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Cramer's 'Mad Money' Recap: Gaming the Russell Rebalancing

05/31/07 - 07:51 PM EDT

TheStreet.com Staff

Click here for an archive of Cramer's "Mad Money" recaps.


The Russell 2000 index is the key to this year's trades, he told viewers of his "Mad Money" TV show Thursday.

When a company gets added to the index, the biggest advantage is that the stock gets a lot more attention and promotion, Cramer said.

Every year, the Russell indexes (not indices), he explained, need to be rebalanced because of certain stipulations the indexes have. The annual rebalancing of the Russell 2000 index, which is made up of 2000 small-cap stocks, will take place in June this year.

To be eligible for the Russell, which makes up its own rules, a stock must have a market capitalization of $233 million to $3 billion, trade on a major exchange and trade at more than $1, among other conditions, Cramer said.

On June 22, the Russell 2000 will be reconstituted, and all companies that don't meet the criteria will be "purged and replaced," Cramer said. "The additions and deletions are based on stock prices as of today's close."

Cramer said he's here to try to predict which stocks will join the index and thus rally. The Russell rebalance, he said, is a "great" trade. It is one of the few events in the year that causes certain stocks to go up.

A great example of the effects of this process, he said, is what happened with Jones Soda (JSDA - Cramer's Take - Stockpickr).

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At the time of publication, Cramer was long Sears Holdings and Halliburton.

Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."

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