Pounce on the Negatives - TheStreet

Pounce on the Negatives

Discerning when things get too negative can also be the best single way to make money.
Author:
Publish date:

Discerning when things get too negative can also be the best single way to make money. Take

Microsoft

(MSFT) - Get Report

. The other day the trades were out with some story about how a key Microsoft product would be late. A couple of analysts issued statements saying that maybe Microsoft wouldn't blow the numbers away.

Microsoft, IBM and Dell: Join the discussion on opinion on

TSC

Message Boards.

At 95, this stuff worried us. At 90, we figured that Microsoft reflected a lot of the negativity, but not all of it. But when this stock got to 85-86, the stock was discounting late products, an in-line number and some cautious guidance. In short, things got too negative. When they get too negative, you have to pounce.

Making things even more supercharged was the notion that Microsoft historically says whatever is the wrong thing at the time in order to damp expectations. They never ever say anything is great, or blow-out or fantastic.

So shorts figured, lay-up. Worst that happens is that Microsoft does a good number and then talks things down as always.

What you saw today was the inevitable outcome of one word: "awesome." Microsoft used that word to describe demand. That one word -- which

Xerox

(XRX) - Get Report

,

Unisys

(UIS) - Get Report

and

Lexmark

(LXK)

did not use -- caused shorts to cover their positions and longs buy more.

This process of too much negativity built into a stock, largely because of collateral worries about other stocks, is an important factor always worth gaming.

For long-term investors, none of this stuff matters. But if you are a lover of Microsoft as I am, and you are always looking to buy more, when there is too much negativity with this stock, as there is right now, I feel, with Intel, you have to make your move.

Oh yeah, let me stick my neck out. I think there is too much negativity involving

Lucent

(LU)

. I am not saying that

TSC's

series was wrong. I am saying that it seems in the stock at 57.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Microsoft, Intel and Lucent. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

jjcletters@thestreet.com.