This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Cramer's 'Mad Money' Recap: Beware 'Treacherous' Contrarians

Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.


NEW YORK ( TheStreet) -- Don't pay attention to which sectors are "under-owned," pay attention to companies that are improving. That was Jim Cramer's thoughts to "Mad Money" viewers Wednesday as he sounded off against the notion of contrarian investing.

Cramer explained when a sector has been going down for a while, the contrarians -- those betting against the prevailing market wisdom -- will come in and say that sector is a buy. Their thinking is that big money managers will own less, or be under-weighted, in that sector as a percentage, compared to that sector's weighting in the Standard & Poor's 500 index.

But Cramer called contrarian investing "treacherous," noting that sometimes even out-of-favor sectors can still fall lower. Contrarian investing to too risky, he said. Case in point: the banks and the industrials, two sectors that have been "under-weighted" by money managers ever since Europe took its latest turn for the worse.

The contrarian view totally backfired for the industrials, said Cramer, as executives announced things were looking weaker than expected in Europe, sending shares even lower than they were. The banks, on the other hand, have been gaining strength, thanks in part to stronger than expected real estate loans. Two contrarian theses, two very different outcomes.

Cramer said that he doesn't think contrarian thinking matters much in today's markets. He said that the smart money seeks out and invests in companies that are improving and those that offer protection from Europe and the other ailing sectors in the economy.

Executive Decision

In the "Executive Decision" segment, Cramer spoke with Dinesh Paliwal, chairman, president and CEO of Harman International (HAR), the auto infotainment company whose shares fell 4% Tuesday on the news that nine automakers would integrate Siri, Apple's (AAPL) popular voice assistance, into their cars.

Paliwal said the Apple news is actually good news for both Harman and the entire auto industry as it helps promote the value of integrated electronics systems, something only two out of every 10 cars currently have installed. He said Harman has been a big advocate of hands-free systems such as what Apple has proposed with Siri. Harman sees Apple as a collaborator, not as an adversary, said Paliwal.

1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,079.40 +49.19 0.27%
S&P 500 2,090.27 +8.39 0.40%
NASDAQ 4,803.6890 +30.2170 0.63%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs