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Jim Cramer introduced a new game with new rules on his "Mad Money" TV show Tuesday, called short-busting.

The shorts are the people who bet against a stock, and short-busting is betting that the shorts are wrong, he explained. In a heavily shorted stock, when all shorts try to cover their shares at once, we call it a short squeeze, which causes the stock to jump.

That's where short-busters make money, Cramer said.

If you're going to ride the short bust, you must eye the stock's average daily volume, which reveals how hard it would be for shorts to close or cover their positions, he said. And if the shorts are deep, they'll drive up the price to get out with profits.

Another important factor to look at is the insider buying of a shorted stock because a big shareholder buy lets people know that things are OK enough for them to join the crowd, Cramer continued.

Though Cramer, when at his hedge fund, used to short stocks all the time, he still worried about losing money.

However, now that James Altucher, a contributor to RealMoney.com, "has gotten systematic about the whole thing" and taken these two key metrics and put them to work on TheStreet.com's Stockpickr service, Cramer said he has two short-buster stocks that stick out in the mechanics and on their own merits.

The first stock is Waste Services ( WSII), he said.

The market believes this stock is trash because its margins are the lowest in the industry and its costs are high, Cramer said.

But even though it looks like a "heinous" company, Cramer reminded viewers that they're short-busting here.

Taking the first metric into consideration, Cramer said that 1.5 million shares of the company have been sold short. Although this might not seem like a lot, he told viewers that it's not the size of the short position that matters but the amount of time it would take to bring in that short.

In Waste Services' case, given that the average volume is only about 104,000 shares traded a day, it would take the shorts 15 days to cover their positions, Cramer said. In addition, the stock has a "significant insider presence."

Also, since Waste Services' fundamentals are improving -- the company should be profitable this year -- Cramer believes that it's time to play short-buster and buy some WSII.

Greenbrier's a Go

The next short-busting target Cramer named is Greenbrier Companies ( GBX), which makes and sells railroad freight-car equipment.

Although Greenbrier may have a lot of debt as well as "serious production issues," and even though it just missed its quarter earlier this month, Cramer believes that it's a great position to be in because the rail business is in a "multiyear bull market."

Regardless, Greenbrier is "spring-loaded with short-sellers" with 1.98 million shares sold short, he said. As it has an average daily volume of 519,000 shares traded, it would take the shorts "way too long to close their positions," Cramer said.

In addition, the fact that this stock also has a big insider presence makes Greenbrier an ideal stock to short-bust.

Plus, Greenbrier's backlog for rail cars is strong, and its acquisitions should kick in next quarter, Cramer said, calling the company "excellent."

CAT Bottoms

The truth is that on Wall Street, professionals don't give a hoot where a stock deserves to be; it's where it deserves to sell that really matters, Cramer said.

While it is typical to expect growth from growth stocks, cyclical stocks are stocks for which a growth rate can't be assumed, he said. Their growth rates are dependent on the economy -- on what the Fed does and on the inflow of worldwide capital.

Therefore, the only way to value a play that doesn't control its own future is to pay less for the earnings of that stock, according to Cramer.

For example, when you believe that the economy has peaked and there is no growth ahead, then pay next to nothing for a cyclical stock, he said.

When the economy peaked last spring, Caterpillar ( CAT) topped off and then fell off a cliff, Cramer said. "The drop was based on fears that its growth would slow, and the fears turned out to be true," he said.

Last week, Caterpillar reported a quarter that was widely perceived as a miss, but the stock went up.

"That is what happens when you catch a real bottom," Cramer said. "The market was smart and told us it doesn't deserve to be so cheap."

Caterpillar bottomed last week, and people can still buy it, he said. CAT, just like Black & Decker ( BDK) and American Standard ( ASD), is done going down and should go up, Cramer said.

Cramer welcomed RPM International ( RPM) President and CEO Frank Sullivan to the show and asked him about his company's naming technique.

RPM is a holding company whose subsidiaries make specialty coatings and sealants for the industrial and consumer markets.

Maintaining the names of the companies it buys is a critical part of RPM's success, Sullivan responded.

There are two things that RPM does right that other companies don't tend to do: It keeps the name and brand it buys, and it keeps original management, Sullivan went on to say.

And shockingly, the first thing companies usually do is change the brand name and management, Sullivan said.

"RPM has never let us down, and it's not going to." Cramer called it a triple buy.

To view Cramer's interview with RPM President and CEO Frank Sullivan, please click here .

Lightning Round

Cramer was bullish on Apple ( AAPL), Abercrombie & Fitch ( ANF), MasterCard ( MA), W.W. Grainger ( GWW), Melco PBL Entertainment ( MPEL) and Gmarket ( GMKT).

For more of Cramer's insights during the Lightning Round, click here .


Want more Cramer? Check out Jim's rules and commandments for investing from his popular book by clicking here.

Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."

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