This Day On The Street
Continue to site
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

Cramer's 'Mad Money' Recap: Protecting Your Profits

Cramer said there are two types of companies that fall into the single-digit territory, and knowing the difference makes all the difference.

The first type are broken companies, those little stocks that no one has ever heard of. Those are the stocks that will likely never amount to anything, noted Cramer, adding that no stock has ever fallen into the single digits because things are going well.

But the second type of low-priced stocks are those of good companies going through hard times, companies like Ford Motor (F) or Sprint Nextel (S) or Skyworks Solutions (SWKS). Cramer said when these companies fall on hard times and their shares fall below $10, money managers are no longer allowed to own them, which only sends prices plummeting further.

But when the fundamentals turn, these stocks can rocket back to the upside, making the speculator look like the smartest guy in the room! These are the speculative stocks for which every investor should be on the lookout, Cramer said.

Think Growth

Cramer said the next type of stock that must be part of every portfolio is a growth company. Strong secular growers can overcome even the weakest of economies because they want what Wall Street craves -- growth and tons of it.

Stocks like (AMZN), Chipotle Mexican Grill (CMG), Deckers Outdoor (DECK) and Express Scripts (ESRX) are all examples of stocks that seem to defy gravity.

Cramer said as a general rule he's willing to pay a multiple up to twice a company's growth rate. So for a company growing earnings by 20% a year, he's willing to pay up to a 40 multiple for the stock. He said growth stocks won't typically trade below one time their growth rate unless something is seriously wrong, which make the growth/multiple metric an easy one to gauge.

Once investors have a growth name in their portfolio, Cramer said to pay close attention to the direction of the earnings estimates and whether earnings are increasing or decreasing. While growth stocks will soar as earnings are on the rise, they will come crashing down at the first change in momentum or stumble. Just look at Apple (AAPL) or Google (GOOG) as recent examples of growth stocks gone awry.
2 of 3

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
Only $9.95
14-Days Free
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
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
GLD $121.96 -0.20%
FRT $157.44 0.41%
AAPL $93.15 -0.50%
FB $117.79 -0.23%
GOOG $701.67 0.86%


Chart of I:DJI
DOW 17,649.58 -1.68 -0.01%
S&P 500 2,049.63 -1.49 -0.07%
NASDAQ 4,719.8330 -5.8060 -0.12%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs