TheStreet.com TV Recap: Catch a Falling Google

Cramer says this 'pyramid style' buying, accumulating more as the price drops, is what made him rich.
Author:
Publish date:

Jim Cramer has a tip for making money on

Google

(GOOG) - Get Report

-- increase your holdings the more it falls, then sell it as the price rises.

"My method of buying is to lose money at a very, very aggressive pace as I buy more on the way down, pyramid style," he said on TheStreet.com TV's Wall Street Confidential Web video Wednesday.

Know How to Sell Google

var config = new Array(); config<BRACKET>"videoId"</BRACKET> = 1309638514; config<BRACKET>"playerTag"</BRACKET> = "TSCM Embedded Video Player"; config<BRACKET>"autoStart"</BRACKET> = false; config<BRACKET>"preloadBackColor"</BRACKET> = "#FFFFFF"; config<BRACKET>"useOverlayMenu"</BRACKET> = "false"; config<BRACKET>"width"</BRACKET> = 265; config<BRACKET>"height"</BRACKET> = 255; config<BRACKET>"playerId"</BRACKET> = 1243645856; createExperience(config, 8);

This is how he advocates buying Google.

With Google, normally a $700 stock, there's a wide scale for people to work with if they buy on the way down. If he could, Cramer said, this is how he would have bought Google: 25 shares at $720 and then another 25 shares at $690, all the while losing money immediately.

"As it goes lower, it gets cheaper," he said. "Then you would buy 40 shares at $660 and if it goes to $640, you buy 50 shares.

This establishes a "really good basis," Cramer explained. Meanwhile, sellers realize that they've sold Google down to a 25 multiple and that they've been irrational.

"As Google comes down, you're buying more and more and you're losing every day," he said. "You don't know when it's going to turn because it's machines that are doing the selling and they have no heart or brain. Then you come in yesterday and Google is up $15. Do you buy it up $15? No, you sell it up $15, the same way you buy Google down $15."

This is what Cramer said he has done. "I don't have any way other than what's made me all the money I've made."

People can do one of two things: they can wait until it's all clear and buy Google up $15, which he said he regards as dangerous, or they can buy Google as it gets cheaper. Amateurs, Cramer said, have tended to want to buy up $15 and count on the next day being good, but he doesn't care about the next day.

Another strategy is buying "deep-in-the-money options as they go down and then as they go up, selling common against them, because they lose their premium," he said.

"What I've been taught is what I've been taught as a professional," Cramer said. "As an amateur I did all the things that I said to do the opposite of ... and I couldn't make a lot of money.

"It is not a mistake for me to buy Google and watch it go down $20 because I get to buy more Google. For me, my method has worked and it's good for me." But in the end, people have to find out what they like and what works for them, and "everything else is worthless."

At the time of publication, Cramer had no position in the stock mentioned.

Jim 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. Watch Cramer on "Mad Money" weeknights on CNBC. Click

here to order Cramer's latest book, "Mad Money: Watch TV, Get Rich," click

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

clicking here.

TheStreet.com has a revenue-sharing relationship with Traders' Library under which it receives a portion of the revenue from Traders' Library purchases by customers directed there from TheStreet.com.