NEW YORK ( TheStreet) -- "You can do everything I do at home, if you're willing to put in the time and effort," Jim Cramer told the viewers of his " Mad Money" TV show Friday. He said that with just a few hours a week, investors can actively invest in stocks and manage their portfolios with great success. So how does Cramer find new stocks to potentially invest in? He said that one way is with the new 52-week high list. Stocks on the new high list obviously have something going for them, he said. It may be that the company is part of a genuine bull market, or it might be that the stock has serious momentum, but in either case, Cramer said stocks on the new high list are worth giving a second glance. "Things pretty much keep going in the same direction under something major shifts," Cramer told viewers. That's why if the fundamentals of a company on the 52-week high list are still strong, it may be a winner. > > Bull or Bear? Vote in Our Poll But Cramer advised against buying any stock that's at it 52-week high. He said that with rare exception, waiting for a pullback will almost always give investors a better entry point, and with the larger up trend still in place, will afford them even greater returns. Cramer said when the broader market sells off, that's the perfect time to snap up the high fliers.
Gradual BuyingCramer's second tip for active investors was to never buy all of a position in a stock all at once. He said that stocks rarely move in a straight line, so there will always been opportunities to buy more, perhaps lower than where a stock trades today. Cramer said that if investors want to purchase 100 shares of a stock, he would start by buying only 25 shares. If the stock pulls back, Cramer said he would buy more. If it trends higher, then he knows his thesis is correct and he can continue to buy more shares as the opportunities arise. There is one exception to his rule, Cramer noted, and that's in the case of strong insider selling. Cramer said that company insiders can sell stocks for all sorts of reasons, but there's only one reason for them to be buying shares of their own company, and that's because they think it's going higher. Cramer said if company executives are buying shares at or near its 52-week, that's a pretty "darned good reason" to ignore both his "buy-in-segments" rule and his "wait-for-a-pullback" rule, and go all in. "If you see an insider buyer," said Cramer, "you might want to be buying too."
Short SellingContinuing his tips for active investors, Cramer said that another tell that a stock may be headed higher is, of all things, a large short interest in the stock. Cramer explained that when a stock has a large number of short sellers betting that the price will go lower, and it doesn't, that creates a short squeeze, which causes the shorts to buy the shares they've borrowed to cover their positions. Cramer said a short squeeze is particularly bullish when combined with large insider buying, which is essentially company executives drawing a line in the sand and saying, "our stock goes no lower." He said that large company stock buyback programs accomplish the same goal, giving the stock strength to pressure the shorts out of their positions and take the shares sharply higher in the process. But even without insider buyer or stock buybacks, Cramer said large short positions in a stock can still be bullish for investors if the company receives good news, changed market conditions, or anything that will rattle the shorts and force them to re-evaluate. In lieu of the recent market meltdown, Cramer issued a note of caution regarding stocks with an extremely high level of short interest. He said that the financial panic of 2008 and 2009 was largely spread by hordes of short sellers and hedge funds ganging up on the financial stocks, forcing them lower in their hour of need. Cramer said in these rare cases, investors need to steer clear at all costs.