping list names,” he said. Finally, “always try to sell into strength,” Cramer said, but not all at once. “Sell part of your position now, but wait for some strength before you unload the rest,” he said. However, if the wait is too long and either there’s no strength or you have evidence the stock will only go lower, then you can sell. Get the scoop on tomorrow’s hottest trade ideas – TODAY! BeaconEquity.com PREMIER PICKS have an amazing track record. Join this select group and ride the profit wave!

This show originally aired on Aug. 4, 2008.
Jim Cramer told investors that it’s important to learn how to limit your losses when you’re investing. Cramer introduced 25 rules that will help market players avoid big losses and play it safe when investing in the stock market.
1. Stay Diversified. Cramer reminded viewers of the losses that investors took in Enron when they weren’t properly diversified.
2. Buy and sell slowly. Don’t buy or sell any position all at once. Look to enter positions slowly, using sell offs to add, and take profits in the way up.
3. Your first loss is your best loss. “If your thesis on a stock changes, take the loss and sell.
4. Dividends limit losses.
5. It’s always good to have some cash. Professional investors always allocate a percentage of their capital in cash.
6. Don’t own too many volatile stocks.
7. Know what you own so you don’t buy into a broken company.
8. Don’t own low-dollar stocks it can wipe out a portfolio.
9. Accounting irregularities equals sell.
10. Stay away for two quarters following an earnings shortfall. It takes at least six months for a company to turn itself around after a screw up.
11. When your broker stops talking about a stock, it’s time to sell.
12. After a big run, get defensive.
13. If a stock’s dividend yield is twice that of Treasuries, sell it. Dividends that high are a warning sign that the yield may be in trouble. There are two exceptions: oil tanker stocks, whose yield is based on their day rates, and master limited partnerships.
14. If a company has a new CEO, stay away.
15. Never turn a trade into an investment. If you bought a stock because of a specific catalyst, sell it when that catalyst doesn’t materialize.
16. Never sell call or put options.
17. Never use margin.
18. Never buy a stock at its all-time high. Wait for a 5% to 8% pullback before getting in from the all-time high.
19. Play with the house’s money. Take money off the table as stocks go up until you’ve recovered your initial investment.
20. Keep your head clear. When times are hard it’s okay to sell.
21. Contribute to retirement accounts throughout the year. Don’t invest in that 401k all at once. Spread your retirement investments out during the year and contribute more during the months when the market goes south.
22. Mutual funds should be diversified, too. If you have money in multiple funds, make sure they don’t all invest in the same kind of stocks or sectors.
23. Playing defense is crucial in volatile markets. Don’t wait for stocks that are down a lot to recover. Bad stocks usually go lower.
24. Invest in stocks with buyback programs.
25. Don’t stop looking at your monthly statement. Get the scoop on tomorrow’s hottest trade ideas – TODAY! BeaconEquity.com PREMIER PICKS have an amazing track record. Join this select group and ride the profit wave!

Word On The Street – Trading Opportunities
The crew talked about some trading opportunities for three-day rally. Adami said he likes the action in ConocoPhilips (COP). Najarian mentioned that he wants to play fundamentals. He said keep an eye on ExxonMobil (XOM), Chevron (CVX) and COP. Finerman said the market isn’t back to fundamentals yet. “There’s a reduction of fear, but don’t confuse that with fundamentals,” she said. Najarian also said there could be some great trading opportunities in Cisco Systmes (CSCO). However, he said if you’re long Freeport McMoRan (FCX), and Southern Copper (PCU) you should sell because the stocks have run a lot over the past few days.
HPQ Demand Woes
The gang talked about Hewlett-Packard (HPQ), which traded lower Tuesday on concerns about weak sales of printer ink and personal computers. Najarian told viewers if they’re looking for a tech play, look at Research In Motion (RIMM).
Robert Rubin
CNBC’s Charlie Gasparino, joined the gang to talk about Robert Rubin’s involvement in the fall of Citigroup. Gasparino said sources have told him that Rubin provided counseling and advice about taking on additional risk to Citigroup. However, he said his sources told him that Rubin provided parameters for that risk-taking and that he wasn’t involved in the management of operations.
Bear Market Rallies
The crew discussed some ways to play a bear market rally. Zack Karabell told viewers that the market is oversold even if you assume a global recession for the next 18 months. Adami said the market looks like it wants to go 1000 points higher, but he wished it had flushed out a few days ago. Finerman pointed out that we’ve already seen a 1000 point move in the Dow over the past few days. She says “the financial crisis remains serious.” Macke said short the S&P 500 with a stop around 860.
Cheap Berkshire
The traders spoke with Whitney Tilson, managing partner of T-2 Partners, about the recent controversy over the $5 billion that Warren Buffett has made in derivative bets on the equities market. Berkshire made the billions for writing put option contracts. Whitney said investor concerns over Berkshire’s positions are unwarranted. “If the market goes up 3 to 4 percent a year on average over the next 13 years Buffett doesn’t pay out a single dollar. And he got paid $4.8 billion,” he explained. Tilson told viewers that if they’re looking for a trade, Berkshire’s stock is the cheapest he has ever seen it.
POPS&DROPS
Pops- Google (GOOG) traded up 9% after Barclays said the recent drop in the stock is overdone. Macke said he’s skeptical. Fluor Corp (FLR) advanced 4% after the company announced it has acquired two European engineering companies. Finerman said she is bullish on engineering companies now that Obama has been elected President. UAL (UAUA) soared 24%.
Drops- Research In Motion (RIMM) fell 8% after a research firm said it expects cellphone sales to decline next year. Najarian pointed out that traders buy the stock at $40 and sell around $45. General Motors (GM) dropped 1% after Merrill Lynch and JPMorgan analysts both said the firm must cut debt and labor costs in order to survive.
Trader Radar
Shares of Dollar Tree (DLTR) were among the most active stocks on the NYSE Tuesday.
Final Trade
Macke said short the SPDR Trust (SPY) with a tight stop. Adami picked Home Depot (HD). Finerman recommended buying the SPDR S&P Retail (XRT) if Wednesday is a big down day. Najarian told viewers to go long the ProShares Ultra Financials (UYG) due to heavy options trading. Get the scoop on tomorrow’s hottest trade ideas – TODAY! BeaconEquity.com PREMIER PICKS have an amazing track record. Join this select group and ride the profit wave!

Jim Cramer said things are finally getting better on Monday’s “Mad Money” TV show. He pointed out that President-elect Barrack Obama is removing some uncertainty from the markets with his appointments of Tim Geitner as Treasury secretary and Lawrecne Summer as head of the White House Economic Council. He told viewers that Summers will likely have Obama’s ear. “Here’s a guy who knew the fundamentals weren’t sound and wasn’t afraid to say so,” he said. He mentioned that it would be bullish if Summers could get the Europeans and Chinese to cut their interest rates. Cramer said the rally on Monday was also due to the government’s bailout of Citigroup (C). He told viewers the news was good enough reason for him to recommended the bank as a buy. Cramer explained that Citigroup plan to keep the common stock alive, wouldn’t punish the preferred shares and doesn’t dump the troubled assets back into a troubled market which was the original plan of the TARP. “Finally, the taxpayer gets some realistic upside with warrants and preferred stock, the same type of deal that Warren Buffett got,” Cramer noted. He said the economy can’t wait until January to get a stimulus package done. He explained that ever day of delay costs the economy more jobs and more foreclosures. However, Cramer said that Obama’s job stimulus program is being well received by the markets. He pointed out that Obama is acting quick and pragmatic to fix the nation’s problems. Cramer said now things have become a lot less uncertain, and investors should be more optimistic. Join the fastest growing community of small cap investors at Stockhideout.com

Jim Cramer spoke with Eric Schmidt, chairman and CEO of Google (GOOG) to his “Mad Money” TV show Monday to talk about his company’s prospects and Obama’s recovery plan. Schmidt told Cramer that Obama’s economic team is a group of very smart people that is working towards developing a plan that can be put into place on Jan 20. He mentioned that he thinks Obama will introduce a stimulus plan in January that will put a lot of money into infrastructure projects like rebuilding bridges, roads schools and energy infrastructure. Moving to Google, Schmidt said he doesn’t know how the recession will impact Google’s earnings, but he still expects the Internet to grow and do very well. Chat and share ideas with the best small cap traders LIVE each day free at Stocknetworkonline.com