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

Jim Cramer: A Momentum Monsters Manifesto

My philosophy, which is a little complex, endorses finding some of the momentum monsters of the market and making peace with them as a hedge against the performance and asset collection of these momentum-oriented managers. I have always thought, as someone who has been paid based on performance, that I had to hedge myself both against the downside of the stock market as well as the upside. That upside hedging often meant having some exposure to stocks that are momentum-driven, even if they are overvalued and riskier than I would like.

So what I have always attempted to do is to divine which stocks fit the patterns these money managers like, and then to exploit the process. It's the process by which these managers derive assets from their own generated performance, and then get more money in and put that money to work in these same stocks over and over again. As I explain in Get Rich Carefully, these managers are not sensitive to short-term valuations. They are sensitive to the big score, the out-years, when they hope these companies and their CEOs will successfully execute on their game plans.

I have always thought you need to hedge against that process, lest you fall behind these managers. These people have a virtuous circle going for them: They own high-growth stocks that go higher, which then bring in more money, and then they can send these same stocks even higher with their own buying. When you couple their buying with the possibility of a short squeeze that comes from hedge fund managers who bet against these companies -- and if they don't stumble -- well, let's just say you have some pretty powerful performers.

This is why, last week, I set out to identify which stocks really fit the Momentum Monsters pattern -- the stocks these momentum investors are using now as vehicles of performance. (See here, here and here.)

Must Read: Jim Cramer: Waiting This One Out

Now, notice I am never saying, not once, that this is my style of investing. I am simply saying that, just as you have to hedge against the downside with short positions or some cash, you have to hedge against the upside. You do this by picking a couple of these names, getting comfortable with them when they go down and then picking them up, in stages, into weakness that is not generated by issues in the companies themselves. So if the federal government shuts down, or if partisan politics causes debt-ceiling gridlock, or if Argentina or Turkey or Brazil or other emerging-market woes infect all stocks, you are ready to buy the momentum names that you can handle.

I am not endorsing the out-and-out chasing of the Momentum Monsters: Amazon (AMZN), Chipotle (CMG), Facebook (FB), Google (GOOG), Michael Kors (KORS), Netflix (NFLX), Priceline (PCLN), Regeneron (REGN), SolarCity (SCTY), Stratasys (SSYS), Tesla (TSLA), Twitter (TWTR), Under Armour (UA), Workday (WDAY) and Yelp (YELP). I am saying that you must find a couple of these that you like. Then, as they go down from a market-wide selloff, and not from some particular company-specific execution failure, you have to be ready to leg into them because of the way the business of money management works. You have to hedge, if you will, against these managers themselves.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

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
  • 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 serious 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

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
Real Money
Try it NOW

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


Chart of I:DJI
DOW 17,812.19 +19.51 0.11%
S&P 500 2,089.14 +2.55 0.12%
NASDAQ 5,102.8080 +0.33 0.01%

Our Tweets

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs