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NEW YORK (TheStreet) -- When expectations are low you may lose money no matter what a company has to say, Jim Cramer told his Mad Money viewers Tuesday. Better to stick with companies that have low expectations, or even no expectations, where any good news will be met with big gains.
Cramer said Apple (AAPL), a stock he owns for his charitable trust, Action Alerts PLUS, is one such low-expectation company. Apple's stock trades as a deep discount to the markets, yet today the company's partnership with IBM (IBM) is sending shares higher in the after-hours.
Two more Action Alerts PLUS names, JPMorgan Chase (JPM) and Goldman Sachs (GS), also fit this bill, Cramer continued. He said both companies trade at just 10 times earnings, far less than the S&P 500's 17 times multiple. Yet, with no one expecting anything from these two financials, both managed to surprise to the upside, sending shares higher.
Compare that to another bank, Wells Fargo (WFC), a stock with high expectations that had run up ahead of its earnings, and Cramer said its easy to see why shares got hit on its release. Johnson & Johnson (JNJ), another Action Alerts holding, also fell because of this high-expectation pattern.
Yes, there are some over-inflated sectors of the markets, Cramer concluded, but there are also lots of companies that no one is expecting to do well, and those companies always seem to be the ones surprising us with good news.
Speculating on Janet Yellen
Was Federal Reserve Chair Janet Yellen out of line when she singled out social media and biotech stocks as having too much speculation? Cramer said he doesn't like it when the Fed publicly dissects the markets. Words don't matter, but actions do.
Cramer said if Yellen really thinks there's too much speculation in the markets, she has a great tool in her arsenal -- raising the margin requirements. By increasing the cost of borrowing money from a broker, the Fed could easily tamp down speculation, Cramer continued. If Yellen is concerned now, where was she four to five months ago when speculative biotech and cloud computing stocks were a lot worse than they are today?