City, that soda. This is sort of our valentines day. Im not here tomorrow to share it with you. I would love to take a swig of this. Look, look see that . Now i know where your true affections lie its the other woman its the other woman what is this . Butter cup. A woman in every port, mel. And you ate half this, by the way. Half is gone. Happy valentines out there. To everybody, a day in advance. A day early. Which is the way to do it. Dont go anywhere. Mad im jim cramer, welcome to my world. You need to get in the game. Stearns are going to go out of business and hes nuts, theyre nuts, they know nothing. I always like to say there is a bull market somewhere. Mad money, you cant afford to miss it. Hey, im cramer. Welcome to mad money, welcome to cramerica. Other people want to make friends, im trying to save you money. Im teaching and coaching you. Call me at 1800743cnbc. Of night i come out here and help you find highquality companies with stocks that are worth owning, stocks that will reward you by going higher or paying you juicy dividends or maybe even both. But perhaps because of my four decades in the business, i sometimes leave too much unsaid. I take too much knowledge for granted. Knowledge you need to know to be the best investor you can possibly be. Were taking timeout to impart some of the knowledge in a special show about the way stocks work and interrelate with the companies they stand for and represent, two different things. On mad money, we analyze companies, trying to see what makes them tick what expectations they are supposed to be, the metrics. We dont trade those companies. We invest in their stocks and never forget the company and stock are not the same thing. I know. That might sound really obvious, the kind of thing you go without saying, but people constantly make the mistake of equating a company with its stock. And its the kind of mistake that can absolutely wreck your portfolio. Especially in volatile markets where many stocks trade off the big picture, macro roh data about the broader global economy, the fiscal cliff. Budget compromise, something in europe. Thats whats known as the macro. Rather than whats known as the micro. Meaning information about the actual companies behind the stocks. Fact is, its all too easy to assume a company and its stock are synonymous. A stock gets crushed, okay . And when assume there must be something wrong with the Underlying Company. Why else would the stock be pounded . When a stock surges, we presume the company must be doing something right. But thats simply not ow the markets work. Often shares of a Company Stock will have big moves up or down for reasons that have absolutely nothing to do with the underlying business it happens all the time and it doesnt mean the market is crazy or irrational. What is irrational is believing it will always be a straight line, a lockstep, between the performance of a company and the performance of its stock. Why is that wrong . Shouldnt stocks trade based on the changes and prospects of the Underlying Company . Isnt that the way the market should work when it isnt broken . Dont we spend lots of time analyzing companies, a free and fair way, showing them to figure out what makes some businesses better than others and teaching you to identify situation where is companies are improving. At least better than people think, right . Better than expected bt. Im always telling you the most important determine every of a higher stock price is increases from earnings. Nothing correlate morn more with rising share price than estimate kriss. Dividend boosts of decent magnitude. Why not enough to steady companies and buy the stocks that look like they have the ability to grow earnings faster than expected or grow the dividend . We cant buy companies, unless youve got hundreds of millions of dollars to throw around, its simply not an option. Instead, we buy shares of stock in those companies. Shares that trade on an open market. We have lots of buyers and lots of seller whos might have very different motivations from you, when you find a highquality company with seemingly excellent prospects, you cant assume shares will gi g. Er higher since you need to take the way the stock trades into. Stock has its own method of training. Like a dna for stock. Dont get me wrong. Over the long haul, the best way to pick stocks by identifying winning companies, ones that are growing faster than others expect and improving dramatically in actual performance. Especially on daytoday basis. They can trade wildly with little relation to whats happening with the company. Those movements can be so con founding that you end up selling low, or buying high. Or you give up entirely, and you know i think you need to stay in the game if you are going to augment that paycheck. Save money for retirement, vacativ vacati vacation, tuition, necessities of life, all the things you want to have the money for. If you assume every move in the stock market makes sense, you will end up passing some incredible opportunities. All aboard to buy merchandise thats been marked down for irrational reasons, meaning no reason whatsoever, and you will miss moments when you sell stocks that are run up too much courtesy of market mechanics rather than anything relates to the Company Underneath the stock in recent years, weve witnessed the rise of a ton of factors, and at least near term, over the longterm, they do tend to converge. That may be longer than kuwait. But over days, even weeks, months, you have all sorts of things this can make the stock of an improving company fall or deteriorating companies rise, many use Exchange Traded funds to get exposure to entire sectors, some allow them to buy or sell, giving them double or triple of the buying or selling back for the original buck. Regardless of needless proliferation of ets and we can o trade in lockstep with each other. And the good in complete tab dem with the badding is and ultimately, the facts show out. The house is in the neighborhood. And nobody wants a good house in a lousy neighborhood. But the influence of epss back noxious, pernicious even it makes the sector more important than it should be, have you High Frequency traders who can actually really i have seen them hijack an entire market, causing massive across the board moves that make no sense in the fundamentals of the individual companies, especially moments of extreme volatility, new waives distort the stock picking beast. I hate it, and when times get tough for companies, they can get tougher for stocks, i spend a locality of time talking about foreselling, the idea that stocks can get slammed because Financial Institutions like hedge funds that own them are in trouble. Theyve borrowed too much money and need to raise cash in order to send some back to investors this happens of time hedge funds make the same bet. Money manager whos bet heavily in europe and lost when the eurozone indebted eurozone crisis, they didnt just have to sell european assets. They are had to sell unrelated stocks too. Especially if incest investors clamoring to get money back, and this is exactly what happened when we crashed in 2008 and 2009. Most stocks went down to absurdly low levels and it happened again with mf global. They ran out of capital and then the reverse happened in 20126. Those who bet in all stocks had their heads handed to them, when they put the foot down on their necks and stopped the back sliding Financial Institutions. It didnt party, look, if a bank was solvent, insolvent, they flew up together, most hedge funds have to make gbets for or against stocks when shots pile into a stock and get unexpected good news from a company, you get a short squeeze that propels the stocks to absurd heights. Since short sellers have to buy to close out positions. Remember, the market is the market which means its dominated by supply and demand. Not enough supply of a given stock or kind of stock to set that, you will see stocks rise beyond what it is expected to be based on fundamentals and too much supply relative to demand, they get hammered beyond what you think they might go to. We saw this with areas like chinese internet ipos. Returns were staggering, but gains became smaller and smaller as we got more and more chinese dotcomes flooding the market. Same thing as what happened with the end of our own dotcom boom before we saw so much Insider Selling, we saw shares upon shares, it could happen again, deluge, social media in 2011, 2012, a repeat of what happened in 2001, 2002. In the end, no chinese deal is worth participating in. Demand well oversaturated. This is one of the reasons chinese ipos reached lowest levels in 2012 in a decade. An 80 decline from 2011, 90 decline from 2010. And the last buyers out of the chute, they were crushed by ways of insiders bailing, seemingly at any price imaginable, just like what happened in the country in 2001, 2002. Super hot stocks became super cold. The public first fascinated and then turn turned on them with a vengeance as fundamentals were never really good to begin with bottom line, recognize whats happening with stocks doesnt always necessarily reflect whats going on with the underlying business and use that to your own advantage. A company in terrific shape sees stocks smashed for reasons unrelated to fundamentals that could be an amazing buying opportunity. Sometimes it can take a long time for the action in a stock to sync up with the performance of the company it represents, a tiny piece of. That way you wont be frustrated with what you thought should happen, if you heard fabulous news and instead, wait until the market gets smart and rewards your stock with the moves that it deserves. Larry in massachusetts. Larry. Caller greetings, rabbi cramer, from boston, formerly pennsylvania, formerly north bergen, new jersey. Whats up. Caller thank you for building the temple for Financial Wisdom and doing what mom felt was your highest and best calling and you are gracious to all of us. Im an enthusiastic subscriber to action alert. You talk about buying in wide scale, could you go into detail about buying down a good stock with bad news, particularly what percentage drop in the stock price, versus catching a falling mine . This is a tough question. Whether there is somewhat real money and somewhat in stay mad. What you got to do, look at the situation and say, look, i want to build a position thats 10 of my portfolio, what if i started buying 20 stock. Bought some at 20, some at 15, some at 12, would i be larger than 10 of my portfolio . If thats the case, buy down in a pyramid. Thats what i want. A pyramid buy. Joel in new york. Caller how are you, dr. Cramer . Real good, doctor, rabbi, whole thing covers. Whats going on . Caller joel from queensberg, new york. A big booyah to my wife gail, who handles all my trading. Gail rocks. Caller whats meant by restricted stock and how does it affective de dividends and preferred . It means you literally have to get it to be free to trade there are ways you have to do it, with restrictions that the government puts on it. You dont have to worry about restricted stock. Doesnt factor into the fundamentals of the company, which we really care about. Dont miss a second of mad money. Follow jimcramer on twitter. Have a question . Tweet cramer, madtweets. Send jim an email to at madmoan cnbc. Com or call 1800743c flnch bc. Tomorrow, guest host jack welch on the economy, markets, and more, plus pepsico and General Motors respond to earnings. First on squawk box, tomorrow 6 00 a. M. Eastern on cnbc. [ male announcer ] any technology not moving forward is moving backward. [ engine turns over, tires squeal ] and youll find advanced Safety Technology like an available headsup display on the 2013 lexus gs. Theres no going back. Transit fares as in the 37 billion transit fares we help collect each year. No . Oh, right. Youre thinking of the 1. 6 million daily Customer Care interactions xerox handles. Or the 900 Million Health insurance claims we process. So, its no surprise to you that companies depend on todays xerox for services that simplify how work gets done. Which is. Pretty much what weve always stood for. With xerox, youre ready for real business. More likes. More tweets. So, beginning today, my son brock and his whole team will be our new senior social media strategists. Any questions . Since we make radiator valves wouldnt it be better if we just let fedex help us to expand to new markets . Hmm gotta admit thats better than a few likes. I dont have the door code. Whos that . He won a contest online to be ceo for the day. How am i supposed to run a business here without an office . [ male announcer ] fast, reliable deliveries worldwide. Fedex. Welcome back to tonights special edition of mad money, when i try to move stocks up, what really moves them and how they diverge from the companies they purport to represent. I talked about the need for investors to get familiar with how stocks trade. You need to know about the traders that drive stocks in Different Directions and watch shortterm moves in stock prices, take advantage of them rather than pretending like so many pundits do, shortterm gyrations are beneath their notice and will pollute gains. May we never be so selfimportant or arrogant to think that entry and exit points dont matter. They control the ability to outperform the market and make a lot of money. We care more about prices at the supermarket sometimes than we do the prices of stocks we buy. Thats just plain wrong. So how do we square the idea that when you buy a stock, its price can become unglued from the underlying fundamentals of the company. With my insistence you do your homework . Whats the point. Keep track of the fundamentals, read quarterly Conference Calls and myriad research pieces, now readily available on the web to keep current. Why bother . If stock prices are going to bounce and at the mercy of macro factors that companies cant control, sound familiar . Or if they are held hostage by hedge fund that trade them, why the relentless focus of learning as much as you can about the Underlying Company. Am i nuts . Why . Especially given that homework is the onerous and most polk folks, the least interesting part of the process . The fundamentals matter a whole lot and they are knowable. The reason we focus on fundamentals, just about anybody can do it, and the information is readily available, public, and on the web and in short, when you may think the homework is tedious and boring, its easy to predict so much of whats out there that is simply unknowable, investors look for an edge, a leg up that provides them with an advantage. That will never change. Not all advantages of the same scale, but by following my standard homework regimen, have an edge over most of the people who trade the stocks you follow. How on earth is that possible . Yours involve looking at publicly available information. According to some economists and arm chair investors and a lot of gray beards critical of the show, it should be baked in to the stock. Meaning the share price should reflect everything you know from the research already, but you know something . Come on, you and i know thats not how the market really works. Lots of people are lazy, Money Managers and technicians, look at the fundamentals and dont get down and dirty to the nitty gritty of the Quarterly Earnings conference if you keep up with the information you will know more about the stock that many professionals do. And if thats not an edge, i dont know what is. Homework is about taking control of your own financial destiny. Eliminating as much emotion as possible. Thats what were trying to do. Get that out of equation. Thats why i focus on the homework. I know it will get results. Knotted just any results, the factual, objecttive kind, not the fiscal cliff that might be irrelevant to the stocks or Federal Reserve minutes. I mean, anything to your position. The homework wont always give you information, enough information to tell you which direction a stock will head, and wont protect you from the whims, yes, call them children in washington that play with the economy willynilly and affecting any number of rogue nations in europe. But it isnt an all or nothing proposition. Familiarizing yourself with a company should ever be dismissed as less than useful. And i said at the top of the show, stocks trend to drift back in line with where they deserve to delayetrade. In addition to knowing a lot of pertinent things, you can assume your stock will end up with a certain price range, really. If you wait long enough it will happen, happens a big percentage of the time and if you keep up with the homework, a good, clean way of deciding whether or not to cut your losses in a stock that isnt working, which is an incredibly valuable tool when you are trying to claw your way because your stock went down because of a typical market selloff. You need to know whether you should perhaps be a buyer, if nothing is going wrong with the company. You know whether opportunity is knocking or your head is about to be knocked to the canvas. On the other hand, it will give you the conviction to stay with a good stock hammered by the market forred wrong reasons, you will know why you are buying or selling something. Isnt that good . Wont be beholden to anyone but yourself. Thats why i teach every night. Now, the better are you at av d avoiding stocks with a risk reward thats good for bad or bad to good, the better position to take more calculated, intelligent risks, more aggressive with your investments, these skills are useful no matter what, but paramount from needing to protect your capital and needing to risk. Thats what the fundamental research and investing is even though these skills are handy, they arent compel asking minpe not give you the total picture and the boredom factor. Think about whaf auto done out here. Years trying to make it more accessible and interesting, even intriguing if not entertaining. No sin, given that so many focus on scaring you out of your shoes, and i have shown a willingness to get investors engaged, keep them engaged, especially on this show. Ive filmed while wearing a hazmat suit to compare hasbro to mattel. Taken a nope on a cozy bed of cheerios, driven on set on my law mower to look at john deere. I cant even put a dollar amount on the gizmos that i have wrecked. And i have even looked at onehit wonders and rappers like biggie smalls. I have ship chiped a tooth not to tell you to touch a stock of crispy creme. I ate pepperoni dog food and threw up on the set all over my wing tips. Im not kwerned that ma ee ee e miss the homework because we have ways of making you motivated. Bottom line, its important for you to know why you are doing the work. Whats the point . A war to build conviction in your stocks, get an edge. When its totally legal, volatile or calm with markets. So many panic at the sight of the president coming to the podium. It might be a buying opportunity and not just a selling one like all of those panicers around you. Ed in california. Ed. Booyah, ed from northern california. Thank you for calling. Jim, in your last book, and on your show, you have mentioned on numerous occasions to buy deep into the money calls. Yes. If my memory serves me correctly. You love buying these calls about three to four months out. My question is this. With the volatility due to the market with several Ongoing Events okay to buy these calls out . You go deep in the money, tend not to have a lot of premium, thats fine. Remember why i do this, stock replacement, a less risky family. Im trying to cut off the down side of a google, apple, some multihundred dollar stock and thats why i recommend these. Jazack in illinois. Caller hey, jim, with the uncertainty with the economy, you know, the fiscal cliff, debt ceiling, all of this, im looking for an investment that etf based and is gold, but based on the physical. I think im really into like, you know, physical investing and not just straightup normal etfs. Well if thats the case, you got to be careful. I the closest we have is the gld and im not backing away from that. I think that is ive talked to a lot of gold dealers, some are nervous, some arent. I think gld does fine. Always telling you too do your homework. Why . Its a way to have conviction. Leave the panic to everybody else, and ill try to make you even more money. Jim cramer, one of my heroes. I look forward to your show every week night. Thank you so much for helping beginning investors like me. When you talk about the market, i just believe that youre spot on. I love it. Thank you so much. Every night we watch you. I have learned and earned. At a dry cleaner, we replaced people with a machine. What . Customers didnt like it. So why do banks do it . Hello . Hello . if your bank doesnt let you talk to a real person 24 7, you need an ally. Hello . Ally bank. Needs an ally. [ male announcer ] ive seen incredible things. Otherworldly things. But there are some things ive never seen before. This ge jet engine can understand 5,000 data samples per second. Which is good for business. Because planes use less fuel, spend less time on the ground and more time in the air. Suddenly, faraway places dont seem so. Far away. We talked about the way stocks diverged from companies, let me tell you about a tool that can help you make money quickly but carries a certain amount of risk and can be trouble if you dont know what youre doing. Im talking about investing in initial Public Offerings, ipos, get more questions about this than anything. Its possible to ignore the opportunities that have come out the last couple of years. Some fizzle from the opening bell. These are led by technology and in some cases social media names, which have been met with exceptional hype. Hype doesnt begin to describe the buzz, almost hysteria, about the facebook ipo. That was super hyped. Maybe hyper hyped. They are sexy, talked about written, endlessly, but hardly ever told what to actually do with them. Im going to teach you the basics right now, because when you know how to tell the difference between an about to be Public Company that will soar and one that will go down in flames, you have the potential to lure in serious profit. When you get one right, gains of 20 to 30 . The stocks are out of whack with the Underlying Company. The instantaneous nature of the profits make them attractive. But they can get in the way of better judgment and cause to you invest in initial Public Offerings that end up stinking up the joint. As helpful as profits can be, dont let buyers believe that the ipo is a great way to make money. But your broken can always finagle you some shares. Wrong, wrong, wrong. Some initial Public Offerings arent worth investing in. They will try to slip in some clunkers much. Now partially because new and Public Companies tends to be all over the map, especially on the first day of trading. There ist much information about the newly public stocks and a tendency to assume that success or failure of a given ipo is a question of luck. You can figure out which ipos to write off as uninvestable and which ones deserve to be bought. Separating the wheat from the chaff isnt about luck, its about analysis, the kind of homework that professional Money Managers do all the time and i advocate tirelessly and endlessly on the show. I have a gripes, because every day i would analyze stocks the same way at my hedge fund, and i made a boat load for myself and my clients by investing in ipos and i want you to know exactly how i did it. Inside basis points you need to know about ipos, the investment banks have their own agenda, one i believe thats about bringing people regular people, Retail Investors, you, back into the game, as it is about helping their clients raise money in the equity markets. One things i learned on many years on wall street, both hawking stocks and both managing money for myself and rich people in my hedge fund and in the charitable trust, and when the market turns south and people start pulling out altogether, brokers like to throw investors some easy wins, layup ipos that are seemingly underpriced to pop when the shares start trading why would they underprice the deal and short change banking clients . Just as important to brokens that other clients, the one that trades commissions, keep being interested in the market. The gains from a sweet underpriced ipo and the small float that boost shares is a great way to feel good about stocks in general. They want to entice you into a stock market. For the anatomy of ipos to fit that pattern, look at linkedin and groupon. They grove 29 and 31 respectively on the first day of trading. There is no doubt that the issue was the artificial way they were priced. Putting out very little stock, knowing that it would cause a big pop, because it was just a sliver of the whole of all the company, the float was small. Creating a bubble all by itself, the broker knew stocks would be hot, in part because of valuation for the social media cohort and the hype among Retail Investors and if they offered a limit number of shares, and put it below the pricing evaluations, demand would be huge. The brokers tightly controlled supply and plus went into accounts that they believed would not flip the stock, doing this. Buy, buy, buy, sell, sell, sell and gave enough to the large mutual funds that they would start and not finish the positions, but the mutual funds were coming to the secondary market the regular stock market and bid linkedin up to get the rest of the positions in. Thats what happened. The trick to a successful ipo is rationing process, the stock to potential shareholders know how much the big shares need enough to have it linked in to affect the performance. They give them a percentage, sometimes a third, sometimes as much as a half of what they need to own a full position. A half a full position, say, and that forces the clients hands to complete the size of the position in the open market. Of course, they could flip the positions themselves, but the brokers have ways to monitor who takes the quick money and will not be allowed to get big allocations the next time around. You benefit because the Syndicate Desk almost always save stock for retailer in investors and they are likely to buy and hold onto a stock. Im indifferent to whether you do either. I you want to make money. The only thing you shudder do is go into the aftermarket and buy stock of a hot deal. Meaning after the market started trading up. If you dont get in on the deal, forget about it. Ive got staggering statistics to show you are almost a sure loser if you buy a hot stock after it trades with a couple of stocks allowing it to make money after several months and most just gigantic losers that could destroy your nest egg. A lot of work on this linkedin. That thrown into. And longterm winner and groupon remains in the dog house as do some of the shooting stars of the bye gone era. And the odds favor losing, and remember you are in a much better position than that of a mutual fund, dont have to buy a lot of stock to be sure you have enough shares, you can pick and choose, providing you do enough business with a full service broker. In the aftermarket, wait until you get a reasonable price and performance details before you start coming in. Like with facebook in the fall of 2012. When everyone feared there would be a ton of Insider Selling when the company got religion about going mobile, that was the moment to buy, not sell. The weakenest hans were gone and the knowledgeable people come into buy. Same thing with raucus, the wifi company, after it broke the print, or the initial ipo price. Ipos can be a great way to make money, but if you are not in the know, it he can be a treacherous path. Remember, the big guys dont necessarily have you, the home gamer in mind. Be aware and trust me, never buy in the aftermarket. For every winner there are ten losers, and please, please, please, dont be a sucker. Stay with cramer. Dealing with ipos can be difficult and dangerous, because the prospect of instant gains so enticing. That was easy. Before it can cloud your better judgment. Everybody who got in on the aborted facebook deal knows too well, you need a consistent method so you dont get torn to pieces by something you dont understand. A deal you cant fathom or make heads or tails of. So here is your primer on an nizing hot and cold and safer from more dangerous. The most important thing with the ipo isnt what the company does, its the companys pedigree. What die mean by that . I care before who the executives are, who the investors are, and the first call with the managers can be irrelevant and strangely, its the least important part of the pedigree equation. Thats because so many of the best deals represent technology companies, including social media, and those companies revolve around an invention, and maybe just an al go rhythm. If you look at googles management, would you have avoided its ipo like the plague. Who the heck were larry page and sergei brynn. A couple of twentysomething willedmen. The new kids on the block have improved themselves and proved them as new kids on the block. Did you know anything about Mark Zuckerberg other than he wore a hoodie . Who are the investors . A negative check, disqualifiers, negative more than a positive one. When look at the investors, i am concerned about you getting caught up on another kind of investment. One funded by private Equity Companies anxious to cash in on a better equity market. And equity firms have taken care of equity firms, they bought many servers and bought far too much of them. They need badly to offload these companies into the market to get them off the books, some of them will barely be profitable, some will simply be stinkers so they will try to entice you to pick up some so a hope of a rising tide could lift all of these boats, including these dogs. The private equity ipos cannot be trusted. And this brings up an important as pefkt ipos, recognize that because a company can be publicly traded doesnt mean it is a piece of junk. Some would qualify as a traf esty, mockery, as a sham. Some of the smaller social media falls into this category. They make companies disclose facts and financials as possible. So you can judge for yourself. Sun li sunlight is the best disinfectant. They do so much business with the outfits, very hard to say no to. They get immense amount of money from private equity firms when they take a Company Private and more fees when the company is spunt off as a public equity firm, and you are thinking about large fees from the new fixed incomes, and i think that that is why the Investment Bankers bend over backward to favor the private equity firm rather than Brokerage Firms that are buying them. And the Main Investors in companies that are becoming public. Well call it, it doesnt mean it says absolutely no. Well call it a red flag and third, i always look at the brokerage houses bringing the deal. I want them to be along the lines of jpmorgan, Goldman Sachs. They have a reputation on theline and that makes them less likely to bring a clunker public. You can take this as a fairly good seal after previously for the enterprise. Why am i telling you this . Let me tell you a story. In the 80s, i personally helped to work with the financing of a Young Company started by some brilliant people out of m. I. T. , called thinking machines. They had a computer that could calculate data faster than any other company in the world. When they decided to bring the company public, i was able to convince them to use Goldman Sachs as a deal manager. Only one problem. I couldnt convince Goldman Sachs to put the name on the deal, despite the immense fees that an ipo brings to a firm. The analyst at the time that would have followed the company, pored over the financials and looked at the product and made a judgment that the company, while having shortterm momentum, would not have any staying power. I was aghast. I stood to make a big sixfigure ticket. Thats when six figures meant something. This analyst simply wouldnt budge. Reminding me this was Goldman Sachs, not some slop firm that will put its name on any company because it was hot. Sure enough, we passed and within a couple of years, the company failed. A victim of Better Technology and poor management. Thats why the brokerage pedigree hearsay, andmatters. It doesnt mean every ipo bought by goldman will be a success, but avoiding smaller outfits does help weed out some of the failures and in the heyday of social media, just like with the dotcomes at the turn of the century, every firm good, bad, got caught up. Never any assurances that a goldman or anybody else will do the job, checking names behind the deal remains a good ipo. Only after ive gone through the threestep vetting process would i consider what the company goes or what it makes or how its done in the past, in part because its so difficult to judge those issues and i would rather use the quick filter i went through above before i crack the books on the company. Something i will teach to you do right after the break. Stay with cramer. Today is gonna be an important day for us. You ready . We wanna be our brothers keeper. Whats number two we wanna do . Bring it up to 90 decatherms. How bout ya, joe . Lets go ahead and bring it online. Attention on site, attention on site. Now starting unit nine. Some of the worlds cleanest gas turbines are now powering some of americas biggest cities. Ens. Answers. Weve reached the final step. How do actually analyze the company thats coming public. Here you have to assess what the Company Makes, ask if its profitable and most important, thinking about hanging on to the stock after the deal, you need to know how big its end markets are. Thats the key thing. This isnt all that different from analyzing any other stock, except you have less information to go on, less track record. Most of it coming from the prospe prospectus. It can be easy to figure out if its a brand or has a product. But it can be more difficult to figure out what the Company Makes if it involves a sophisticated product, especially if its technology. Semiconductor miniaturization that can be some of the toughest ones. Do you like it . That isnt the only question. But it doesnt matter. Think about heelies. A fad i absolutely despise. Safety. I jump when it became quickly and you have to get in and get out quickly. It popped into the 30s and began a long, sickening decline that took it as low as a buck and change a few years later. On the other hand, when a company has a good product, profitable, and many ipos arent, then maybe you can catch both the gains from the initial first aid pop and an extended run afterward. That is very rare. That happened with underarmour, and we knew that the steak matched the siz ill. It popped from 12 to 25, i said hang on. Break my rule. Hang on from taking profits, some, little, but not also shg all, because underarmour being valued as much as nike. But higher growth rate. Pricing that works to your advantage. Once in a while you get a thrice blast ipo. Profitable entity with lots of room to run, and a great spot, and lulu lemon is a good place. A yoga based Apparel Company that came public in 2007 and the stock continues to grow, despite the it 00809 selloff because the gigantic addressable market. It used to be women that just performed yoga, and now its all women, and some men too. Organic foodmaker, annies, symbol bunny, buny and good wire, they all fit the test. They recognize the size of the mark, power of competitors and the value versus similar players, deals which are priced at significant discounts, and you pack factor in long term growth rates, but they are rare indeed. Bottom line, to analyze an ipo, including the obtuse technologies, the ones that have those kinds of technologies that we dont really understand, look at the aaddressable market, the competitors, historic growth rate of the company, versus the growth rate of the market its and see if the company is profitable and see if the brokers pedigree and then and only then you will know whether its worth it to put in for the deal. Mad money back after the break. Nobody is more passionate about the market than i am. Nobody in the whole country. I want to thank you. You have saved my retirement. You are why i come out here and do this show. Thank you so much. The stuff that youre doing for all of us, its so important. I want to say thank you. My husband and i watch every day, and we count on your help for small investors like us. Put cramers 30plus years of experience to work for you. Mad money, weeknights on cnbc. How do you keep an older car running like new . You ask a ford customer. When they tell you that you need your oil changed you got to bring it in. If your tires need to be rotated, you have to get that done as well. Jackie, tell me why somebody should bring theyre car here to the ford dealership for service instead of any one of those other places out there. They are going to take care of my car because this is where it came from. Price is right no problem, they make you feel like youre a family. Get a Synthetic Blend Oil change, tire rotation and much more, 29. 95 after 10. 00 rebate. If you take care of your car your car will take care of you. Clamp. Glitter. [ male announcer ] staples has everything your business needs. Even custom banners. And now get 50 off banners and posters. Staples. That was easy. Now, its time for some tweets and mail from you home gamers. First tweet comes fro from reelsfly. New player to the game. Talk about waiting for a pullback. Any standard percentage to look for madtweets, madmoney. Yes, 5 to 8 when i say the market is about to pull back. For individual stocks, if they are on the new high list, you are thinking two to three points for a stock under 50, over 100 has got to be say five to ten points. Im looking for tighter when it comes to pullback on the stock. For market, its 5 to 8. Another tweet fro from jimmyjenga17. I wonder if you have any advice for a 20yearold looking to start early. Look around yourself. What are people wearing . What are people buying . Where are people shopping . What are people eating . What restaurants are they going to . Go to the website. Its going to be right there go to the worldwide web and look at the financials. And look at the Conference Calls, analyst presentations. Those are important. Look at newspaper articles, google news, get comfortable, because i can tell you the first buy you make, its going lower, it happens to everybody who is younger. You have the rest of your life to make it up. I have a another tweet. Is there a number of stocks you should buy. Should you waste your money if you can only buy five shares of a company . Absolutely not. Thats how i started. And i ended up doing very well. I started out with five, seven, nine. Dont be intimidated. I would say to a broker, i would to buy five shares, and was like please dont make fun of me. Please take mail. Cramer, love the show. A company invest in and work for is undergoing a one to one conversion conversi conversion. Any impact . It simply doesnt matter. I know it seems wrong, but it seems like a big move, but the market has figured out well ahead of time. All right, stay with cramer. [ male announcer ] any technology not moving forward is moving backward. [ engine turns over, tires squeal ] and youll find advanced Safety Technology like an available headsup display on the 2013 lexus gs. Theres no going back. But at xerox weve embraced a new role. Working behind the scenes to provide companies with services. Like helping hr departments manage benefits and pensions for over 11 million employees. Reducing document costs by up to 30 . And processing 421 billion dollars in accounts payables each year. Helping thousands of companies simplify how work gets done. Hows that for an encore . With xerox, youre ready for real busine