Buy Best-of-Breed Companies

Editor's note: As a special bonus to TheStreet.com readers, we will be running an updated version of Jim Cramer's "Twenty-Five Rules of Investing," from his latest book, Real Money: Sane Investing in an Insane World.. Here's Rule 8.

In cars, we buy best of breed. Not even an issue. We pay up for the brand because we know that a brand, a good brand, signifies reliability. It signifies a higher level of service, a quality of ownership that can pay dividends for years.

Why don't so many of us feel that way in the stock market? Why are so many drawn to a Safeway(SWY Quote) or a Kroger(KR Quote), inferior supermarket chains, when Whole Foods Market(WFMI Quote) is clearly the best of breed?

Why did so many people lose money in so many different audio component stores, when Best Buy(BBY Quote) is the only company that delivers sustainable profits in that retail sector?

Why would people want to own General Motors(GM Quote) or Ford(F Quote), just because those stocks are down a lot, when they could own best-of-breed Toyota(TM Quote), which is taking share and making big profits? I know they are drawn by the low dollar amount of the American carmakers, but Toyota is the cheapest and the best, a rare find.

The list goes on and on. Way too many of you are unwilling to pay up for best of breed because you think that you are getting short-changed. There are very few bargains out there in the world of secondary and tertiary players. I believe that when it comes to price-to-earnings multiple, investing in the more expensive stock is invariably worth it because you get piece of mind.

That's why I say:

Own the best of breed; it's worth it.

Take Walgreen(WAG Quote) and Rite Aid(RAD Quote). Sure, Rite Aid seems perpetually in turnaround mode and you have to love the cheaper stock. Don't you? Not me; I have to tell you that I think Walgreen is the bargain of those two, because I never mind paying a higher price for the better company.

Forget about it. Buy best of breed. Pay up. You almost never will find yourself regretting it.

	1.	Pigs Get Slaughtered		2.	It's OK to Pay the Taxes
	3.	Don't Buy All at Once		4.	Buy Damaged Stocks
	5.	Diversify to Control Risk		6.	Do Your Homework
	7.	Don't Panic		8.	Buy Best-of-Breed
	9.	Defend Some Stocks		10.	Don't Bet on Bad Stocks
	11.	Own Fewer Names		12.	Cash Is for Winners
	13.	No Regrets		14.	Expect Corrections
	15.	Know Bonds		16.	Don't Subsidize Losers
	17.	No Room for Hope		18.	Be Flexible
	19.	Quit When Execs Do		20.	Patience Is a Virtue
	21.	Be a TV Critic		22.	When to Wait 30 Days
	23.	Beware the Hype		24.	Explain Your Picks
	25.	Find the Bull Market