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NEW YORK (
) -- Wednesday's Independence Day holiday won't bring the American stock markets any independence from Europe next week, Jim Cramer told
He said his Game Plan continues to be dominated by European news. He cautioned investors to lighten up on technology stocks, the industrials, the banks and brokers, and the oil and gas stocks.
On Monday, Cramer said the June Institute For Supply Management, or ISM, index, is due out. He expects a bad number, with oil and gas production slowing amid falling oil prices. Cramer said he'll also be watching the German purchasing managers index, or PMI, to see if the hard times in Europe are finally spreading to the continent's strongest economy.
For Tuesday, Cramer said all eyes will be on the June auto and truck sales numbers. Strong auto sales could be good for
, but he remains bearish on
in the truck sector.
Then, on Wednesday, it's back to Europe with the latest retail sales numbers when the continent will dominate the headlines while we celebrate the Fourth of July in the U.S.
Thursday brings more euro-news, the European Central Bank meeting. Oil crude inventories will also come out, he noted, and any spike in supplies will likely kill the slight rebound in prices the markets have seen as of late.
But the end of the week brings the most important number, said Cramer -- the non-farm payroll report. Here again, Cramer said he's not expecting any good news. That's why he's looking forward to the following week, when earnings will once again take center stage.
Tips and Strategies
"What's happening with your stocks doesn't always reflect what's going on with the underlying business," Cramer reminded viewers, as he outlined some new tips and strategies to help individual investors manage their portfolios and get back to even.
Cramer explained that it's all too easy to assume a company and its stock are synonymous. After all, much of "Mad Money" is spent analyzing companies with good growth prospects and hefty dividends in the hopes they will reward shareholders for years to come. But in today's complicated markets, stocks, and markets, can move for many reasons, most of which have nothing to do with the underlying fundamentals.
A company's performance and its stock price don't move in a straight line, said Cramer. For example, many investors now use exchange-traded funds, or ETFs, which trade sectors or even the entire market as a single commodity. This allows good companies to trade in lock-step with the bad ones. There are also macro-economic factors, such as the financial crisis in Europe, which weigh heavily on the day-to-day action of the markets.
Cramer said there are also the hedge funds and institutional investors. He said if too many hedge funds are trading around a single thesis and if that thesis doesn't come true, margin calls and redemptions often force funds to sell when they'd rather not.
Short-sellers are another contingent to consider, said Cramer, as large groups of investors betting against a stock can also cause unexpected volatility.
Finally, there is the company itself. Cramer said when times get tough for a company, things can get much tougher for its stock, which gets slammed much harder than it deserves. The key is to recognize that's happening with your stocks, and think like a trader to use those short-term swings in prices to your advantage.
"All investors are looking for an edge in the markets," Cramer said, which is why doing the homework and studying a company's fundamentals are so important. He said the notion of homework may seem trivial, given everything else that moves stocks up and down on a day-to-day basis, but in reality, homework builds conviction and can give investors a leg up on everyone else.
Cramer explained that lots of people are just lazy and many money managers are often technicians analyzing charts for patterns. That means investors who do the research, who truly understand a company, will often know more than even the professionals.
"Homework is about taking control of your own destiny," said Cramer. Homework gets results, and anyone can do it. Homework may not tell you which direction a stock is headed next, said Cramer, but ultimately stocks drift back to where they "deserve" to be trading, given how the underlying company is doing, and that's where homework matters most.
Cramer said the better investors are at avoiding stocks where the risk-reward is changing from good to bad, or bad to good, the better positioned they'll be to take calculated risks and move swiftly to changing market conditions.
Watch Those IPOs
Cramer also advised on initial public offerings, those sexy deals that are talked about and written about endlessly in the media. He said IPOs can make incredible, instant profits, but they can also go down in flames if investors choose the wrong ones. Every IPO is not a great way to make money, Cramer explained, and determining the ones that will, can be a real challenge.
One little-known secret about IPOs, said Cramer, is they're designed to pop on their first day as a way to lure new investors into the market and reward loyal customers at the investment banks that underwrite them. He said that too often the tool of choice is the float, or the number of shares being offered at the IPO. By keeping the float small, shares are almost guaranteed to pop on their first day of trading.
But having a successful first day does not mean you should invest in that stock thereafter, warned Cramer. In fact, he said investors should NEVER buy an IPO in the aftermarket or in the open market after it begins trading. He reminded viewers that if they can't get in on the IPO deal itself, they need to forget about it. The IPO mechanics do not have the individual investor in mind.
Good vs. Bad
Continuing with the IPO theme, Cramer explained how investors should determine a good IPO from a bad one, assuming they can get in on that initial offering. First and foremost, investors need to look at a company's pedigree.
Cramer said those involved in a company say a lot about it. Who are its executives? Its investors? Who is bringing it public? This is not always a good way to tell, however, as many of the hottest technology and social media companies were all started by total unknowns.
One potential negative for an IPO is if it is being brought public by a private equity firm. Cramer said too often private equity firms need to unload their investments in a hurry and bring companies public that shouldn't be. As a rule, he said, private equity IPOs cannot be trusted. "Just because a company is being traded publicly," said Cramer, "it doesn't mean it should be."
Another aspect of an IPO to consider is the brokerage bringing the deal public. Cramer said he likes the major firms, like
, because those firms put their reputation on the line with every deal they bring public.
Only after an IPO has gone through this three-step vetting process should an investor consider investing in an IPO.
--Written by Scott Rutt in Washington, D.C.
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At the time of publication, Cramer's Action Alerts PLUS had no position in any of the stocks mentioned.
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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