But Cramer warned that, for the moment, Kandi is simply a go-cart company, one with no analyst coverage and little oversight by the Chinese government. That fact was driven home when the company received a formal investigation letter from the SEC back in November, yet chose not to disclose it in the company's quarterly earnings. Kandi buried the investigation in the 16-page "risk factors" section of its annual report.
Maybe someday Kandi will be the way to play electric cars in China, Cramer concluded, but for now this stock is just far too risky.
Respect the Rotation
"Respect the rotation," was Cramer's next lesson for viewers as he recounted when he first learned this lesson in the early days of his hedge fund.
Cramer explained the first two stocks purchased by his fund were Heinz and Kimberly-Clark (KMB), two stocks he deemed as unassailable, with solid products and terrific management. The only problem was the economy was picking up and investors were leaving the consumer products stocks for everything related to industry and construction.
That was a big problem, Cramer recalled -- his fund ticked down 9.5% in the blink of an eye, coming dangerously close to the dreaded 10% loss that would have allowed investors to take their money back.
But Cramer said that's why investors need to know what they own and why they own it. For only with that knowledge can they take the beatings the biotechs and the cloud stocks are currently taking. Only with knowledge and homework will you have the courage to buy more as everyone else is heading for the exits.