Editor's note: This is a special excerpt from Jim Cramer's book, Jim Cramer's Mad Money: Watch TV, Get Rich. To order your copy and read all the rules, click here.
Sneak Preview: Home Lightning Round
So let's get to business. To make step one easy for you, I'll tell you how I would break up the market into sectors and then I'll identify industries within each sector. Here's a quick and easy breakup of the economy into sectors, and sectors into subsectors. This should make your job a lot easier. I'm not going to pretend that this is a thorough and canonical way to slice and dice the market, but as long as you're flexible and careful about grouping companies into their respective industries, I'm sure you'll be able to take care of step one easily.
Sectors
- Aerospace
- Automobiles
- Consumer goods
- Defense contractors
- Financial
- Food and beverage
- Health care
- Housing
- Industrials
- Metals and minerals
- Oil and gas
- Paper and chemicals
- Retail
- Services
- Technology
- Transports
- Utilities
These are the big-picture sectors that people usually talk about. Some of them are self-contained and make a lot of sense internally, but some make no sense whatsoever. Tech, for example, isn't really a sector. Tech stocks do trade together — there's no question about that — but "tech" is really a twentieth-century designation. There used to be a lot less software, a lot fewer gadgets, and no good way to make money from the Internet. Now all of that's changed. I defy anyone to tell me what Google (GOOG — Cramer's Take — Stockpickr), which makes the vast majority of its money from selling advertising on its searches, and KLA-Tencor (KLAC - Cramer's Take - Stockpickr), a company that makes the machines that make semiconductors, have in common.
On the other hand, autos, aerospace, and defense contractors are much more sensible groupings. There are only a handful of big defense contractors. There are only a handful of big automakers. These companies can be compared easily, and that makes your life easier if you're trying to play your own Lightning Round.
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At the time of publication, Cramer had no positions in any of the stocks mentioned.
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