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"It's time to unlearn a common myth about investing," Jim Cramer told viewers of his "Mad Money" TV show Monday. "The best way to invest is not to buy a bunch of stocks and just sit on them."
Cramer said the arguments that frequent trading result in high commissions are just false. "Commissions have been dirt cheap for years," he explained. He also said that paying taxes on gains is a good thing, much better than posting a loss. Instead of buy and hold, he said investors should buy and do the homework.
Cramer told viewers that they should spend at least an hour a week on a stock checking on the fundamentals of a company's underlying business. When it's time to sell, then sell and move on. "Sooner or later you always have to sell," said Cramer.
Cramer took aim at a story on page B1 of the
Wall Street Journal
last Saturday that criticized "TV pundits who shriek out trading advice." The article, which he felt took aim at him, advocated a strategy by famed investor Warren Buffett, which said to buy more anytime a stock declines 50% or more. Cramer called that strategy wrong.
If you had adopted that strategy and bought stocks such as
, as well as the former Enron, you would have seen them plunging beyond 50%, many towards zero.
Cramer: What a Fannie/Freddie Recovery Means to You
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He recommended mutual funds as great investment vehicles for those who don't have the time to do the homework and manage their portfolios.
"Perhaps the greatest thing I've ever done in my financial life was to scream "they know nothing" at the Federal Reserve last year," said Cramer. "If I hadn't yelled, no one would've heard me."
He urged investors to remain involved in their portfolios. "The results are completely worth the effort," he said.
The Real Danger
Cramer reminded viewers of another rule in book
Control your losses and the winners will take care of themselves, he said. He then instituted a new rule for the financial stocks: If a bank stock falls below $5 a share, it's time to sell.
Cramer made a clear distinction between the customers and depositors of the failed and nearly failed banks and the shareholders of these entities. He said he does not feel customers need to withdraw their money. "Your deposits are safe," he emphasized, calling that the silver-lining of the financial story.
However he went on to say that while deposits are fine, the stocks of the banks are not. And that's the real "danger," he said.
Cramer said he doesn't believe anything remotely positive has happened yet for the banking industry. The many plans, frameworks and blueprints that have been espoused don't change a thing.
He said he's most worried about
( FED) and
He is also deeply concerned with
Cramer was also bearish on
Bank of America
, and even brokers such as
( LEH) and
Back in Style
Cramer proclaimed his "year of natural gas is back!" With the successful secondary offering of shares by
last week, Cramer said it's finally safe to invest in natural gas stocks.
Cramer has featured wildcat drillers, oil shale companies and clean drilling stocks in past shows. On Monday, he said the next opportunity is the pipeline companies.
While he still believes in
, Cramer feels that
is another great company to own.
Cramer said his thesis is simple: the more gas there is, the more demand for gas infrastructure there will be.
Williams, he said, is expanding from the New York City area further in the mid-Atlantic region, where there are millions of potential customers. The company is also building pipelines to transport more gas from the Rocky Mountains.
Cramer also finds Williams' drilling operations attractive. With over 22 trillion cubic feet of proven gas reserves, the company is drilling as much as it can while remaining a low-cost producer. Williams also has 50% of its 2008 production un-hedged, allowing it to realize huge gains as the price of gas continues to rise.
Williams is a company that can make money now, he said.
A Stock Worth Considering
In his quest to find stocks not levered to mortgages or the rising price of oil, Cramer talked with Catherine Burzik, President and CEO of
( KCI), for an update on her business.
Burzik said Kinetic Concepts is a lot more than just wound care products. With the recent acquisition of LifeCell Corporation, Kinetic Concepts now has products to treat complex hernias as well as breast reconstructive surgery after mastectomies. She also touted the company's hospital beds as the best in the industry for aiding in the treatment of ulcers and other conditions.
Burzik said she feels the company's stock is grossly undervalued, but hopes investors begin to see the synergies realized from the merger. Cramer said he likes the healthcare group, but wants to see one more quarter of results before recommending the stock.
Cramer was bullish on
Laboratory Corp. of America Holding
He was bearish on
Encore Wire Corp
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At the time of publication, Cramer was not long on any stock.
Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."
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