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The Method Behind the Trades

Cramer shares the thought process behind his trading actions and shows how you can profit from fundamental research.
Author:

I have enjoyed more than two decades of success on Wall Street, primarily by finding and taking advantage of undiscovered stock opportunities. I want to show you the thought process behind my trading actions and how you can profit from fundamental research.

I have invested my own money in the

Action Alerts PLUS

portfolio so I have a personal stake in how it performs. Additionally, in March 2005, I irrevocably conveyed the portfolio to a Trust with all realized profits going to charity. I have retained full investment discretion over all securities contained in the Trust.

Going into this, I knew that every investment would not be a winner. In my best year as a professional hedge fund manager, I realized $400 million in trading losses, compared with $550 million in profits. However, if you use the information I provide, I am confident that over the long-and sometimes short-term, you will come out ahead of the game. To achieve the greatest success with

Action Alerts PLUS

, you should

invest with these factors in mind

:

Performance

Subscribe to Action Alerts PLUS with the intention of evaluating the portfolio performance with enough time to see my ideas work. I typically purchase positions with a six- to 12- month time horizon.

I tend to seek out what I believe to be the best companies that consistently pay dividends, because historically they have outperformed the overall market.

I will provide you with insight and guidance right before I purchase or sell positions to give you a head's up.

Because of certain trading restrictions I sometimes cannot make trades I think are important.

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However, I am not restricted from telling you what I would do if I could. This way, if you follow my lead, your performance should beat my stated portfolio in the Action Alerts PLUS site over the long term.

Trading

I will guide you to build or extend a core portfolio with a relatively low turnover rate.

The way I trade around core holdings as market opportunities arise contradicts the "buy and hold" mantra that was a product of the last bull market. I believe it's necessary for folks who own individual stocks to be willing to take profits on favorite winners and not to be afraid to sell a losing position when they think there's little chance to recover.

Sometimes I like to better my cost basis by buying lower when the fundamental story remains intact.

Don't feel like if you don't act immediately after receiving my Alert you have missed the opportunity. As I mentioned above, most of my picks are long-term in nature and less time-sensitive, so you can act when your time permits.

I am restricted from buying or selling any security I mention on CNBC or my radio program for at least five trading days following the broadcast and I must hold all securities in my portfolio for at least one month.

James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS by

clicking here. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to

jjcletters@thestreet.com. Listen to Cramer's RealMoney Radio show on your computer; just click

here. Watch Cramer on "Mad Money" at 6 p.m. ET weeknights on CNBC. Click

here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click

here to get his second book, "You Got Screwed!" and click

here to order Cramer's autobiography, "Confessions of a Street Addict."