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[Beginning of
Cramer's
verbatim
comments for
this segment...]
Jim:
Welcome back to
this
disciplinary
edition of Mad
Money… I am not
talking
discipline as in
crime and
punishment…. or
the cat-o-nine
tails although
you know that I
like that… I
mean investing
disciplines…
rules that can
help you
sidestep losses…
and help you try
to make money…
in an incredibly
befuddling,
scary stock
market… the next
rule that I want
to tell you
about, one that
I have developed
based on 30
years of
investing
insights is the
most important
that I can ever
teach you… and
that is that
price, the entry
price that you
buy a stock
matters… price
matters so much
it means that
you can buy the
stocks of
companies that
you do not like
all that much if
they go low
enough… and
become
attractive…
because of
price.
In fact, for the
right price even
inferior
merchandise is
worth buying… as
long as it is
not
deteriorating…
some of the best
opportunities
that I have ever
seen have come
from holding
your nose and
buying the
stocks of
companies that
you never
imagined wanting
to own in the
first place…
because they
have just
finally become
so darn cheap…
now, I will
never on this
show endorse a
stock when I
think the
fundamentals of
the underlying
company are
deteriorated…
and I won’t go
near anything
that could be
headed for
bankruptcy…
remember,
accounting
irregularities
equal sell.
But there is a whole
lot of space between
best of breed and
one that is
currently
uninvestible…in
normal circumstances
though the stocks of
the lowliest
companies that still
pass the smell test…
sell for much more
than I would ever be
willing to pay for
them… usually
because there are
too many hopeful
investors
speculating unwisely
on a low dollar
stock… and buying
barely inadequate
merchandise because
it looks cheap… when
in fact, it is just
selling for the
appropriate
discount… it is
selling where it
should be… however,
if the price drops
far enough… then it
is perfectly okay to
buy a stock when you
merely have a low
opinion of the
underlying company…
that is how much
price matters.
Now, I get enormous
volumes of hate mail
on this subject too…
normally from people
who are upset that I
recommended selling
a company… that I
had previously said
that I liked after a
big increase in its
share price… just as
even best of breed
companies become too
expensive at nose
bleed heights… there
are levels where
worst of breed
companies are cheap
enough that I need
you to pull the
trigger and do some
buying… notice that
worst of breed is
different than just
plain worst… a worst
of breed business
might not look like
much compared to its
best of breed
competition… but at
least it can get
into the dog show.
How do you know when
the price is right
on something that
you wouldn’t
otherwise buy…
obviously there is a
sliding scale here…
the better the
company, the more
that you should be
willing to pay… if
you are speculating,
then it is worth
looking for
companies that have
been left for dead…
even though they
still have a
perfectly strong
pulse on close
inspection…. where
avoiding these… but
still looking for
others that could
just be a little
scary but might be
healthy… there is no
price that you
should be willing to
pay for a company
that might go
potentially under…
none… none… but if
you are truly
convinced that
bankruptcy truly is
not on the table…
and the street just
has it all wrong…
then buying an
unattractive company
at an attractive
price could make a
whole lot of sense
for you.
At the bottom of the
barrel,
Bank of America (BAC*)
and
Sprint Nextel Corp.
(S)
were both knocked
down prices that
frankly were
ludicrously cheap…
if you thought the
government was not
going to seize the
first… and the
second was going to
be able to pay its
bills… at less than
$4 in early March of
2009, even if you
liked other banks a
whole more as I did…
a whole lot more
than Bank of
America… as long as
you thought that it
would survive and
not be nationalized…
then it was priced
too low to ignore…
and sure enough the
stock more than
tripled in the next
2 months… your key
to buying Bank of
America was of all
things, a bullish
interview with Fed
Chief Ben Bernanke,
on the television
show “60 Minutes”…
saying no major bank
would be allowed to
fail… what a great
time to jump into a
major bank that
everyone was betting
would be seized by
the government
before the interview
took place… the next
day Bank of
America’s
magnificent run took
hold.
And as for Sprint,
this one looked
touch and go at the
beginning of 2009...
with its stock
starting the year
under $2... but even
after it told us
that it had enough
cash to pay its
debts… when it
reported a bad but
better than expected
quarter on February
19th… you could
still pick this
stock up for
$3.25... even though
I thought that
Sprint was by far
the worst wireless
carrier in the
nation… even though
it was hemorrhaging
subscribers… it was
still solvent… and
looking more and
more like a take
over candidate every
day… making the
price just too good
to ignore… if you
were willing to hold
your nose… it gave
you a 69% gain in
just 3 months… and
Sprint actually
turned out to be the
best performer in
the S&P 500 for the
first quarter of
2009... those who
thought it was too
horrible missed….
*************************************
BREAKING NEWS BREAK
IN
Michael Jackson Dead
*************************************
the week before…
before BBT got the
deal done the market
was softened… so the
price was able to
spring back after
the secondary… that
plus the fact that
the company was
worth a heck of a
lot more after it
raised the money
than before… because
its solvency was no
longer in doubt…
taken off of the
table… that made the
secondary offering a
steal… both deals
made you money I do
not care if you
traded them or not…
you made money… even
if you had no prior
interest in either
Ford or BB&T, and
thought that they
were both mediocre
at best, as I did…
at discounts that
steep, both stocks
were clearly great
buys.
Always keep your eye
on the price because
even less than
stellar companies
can turn out to be
big winners if you
get the chance to
buy them low enough…
do you know the
ultimate example of
this worst of breed
buying that was so,
so imprisoned… was
AMD at the bottom of
2008...
Advanced Micro Devices Inc.
(AMD),
semi conductor
company, hated here
in Cramerica and by
me 22 years… I hated
it for 22 years… but
when it hit $2 after
agreeing to sell its
problematic foundry
division… and after
its graphic chip
division began to
take share from
market leaders
Intel (INTC)
and
NVIDIA Corporation (NVDA)…
the opportunity was
too great… I call
this one a hold your
nose and buy
situation… and if
you listened to me,
you caught a double
in a matter of
months.
Here's the bottom
line...
▼ ▼
▼ ▼
▼
 The Bottom Line!:
Remember, price
matters… you do not
always need to love
the company… if the
price is right… you
can hold your nose
and buy, buy, buy…
but do not forget to
sell, sell, sell
when the stock moves
up.
[verbatim recap]
[end of segment]
Read Jim's next Segment
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