"There's a central lesson that it took me years to understand ... that is going to make you money," said Jim Cramer on his
"RealMoney" radio show Wednesday. "I call it UPOD," he said, which stands for underpromise, overdeliver; it's a tactic that is commonly used by executives to get Wall Street on their side. "If you spot UPOD while you're doing your homework, you could make lots of money." Cramer said that UPOD is happening right now in the market, and that Microsoft ( MSFT) is suffering because it doesn't understand the underpromise, overdeliver strategy. Chief Executive Steve Ballmer has done just the opposite, Cramer said, adding that he has overpromised and underdelivered. Ballmer said that the company's new operating system, Vista, would hit the market and replace Windows in November of this year. "I've been buying the stock for my charitable trust, Action Alerts PLUS , knowing that we had a catalyst," Cramer said. The anticipation has been high, but then Ballmer said late Tuesday that there will be no Vista this year.
This makes management look like morons, like they have no control of the situation, Cramer said, and the stock got hammered on the news. "Who will go out and buy a PC for Christmas when it will be outmoded in 10 days?" But Vista ultimately will be released and the stock will eventually go higher, he said. But he still wishes that he didn't own the stock because the big catalyst is farther out in time and no one trusts management anymore. On the other hand, FedEx ( FDX) reported a stellar quarter and its profit beat expectations, but the company was unwilling to say that the quarter going forward will be terrific, Cramer said. They underpromised in September, too, he said, saying that high oil prices could keep them from meeting estimates. And FedEx wound up delivering results that exceeded expectations. When FedEx said it might be soft going forward, the stock dropped, Cramer said. That was your opportunity to buy on weakness, because it ran up to $115. "I think they're doing the same thing today." Nike ( NKE) does this too, Cramer said. The company reported a "monster quarter" this morning, but gave a muted outlook. "Their quarter was so outstanding that no one believed them ... the stock has been going up all day," Cramer said. "Sometimes it's too hard to hide the upside." A caller said that he's in the house of pain with UnitedHealth Group ( UNH). He wanted to know if he should be worried about the fact that the company's CEO, Dr. William McGuire, exercised more than $114 million in stock options. Cramer said we always need to try to decide whether a decline is an opportunity to buy or if it's telling us something bad about the company. He said that accounting irregularities normally equal sell, but that in this case things are different. This was Dr. McGuire's first opportunity to sell, and he still holds a lot of stock, Cramer said. "Rather than blast him for what he's done, let's recognize that he should have taken some off the table," he said. "This pull back is a 'mon back."* He believes that UnitedHealth will be a "house of pleasure" in six months, and that the stock could take out its 52-week high.
Cramer said that the Internet isn't a sector but an industry within the technology sector. He said this is important to know because 50% of a stock's performance will come from its sector. "A sector is a neighborhood," he said. "If you buy a house in a bad neighborhood, it isn't going to appreciate. The worst house in a good neighborhood is better than the best house in a bad neighborhood." If you own Google ( GOOG), Microsoft, Intel ( INTC) and Broadcom ( BRCM), you're not diversified, he said. All of your eggs are in one sector. For example, oil is a sector. Its industries include oil services, natural gas, drilling, oil shale and refining. You don't necessarily get protection if you buy the right industry in the wrong sector, he said, pointing out that drilling is a good industry but that the oil sector is out of favor, so the drillers have taken a hit. Defense is the sector to be in now because of Iraq, Cramer said. And even though Raytheon ( RTN) is one of the worst companies in the sector, Cramer would rather own Raytheon than the best auto, semiconductor or health care stock. Cramer told a caller that he gives Marvell Tech ( MRVL) a thumbs up as a play on wireless, even though the complex of wireless semiconductors has been under pressure. He also said that Viisage Technology ( VISG) is the best biometric play out there because it has great management. *For all you home-gamers, a 'mon-back opportunity means Cramer would back up the figurative truck and load up on a stock.