Investors Pass Up the Picked-Over

Thank heavens managers aren't indexed to the S&P SmallCap 600. I can't find a manager who beat that index, save some guy from Calamos. Even the Janus Twenty tied but didn't beat the darned thing, and that guy's on fire.

You gotta hand it to an index that is up 9.6% since the year began. That's mindless indexing at its best! When you look at its components, you know that this is a collection of total cats and dogs and nothing else.

Fortunately, Investor's Business Daily identifies the winners in the index. Unfortunately, there's no DNA to it:

NVR (Amex - commentary - Cramer's Take), a homebuilder
Urban Outfitters (URBN - commentary - Cramer's Take), a good retailer
Timken (TKR - commentary - Cramer's Take), a decent ball-bearing company
Medicis Pharma (MRX - commentary - Cramer's Take), a offbeat drug company
Idexx Labs (IDXX - commentary - Cramer's Take), diagnostic type of thing
Massey Energy (MEE - commentary - Cramer's Take), that's coal
Patina Oil & Gas (POG - commentary - Cramer's Take), enough said
Roper Industries (ROP - commentary - Cramer's Take), a fluid handling and control company
MDC Holdings (MDC - commentary - Cramer's Take), another homebuilder.

I say there's no DNA to this list because if you bought the best homebuilders or the biggest medical device and oil and gas companies, you wouldn't have done nearly as well. In fact, the thing that these companies have in common is their size, which isn't much of a limiting principle.

But it is something. What it says is that people want under-recognized companies that will get recognized. They don't want already-recognized companies that have been picked over. They want companies that nobody knows about and that are undercovered, and they are shunning all the covered companies -- save the BERQYs.

Random musings: What's another conclusion you can draw from this? That you have to look in places others aren't willing or able to look for returns, like Stocks Under $10. That's where the action is. That's what's working, except BERQY.

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James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS by clicking here. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to [e-mail]. Listen to Cramer's RealMoney Radio show on your computer; just click here. Click here to buy Cramer's latest book, "You Got Screwed!" Click here to order Cramer's autobiography, "Confessions of a Street Addict."