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NEW YORK (TheStreet) -- Investors who are focusing only on Vladimir Putin are missing the point, Jim Cramer said on "Mad Money" Tuesday. When it comes to investing, profits matter. They always have and they always will.

That might seem like a foreign notion to many investors, however -- the Wall Street hedge fund machine isn't bound by logic. Cramer explained that big fund managers need to make money whether the market is going up or down, so they're constantly on the lookout for negative news as much as positive news.

A typical day for a hedge fund manager would start out in Russia, said Cramer. But without any bad news from Ukraine, the managers probably quickly turned to China. Unfortunately, there wasn't any bad news from China either, sending managers to scour the rest of the usual subjects, including Europe, Japan and the emerging markets.

But with a bad news shortage in most of the world today, that left managers to turn back to the good old U.S., Cramer continued. Housing starts and permits were right in line and the consumer price index showed only a modest 0.1%. Then, and only then, were fund managers convinced that today was indeed a good day to buy stocks instead of shorting everything.

And that is how the markets were able to rally, Cramer concluded.

Executive Decision: Jim Foster

For his "Executive Decision" segment, Cramer spoke with Jim Foster, chairman, president and CEO of Charles River Labs (CRL - Get Report), a stock that's gained 49% since Cramer last checked in back in May.

Foster said biotechs and big pharma companies continue to reduce their clinical testing infrastructure and Charles River continues to be there to pick up the slack, making acquisitions to become more responsive to clients' needs.

Foster explained that thus far Charles River has focused on later-stage testing with animals, but his company is now moving earlier in the drug discovery process to help companies make go, no-go decisions faster and eliminate wasteful spending.

Foster also said that just as technology is rapidly moving forward for humans, the world of animal testing is also advancing, allowing animals like mice to become "humanized," or able to respond to drugs more like humans would.

Cramer said that some companies just "get it right," and Charles River is one of those companies that can go a lot higher.

Cramer's Playbook

For the next installment of "Cramer's Playbook," Cramer dove deeper into his rules that all investors should have two portfolios, one for retirement and one for discretionary, and no portfolio should have fewer than five stocks or more than 10.

Cramer explained that in order for any portfolio to be diversified, it needs at least five stocks. But since each stock takes regular homework, investors need to avoid burning out by keeping fewer than 10 names.

But can investors have the same stocks in both portfolios? Absolutely. Cramer said for younger investors especially, these portfolios can be identical. For older investors, however, the retirement portfolio should begin taking on less risk.

As an example, Cramer said that stocks like EOG Resources (EOG - Get Report) and Johnson Controls (JCI - Get Report) are fine for both portfolios, but he'd go with (CRM - Get Report) for a discretionary portfolio, while choosing the more conservative Google (GOOG - Get Report) for retirement.

Likewise in the health care industry, Gilead Sciences (GILD - Get Report) would be fine for discretionary, while Johnson & Johnson (JNJ - Get Report) is better suited for retirement.

Lightning Round

In the Lightning Round, Cramer was bullish on Organovo Holdings (ONVO - Get Report), St. Jude Medical (STJ), Vodafone Group (VOD), Primerica (PRI - Get Report) and Sirius XM Radio (SIRI).

Cramer was bearish on Bank of Internet (BOFI), Express (EXPR - Get Report), Nelnet (NNI - Get Report) and Exact Sciences (EXAS - Get Report).

No Huddle Offense

In his "No Huddle Offense" segment, Cramer likened picking stocks to picking the winner team in the upcoming NCAA college basketball "March Madness" tournament. He said that in stocks, as in basketball, emotions influence your choices, and that's never a winning strategy.

Cramer said he's taken a lot of heat on his negative calls on Plug Power (PLUG - Get Report) and FuelCell Technology (FCEL - Get Report) from very emotional fans of these companies. In reality, Cramer noted these companies have lost money year after year and, while closer to viability, still are Wall Street darlings.

Stocks like Tesla Motors (TSLA - Get Report) are a different case, however, because that company has also risen on pure emotion but has solid underpinnings that just might make its promise a reality.

But no matter what the stock, Cramer said it's important to realize when you're betting on solid fundamentals versus pure emotions.

Am I Diversified?

In the "Am I Diversified?" segment, Cramer spoke with callers and responded to tweets sent via Twitter to @JimCramer to see if investors' portfolios have what it takes for today's markets.

The first portfolio included Applied Materials (AMAT - Get Report), Wells Fargo (WFC - Get Report), Kraft (KRFT), Novartis (NVS - Get Report) and J.B. Hunt (JBHT - Get Report).

Cramer blessed this portfolio as diversified.

The second portfolio's top holdings included Wells Fargo (WFC - Get Report), Johnson & Johnson, General Electric (GE - Get Report), Verizon (VZ - Get Report) and 3M (MMM - Get Report).

Cramer was also bullish on this well-diversified portfolio.

The third portfolio had Apple (AAPL - Get Report), Costco (COST), Lowe's (LOW - Get Report), Morgan Stanley (MS - Get Report) and Wells Fargo as its top five stocks.

Cramer said this portfolio cannot have Lowe's and Costco and he'd sell Lowe's and swap in a drug stock like Bristol-Myers Squibb (BMY - Get Report).

To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.

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-- Written by Scott Rutt in Washington, D.C.

To email Scott about this article, click here: Scott Rutt

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At the time of publication, Cramer's Action Alerts PLUS had positions in AAPL, GE, GOOG, JCI and JNJ.