The War YearsThree years ago the U.S. attacked Iraq, and since that opening strike, the war effort has gone through many gains and setbacks, Cramer said. And whether we support or question the war effort, we need to understand how Wall Street responded because there's money to be made. In the lead up to and beginning of the war, defense stocks all rose, he said. But at "mission accomplished," when President Bush announced from an aircraft carrier that the major combat was over, defense stocks went down and stayed down as the system believed that the war had been won. Then we had that difficult battle at Fallujah, when it was clear that the insurgents were stronger than we had thought and that we had to use real military might to defeat them, Cramer said. Ever since then, defense stocks have gone up because Fallujah signaled the start of a longer war. When war is a permanent state for the near- and medium-term future, Cramer said that the following defense plays would continue to rally: Lockheed Martin ( LMT), Boeing ( BA), General Dynamics ( GD), Northrop Grumman ( NOC), Raytheon ( RTN) and L3 Communications ( LLL). Cramer owns Boeing for his
How to Read a Report CardCramer told listeners that it's essential to pay close attention to a company's quarterly report, which all publicly traded companies must do. It's like the company is issuing its own report card, so you have to be a bit skeptical, Cramer said. But earnings season is where the big moves occur. When I talk about homework and fundamentals, the only real insight is in these quarterly reports and conference calls, he added. And this is what Cramer said to be looking and listening for: Did the company beat Street estimates? If everyone was looking for the company to report 10 cents a share, did it do 11 cents? "The Street" means Wall Street, specifically, the large brokerage houses. By earnings, he means the company's profit. And earnings and earnings estimates are always expressed in terms of earnings per share, or the company's profit divided by the number of shares outstanding. What was the company's guidance like? This can be problematic because management wants to be upbeat. But they hate being sued, so they can't be too upbeat. But sometimes they will even give guidance that is negative, Cramer said. Was business strong or weak? What was the tone like? Did the company make it sound like the environment had been bad? Did the company take market share from its competitors? What was growth like? Did the company say that sales and earnings were growing faster than before, the same as before or slower than before? When a company says that growth is accelerated, the stock tends to go up. When it is flat, the stock tends to do little. And when it is down, the stock tends to take a hit. These questions are answered by the conference call, Cramer said, which is made available each quarter on the company's Web site.
Cramer's CallersCramer told a caller not to sell Vodafone ( VOD). "It is integral to a world that I am completely and utterly addicted to right now ... and that is telecom," he said. The company spent a fortune on building the most advanced wireless communications network in the world and is a 49% owner of Verizon Wireless ( VZ), he said. But everything fell apart six years ago when no cell-phone equipment makers made cell phones that could take advantage of everything Vodafone had to offer. Now, phones do have the capabilities to use that network, and Cramer said that after surviving this tremendous downturn, the company is poised to be at the forefront of a telecom bull market. He told another caller that he would also hold on to Diebold ( DBD) because it makes voting machines and ATMs, two business streams that should grow. However, Cramer also said that Diebold has had problems with execution, which is why the stock is down 15 points from its 52-week high. Even though he gives the company "the benefit of the doubt," because there seems to be a fundamental story that should help the stock, he also worries every time Diebold reports earnings that it will have missed estimates. Finally, a 28-year-old cost estimator sent an e-mail to Cramer saying that he wants to switch careers and work in the financial sector. He wanted Cramer's advice on the pros and cons of different fields, including investment banking, selling stocks or working in personal finance. Cramer said that the best thing to do is to get into a training program at a major firm like Morgan Stanley ( MS), Bear Stearns ( BSC), Goldman Sachs ( GS), Merrill Lynch ( MER) or Prudential ( PRU). He also recommended regional players including Raymond James ( RJF) and Piper Jaffray ( PJC). "They teach you what you need to know," he said. "This is a humbling business." Cramer said that the most money is in bond trading, but that he loves trading stocks, so he's partial to working in equities. He said that the bulk of investment banking work is tied up in initial public offerings. While it's a good way to make a lot of money, mergers and acquisitions work is "around the clock," Cramer warned. It will take a tremendous toll on your personal life, he said, whereas sales and trading is finite because it ends when the market closes at 4 pm ET. Cramer doesn't believe that it pays to go to a commercial bank. A good goal could be to run your own business or to work for a money management firm, he said.