"Every time we have a good market, we then get selloffs," Jim Cramer told his
"RealMoney" radio show listeners Friday. "But we get younger fellas who think selloffs should never occur ... or you get another group of people who say this game is rigged.They think selloffs are the end of the world."
But selloffs occur routinely, Cramer said, and the way to beat the blues is to be sure that you're selling into strength, particularly when the market is overbought and there is too much optimism.
He told listeners to take a little off the table when the market soars and do some buying when it's down in order to get the best prices.
"Would you buy something expensive in a store and return it when it's on sale?" he asked listeners. It's the same common sense with the stock market, he said.
This is not market-timing, but it's about going against the grain and letting go of even some of your favorite stocks so you have the cash you need to buy them back when they do go down, said Cramer.
as an example of this strategy, saying that he still believes the stock has a lot of upside.
But, he warned, that's an ultimate destination -- not a near-term prediction.
He said for investors who unloaded Google when it was flying high 70 points ago, as he recommended, they should start thinking about the fact that they can buy a little bit back now that it's down 40 points.
"You need to be in a position where you think selloffs are not dramatic, dangerous or corrupt ... because you have cash on the sidelines," he said.
Cramer was bullish on:
Cramer was bearish on:
TII Network Technologies
Charles River Laboratories
Cramer welcomed to the show Michael Comeau and Will Gabrielski, co-authors of TheStreet.com's
Stocks Under $10 newsletter. They gave Cramer the rundown on the two stocks that had stumped him on Thursday, when listeners found companies the stock guru knew nothing about.
Sadly, Comeau said, both stocks are dogs.
He began with
Top Image Systems
, a small Israeli company that markets information recognition systems.
Among the company's red flags, Comeau said, is that it's very illiquid, "and it's only covered by one analyst, and the company pays that firm to cover the stock."
Given that Top Image has only $11 million in revenue and negative cash flow, Comeau also said that the chief executive's $300,000 salary was too much.
, a specialty chemicals company based in Las Vegas, was the other dud.
Comeau said that the company made a large acquisition in 2005, and with a company that small, there's no need for it to be making big deals.
The story is very interesting, but he said he'd wait until the numbers caught up with the story and then look at it again.
Comeau and Gabrielski also write a newsletter called
Breakout Stocks for
, and Cramer wanted to know why investors might think about looking at smaller-cap plays rather than buying only large-cap, well-established companies like
. (Cramer's TV show "Mad Money" is on
, a unit of GE.)
Everyone loves GE and rates it a buy, said Comeau, but the company trades 22 million shares a day, and it takes a lot to get the stock to move too much in any direction.
Gabrielski added that small- and mid-cap stocks are small enough to deliver tremendous growth. GE delivers more mature growth, but without the same type of acceleration.
These companies don't have the same amount of analyst coverage, Gabrielski said, making it less efficient to analyze them. But doing more homework could result in finding a good company with great growth.
In the 401(k) focus, a listener asked why Cramer recommends
Fidelity Contrafund, but never talks about
Fidelity Advisor New Insights.
Both funds are run by one of Cramer's favorite money managers, Will Danoff, and the listener said in an email that New Insights has performed just was well as Contrafund, and at times done better.
Cramer replied that he likes New Insights, which doesn't have as much foreign exposure as Contrafund. But he said that the fee for New Insights is much higher than the fee for Contrafund, so he's inclined to stick with Contrafund.
Another caller wanted to know Cramer's forecast for equities in 2006. He said that one of the reasons stocks opened up with a bang this year is because everyone thought oil wouldn't be as big a story in 2006 as it was in 2004 and 2005.
He said that he thought it would go to $50, but that he was wrong,
Until we adjust to the idea that maybe oil will go to $75 or $80, it will hurt stocks, he said.
Cramer also said that we're starting to see the downside of more than a year of
interest rate hikes. He used
quarter as an example, saying that rate hikes were one of the reasons why Citigroup had a hard time in itsr most recent quarterly results.
When oil goes down, or when the Fed stops raising interest rates, stocks should get a break, he said.
He told anther caller that when looking at a company's growth, he uses an 18-month horizon.
This seems like a fair time period because sometimes things take longer than people think, Cramer said. Often a thesis doesn't play out as early as you thought it might, but that doesn't mean the thesis is wrong, he added.
As far as
is concerned, Cramer said the stock is falling in part because the whole market got hit on Friday.
The company also gave a lot of good news, leaving the market to wonder if it had anything left to give, Cramer said.
Then there is the matter of Apple's weak guidance. Cramer said that this could be the company low-balling the numbers so that people get excited about the results when they report on their next quarter. Whether this is the case or not, the announcement got some people worried, and so Apple is feeling pain from this, too.
A caller who is new to the stock market wanted to know if she should sell some shares of
now that she has made 32% on the stock.
Cramer said that with the stock at a 52-week high, he would ring the register and lock some of that gain in.
He said that if he had 200 shares, he'd take at least 100 off the table, and might even consider cashing it all in.
At the time of publication, Cramer was long Ameritrade, Motorola and Yahoo!.
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
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