This Day On The Street
Continue to site right-arrow
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
TheStreet Open House

Cramer's 'Mad Money' Recap: Making Sense of Earnings Season

Look at the banks, for example, said Cramer. When the financial crisis began it didn't matter whether a bank was doing well or not. If it was a bank, its stock was headed lower regardless. Cramer said the key is figuring out which stocks in a sector, if any, can buck that trend.

When the retail sector began to come back into favor in 2009, Cramer said he immediately gravitated towards the discounters, the dollar stores in particular. Why? Because he knew that stocks like Dollar Tree (DLTR) and Dollar General (DG) already had earnings momentum, so when money began returning to the retail group the dollar stores would shine.

Sector is even more important when it comes to technology stocks. This is, in part, because technology makes up a whopping 15% of the S&P 500, but also because technology encompasses a host of sub-sectors -- everything from semiconductors to disk drive makers, software companies to cloud computing and infrastructure players. Cramer said each of these sub-sectors is unique, with its own set of growth rates and expectations.

When investing in tech stocks, Cramer said investors must pay very close attention to a company's sub-sector and how it relates to its peers. "There is no room for error," he explained, for when a company in this group misses earnings, its shares get pancaked immediately.

Gross Margins Matter

Another key to figuring out a company's earnings trajectory is its gross margins, or the difference between what it costs to make an item versus what it can sell it for.

Cramer said there are a lot of factors that go into a company's gross margins. In the case of a restaurant such as Chipotle Mexican Grill (CMG), the key metrics are its food costs, the price it pays for beef, chicken and guacamole, and its labor costs.

For other industries such as semiconductors, gross margins are often influenced by inventory levels. When demand is high, a company can produce as many chips as possible and sell every one at full price. But when demand slows and inventory builds, these same companies must discount their chips to keep them moving, thus lowering gross margins.

2 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr 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

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

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!
AAPL $125.48 1.80%
FB $82.99 -0.37%
GOOG $552.08 0.68%
TSLA $189.13 2.20%
YHOO $44.94 -0.35%


DOW 17,989.89 +277.23 1.57%
S&P 500 2,085.06 +24.04 1.17%
NASDAQ 4,939.4490 +48.23 0.99%

Partners Compare Online Brokers

Free Reports

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