If you want to make money, "don't look at news headlines about the stock market," said Jim Cramer on his
"RealMoney" radio show Wednesday. He pointed to a piece in USA Today's business section as a prime example. The paper attributed Tuesday's stock rally to lower oil prices, but Cramer said that the opposite was true. Stocks rallied because oil and gas companies blew away their earnings numbers he said; and companies in this sector are reporting good numbers because oil prices have been high. Companies such as ConocoPhillips ( COP) and BP ( BP) are "making cash left and right" on oil prices, he said. Moreover, UPS ( UPS) was Tuesday's big loser because it is contending with the effects of higher oil prices. Stock rallies are simply about how much stock is available to buy or sell at any given moment, he said.
Amazon ( AMZN), on the other hand, is a $14 billion company with great sales, but it needs to spend a lot of money to run its business. That was the essence of Amazon's latest earnings report, and the stock has been down precipitously ever since. Even though the stock has been beaten up, he said that it's not a buying opportunity. Even though companies such as Borders ( BGP) and Barnes & Noble ( BKS) don't have Amazon's sales, they are not spending tons of money to maintain those sales levels.
Amazon is down, and Cramer said that investors were right to bail. Action Alerts PLUS. Even if Wall Street hates cyclical plays, he said that this stock is still good. He told another caller that Chesapeake ( CHK) is a driller that's a pure play on natural gas. Chesapeake is the "best in show" and should be held because natural gas prices should rise at some point.
A caller wanted to know how many shares a person should own to be in the game. Cramer said that it's not a matter of shares, but a matter of how much money a person invests. He believes that an investor should hold at least $5,000, and preferably $10,000, in the stock market. This is the amount of money he feels is necessary to be diversified. The amount of shares a person owns depends on the price of the share. If person has $10,000 in the market and invests in a stock that costs $10,000 a share, that person will only own one share. If the stock costs $10 a share, then the person will own 1,000 shares. Cramer said that companies including Wynn Resorts ( WYNN), Urban Outfitters ( URBN) and Amylin ( AMLN) are priced to perfection and that investors should be very wary of these stocks. He said that Sears ( SHLD), the third largest retailer, is a stock to own for the long term. He owns it for
Action Alerts PLUS. He also recommended Amgen ( AMGN) and Apple ( AAPL).