Cramer's Mailbag: Study Stocks Abroad

Editor's note: Jim Cramer answers questions below.

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Given that Caterpillar (CAT Quote) generates about 50% of its revenue overseas, is that a good substitute for having 20% of your holdings in foreign stocks?

-- Dave D.

Jim Cramer: You're correct that this is definitely a step in the right direction. Still, with active trading in many foreign stocks through American depositary shares, I'd prefer to see investors own at least one foreign-based company in the portfolio. Two such stocks I own for my charitable trust are Toyota Motor (TM Quote) and Diageo (DEO Quote).

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Which energy stock do you like better, Marathon Oil (MRO Quote) or Devon Energy (DVN Quote)?

-- Stephen G.

Jim Cramer: First of all, these companies serve two different niches of the energy market, so be careful when you compare them head-to-head. Marathon is a major integrated energy company, which means it both produces oil and natural gas from the ground and refines it into other products such as gasoline. On the other hand, Devon is a pure-play exploration company with a lot of exposure to unhedged natural gas. With that in mind, both stocks appear attractive, if energy commodity prices truly have bottomed out for the time being.

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What's your formula for figuring out a reasonable P/E ratio for high-growth stocks such as Google (GOOG Quote) or New York Stock Exchange (NYX Quote)?

-- Shelley L.

Jim Cramer: At the simplest level, I believe that stocks like these deserve to trade at two times their growth rate. That said, you must keep in mind that this area of the market is very fluid and that the underlying earnings expectations can change in a heartbeat.

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