Cramer's 'Mad Money' Recap: Piggybackers Go to Market

Therefore, when piggybacking, people must wait for a financier such as Icahn to take a position, try to understand the methodology and thesis behind buying such a stock and then wait patiently for the "hoopla" surrounding the stock to die down before getting in, he said.

Multiple Subjectivities

Sometimes the most difficult thing about the stock market is that it's subjective, Cramer told viewers.

Case in point: After having one of the single best years Cramer's ever seen, Genentech (DNA Quote) is lower today that it was 14 months ago.

Because the stock was expecting 30% growth but actually reported 70% growth, he regards Genentech's current stock price as illustrating the height of the market's subjectivity and irrationality.

Earnings and what people are willing to pay for the earnings -- also known as the stock's multiple -- are the two things that make stocks go up and down, Cramer explained.

Because Genentech reported earnings that were way better than expected, he said the problem with the stock must be its multiple, or what the Street was willing to pay for its earnings.

Genentech came down with a case of multiple contraction, Cramer said, which is why it's cheaper today. However, he believes this is all about to change.

There are three things that decide a company's multiple: earnings risk, inflation risk and political risk, Cramer said. Because earnings are clearly not a problem at Genentech, he discounted the first risk and moved on to the latter two.