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
EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stock Under $10 that he thinks could potentially double or triple in the next 6 to 12-months. See what he's trading today with a 14-day FREE pass.

Beyond Earnings; Greatest Loves: Jim Cramer's Best Blogs

 

NEW YORK (TheStreet) -- Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:

  • knowing your metric
  • the market's love for certain stocks

Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.


It's Not Always About Earnings 

Posted at 11:42 a.m. EDT on Friday, Dec. 13

Know your metric! Last night, Adobe Systems  (ADBE) reported a quarter that looked like it was from Hades, and sellers dashed out of it, on the basis of what looked to be a serious shortfall. I know I was crestfallen when it came out, because we own it for the Action Alerts PLUS charitable trust, and I didn't want the trust to get hit this close to year-end. I don't throw things anymore, but it was upsetting, as it always is when one of your stocks is trading down in afterhours. You feel helpless and befuddled, knowing that the night and the next day's trading are going to be hideous.

Wait a second, said Stephanie Link, my co-portfolio manager, you know we have been telling people that this stock trades off the cloud orders, the new lucrative subscription suite offering that has ignited sales and will be a big part of the earnings stream in the future.

I said to her that everyone knew that and they don't seem to care, as they are selling it down anyway. She challenged me and said they are selling it down precisely because they don't know that the earnings per share are not what controls. Plus, when a stock heads down, it is a self-fulfilling prophecy, as the media then jump all over it, accentuating the horrendous shortfall and the big, big miss that has made it the disaster du jour.

[Read: Adobe Systems Reaches New Lifetime High]

Sure enough, what we were looking for, the subscription orders, were far better than what we thought. Initially, as you watched the stock tick up, you could see that those who were selling it on earnings were confused. The climb made no sense to them either, because they were using a service that told you what the earnings-per-share consensus was, and it didn't hit the consensus, so therefore that meant sell. Or they weren't on the conference call at all, or else they would know that the key metric is so much better.

Next thing you know, the stock is up 2 and a half from the bottom as management outlined the cloud business, and then it jumps another dollar when they get downright giddy about the company's success in transitioning to cloud-based orders.

By that point you know that the shorts are so baffled that they simply have to cover, and that has led to the huge run higher that you can see on your screen.

Now, I have been a huge proselytizer for waiting to hear what a company has to say on a call before taking action. Sure, there are cases where things are bad, and when the company fleshes it out on the conference call, the stock gets hammered once again. That's exactly what happened to Cisco Systems  (CSCO). But waiting to hear the real story has, on balance, been much better than worse in the years of the conference call's ascendance.

Even more important, though, is the recognition that not every stock is an earnings-per-share-driven stock. In my soon-to-be for sale book, Get Rich Carefully, I give page after page of key metrics that are the real drivers of what must be beaten to send a stock higher. We know now that the sellers of Adobe didn't see the truck coming that ran them over because they simply believed that investing is as simple as finding out what the EPS consensus is, seeing if a company failed to beat it, and then shorting it to Kingdom Come. I wish it were that easy.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
DOW 17,039.48 -40.09 -0.23%
S&P 500 1,995.65 -1.09 -0.05%
NASDAQ 4,556.5810 -1.1140 -0.02%

Our Tweets

Brokerage Partners

Top Rated Stocks Top Rated Funds Top Rated ETFs