Conviction. Sometimes they sound so super intelligent, much smarter than i sound, right . Lets face that. Here on mad money were not about sounding smart. If it were, i probably wouldnt have so many sound effects. Were about trying to get it right, what to buy. Buy, buy, buy. What to sell. Sell, sell, sell. What direction the market is headed. You get these things right and its a heck of a lot easier to make money in all the markets. In all my 30 years plus in the investing business the easiest way to get it right is by working hard and being as rigorous as possible. Theres no trick. Theres not five simple rules that would make you a multimillionaire overnight. Thats all hogwash. If do you the work and practice real analytical rigor you might learn something that makes you a better investor. A better investor is one who simply makes more money than the other guy and thats the goal. For the better part of a decade ive been running my own Charitable Trust at actionalerts. Com with the help of my cnbc contribute for stephanie link. We sent out every trade that the trust makes before we make it showing you with years and years of documentation where i went wrong and wrong. As part of my research for my latest book, get rich carefully, i went back on every single trade from the last five years to analyze what worked and what didnt. You know what . I got a treasure trove of valuable information. Tonight i want to take you through some of the most important lessons i picked up from going over the trust, best successes and more important worst blunders. Before i get down to details i advise you to do the same thing with our own trading history. You can learn a lot by systematically going over all of your past decisions. Know yourself, and you need not fear the result of 100 battles. So lets get started. Looking at the trust i noticed something is really counterintuitive. Sometimes the best time to buy a stock is right after the analysts cut their estimates for the underlying company, yeah. Arent we supposed to be buying all sorts of prizes. One of the best investment my Charitable Trust ever made was back in march of 2009, near the big generational bottom when caterpillar was going down and down and down for weeks on end, as they raced to clock their estimates ahead what have looked like a particularly bad quarter. Oh, the analysts, they all turned bearish at once after cats business globally took huge hits because customers were struggling to get credit for new machines and orders seemed to be cancelled every single day, right at dips of the great recession. When caterpillar reported, dip turned out even uglier than the analysts predicted an some firm slashed their estimates big for the year, taking it down as much as 50 . Can you imagine . But, and this is important, cats stock barely reacted to the bad news, falling only slightly and instantly stabilizing and returning to where it was when the hideous Earnings Announcement was issued. You know what that is . Thats the classic sign that you are looking at a bottom. Right then cat was screaming look at me. Look at me. All the bad news is out in me. The worst is over calling bottoms yourself can be dangerous and fraught with peril if you call too early and sometimes the market will call the bottom for you and thats what happened in 2009 with caterpillar. The analysts misread their estimates and bingo, a bottom was formed. It may seem counterintuitive to buy a stock right after the estimates were slashed. Used to buying them when they gun. Think about it, it actually makes a lot of sense. Wait until a stock has been derisked so to speak, until the bad news is totally baked into the share price and you can build a position that just might lead to tremendous proves down the world. Sure enough, caterpillar roared from the perch for months on end as by the improved and analysts had to raise their estimates from what turned out to be the levels that were far too low. Yet the big money made, they all made a huge amount of money because they bought the estimate cut, not an estimate boost, but the cut because cats earnings had finally troughed. Thats the key word, trough, and anybody could have caught this move by watching how the stock didnt get crushed, like youd expect after the hideous quarter and the last barrage of estimate cuts. Now, maybe some of you are saying, okay, cramer, that was march 2009. Generational buyout, once in a lifetime example. Let me give you a more recent example. Jpmorgan. Remember the incident with the socalled london whale back in 2012, the rogue trader who caused the bank to lose 6 billion by hiding ever and larger losses. As the market kept trying to get a handle on the magnitude, the stock kept going lower in sync with the estimate cuts and on monday the New York Times reported the london whale losses might total as much as 9 billion, thats it, but 9 billion for jpmorgan and several firms following the stocks slashed their estimates to match that New York Times figure. However, just like caterpillar march in 2009 jpmorgans stock didnt get hit on that last round of estimate cuts. You heard me. It didnt get hit. Instead, it flatlined. And then it inched up, ever so slightly when that news broke. Again, just like with cat the stock was telling you the estimates had come down too far. Sure enough, soon after as we learned that jpmorgans losses were not 9 billion. They were contained at 6 billion, not that much larger figure, and that was the moment you had to buy. The stock had been clubbed down to 31 over the previous month and if you bought jpmorgan right after the last round of number cuts, the ones that failed to take the stock down, you caught an immense rally. 31 goes to 50, almost in a Straight Line over the next 12 month, and, that my friends, is a 61 gain hallelujah. Heres the bottom line, want to note single most reliable sign that a stock is bottoming, simply wait for the moment that the estimates are so low that they can finally at last be beaten and lucky for you the market will almost always tell you when that happens, as we saw with caterpillar in 2009 and jpmorgan in 2012. When the estimates get slashed and the stock doesnt go lower, thats the market screaming that a bottom is probably at hand. Can i go to leo in louisiana. Leo. Caller hey, jim. Look, always really appreciative of you, helped me recroup over the last years recoup the thousands that my socalled professional broker lost me. Thank you for those kind words. Go at it every day trying to help you. And ive got a fund set aside for my granddaughters college. Look, whats the deal with afterhours trading and why are we so cut out from that . First of all, not a bad thing youre cut off for it. Why . So often afterhour trading is misdirection plays, not unlike a quarterback giving it to a halfback but not really doing it, how he slips his end like a read option play. I feel its a fakeout city, wild west. I dont want you there. You can certainly get in it but why trade on no information. Thats just guessing. We dont guess on mad money but thank you for the incredibly kind comments and glad to hear about your granddaughter and the trust. Rob noncalifornia, robin. Caller hi, jim. Robin, how are you . Caller just fine, thank you. I am an obedient cramer gamer. Thank you. Caller and i have a question about market limit orders. I used to buy on open orders and often found that the stocks i bought were higher when i placed the orders. Right. Caller so i took your advice, which ive heard you say multiple times to use limit order and now i get the stocks at the price i order, and sometimes even a little less. Right. Caller i was wondering though can i even improve on that, the Brokerage Firm i worked at or use has additional stop like stop on quotes, limits on quote and a trailing stock on quotes. No, no, those are all tricks. They set that. Any time you take it out of your observe hands, when you dont determine what markets you want, doesnt matter, jim, youre being too careful. Can you really be too careful when it comes to your money . Thank you for the comments. Bottom fishing, everyone loves it, but how do we call that elusive bottom . By reading the signals the market sends us when the market has had a slide and the estimates get slashed but the stock doesnt go down. You know what that is . Thats the true sign of a bottom. Mad money is back. Dont miss a second of mad money. Follow jimcramer on twitter. Have a question . Tweet kramer, madtweets. Send jim an email to madmoney cnbc. Com or give us a call at 1800743cnbc. Miss something . Head to mad money. Cnbc. Com. And if i tap my geico app here i can pay my bill. Tap it here, Digital Insurance id card. And tap it here, boom, roadside assistance. Ontday ooklay, its axwellmay. The igpay . Otallytay. Take an icturepay onephay, onephay really, pig latin . [ male announcer ] geico. Anywhere, anytime. Just an aptay away on the geico appay. [ male announcer ] gseeing the world in reverse, and i loved every minute of it. But then you grow up and theres no going back. But its okay, its just a new kind of adventure. And really, who wants to look backwards when you can look forward . Everybody makes a mistake sometime. Thats classic investing advice from stock sage otis reddick. You dont just need to learn from your mistakes. Anybody can tell you that. You need to learn how to recognize what your mistakes actually are, and by the same token you need to notice what works. Okay. Might sound trite. Trust me. Its not. The thing about being human is that we have a very hard time acknowledging whats actually going on inside our own heads. Were full of all sorts of unconscious biasses, and that can make it incredibly difficult to learn frequents appearance. But, look, im not here to give you a psychology 101 lesson on cognition. Im hear to be your investing coach so i mentioned all this because its important to remember that you need to approach all the stuff empirically, and what do i mean by that . At my old firm i used to keep a box of trading tickets in my closet. Yeah, musty corrugated box. I spent a tremendous amount of time scrutinizing the buy and sell tickets looking for mistakes and patterns of wrongdoing that needed correcting and much more rarely for patterns of success that needed repeating. These days i dont have a box anymore but i do have the entire record of my Charitable Trust which you can follow along on actionalerts. Com and keep track of all my trades and all my reasons for buying or trading a stock. I recently analyzed the last five years of trades as part of my research for get rich carefully, my latest book, and it taught me a lot of things. Some of which might sound very hard for you to swallow. Thats why i approached this whole exercise empirically because the numbers, when at allied, dont lie, and what do they teach us . Ive got another counterintuitive lesson for us. Stop worrying and allow secondary Stock Offerings. When a Company Issues new stocks its bad news. Geez, well get killed by that. When the company does a secondary it tends to weigh on the stock for a long time. These days that totally reasonable fear of secondaries is also a mistake because Interest Rates are low by historical standards, true even after the big rate rise in the summer of 2003, companies can issue equity to pay back debt and derisk their enterprises. Thats why the deals are worth running to, from running from. For example, the Real Estate Investments trusts have done a huge numbers of secondaries and those deals have worked fabulously because, first of all, the Money Companies used to pay down expensive debt or cheaper debt that carries a lower Interest Rate. The money saved on these Interest Payments fall straight to the bottom line allowing managers to raise rates. Companies issue stocks to expand their buses and that almost always produces a nice move up in the share price. Third, the newly raised capital might allow these Real Estate Investment trusts to buy new properties leading to greater earnings power and dividends down the real. The only Real Estate Investment trusts are found in all Different Companies hit hard by the housing crash and snapping back pretty furiously. Think about the mortgage insurance companies, a group pretty much left for dead, right, come on. Additional capital raised by their secondaries allow them to write more policies on new homes. You made a killing if you listened to me in february 2003 when i said buy the stock on the offering or even ahead of the dock. Right after the stocks went down, after the offering, didnt want you to wait. I caught anot of flack on twitter as many thought it signalled a top, not an opportunity. They plenty of sophisticated institutions out there because they realized if the company got its hands on more capital it could flourish. Thats why you had to take action as soon as deal was announced. Ratings prices secondary prices 8 in february and two months later a 12 gain. When you see these kinds of deals you need to take action, bold action immediately. The opportunity will not last long if you wait. Now theres another kind of secondary that i think you should jump all over, the kind that Master Limited partnerships do, the oil and gas pipeline players that are issuing stocks to have their expansion plans to have pipelines that are so needed to move oil and gas from texas, oklahoma, colorado, west virginia, ohio and pennsylvania to the rest of the nation. Pipelines are by far the best and cheapest way to transport gas. Constructing new pipelines section pensive and the companies that build them need to raise cash pretty constantly in the products, Kinder Morgan energy partners, mark up, mwe, the best players out there and they have become serial insurers of equity to expand their Pipeline Networks and the deal is almost all work. I have to warn you the Master Limited partnerships are super high yielders which means they could be dangerous stocks in an environment where Interest Rates are rising quickly and bonds are becoming much more competitive as an asset class. However, if were in a moment where rates are stable jump all over the partnership secondaries. Allow increased capacity so they can meet the surging demand from the explosion of oil and Gas Production in this company and more capacity means more dividends down the road. Third, keep your eye out for secondaries for whats priced as whats known deep in the hole meaning they are being sold at dramatically lower prices than where the stocks were trading when the deals were announced. For example, september 2013 when social media darling linkedin was trading 246, Company Announced when to sell 1 billion worth of stock to raise money for corporate purposes. The brokers who handled the deal let it be known they were willing to sell their shares well below that price, had to have a full broker deal, full Service Broker to know this, but you got the word. Buyers lined up to get a piece of the deal. Soond after linkedin raised 1. 2 billion, not 1, sold 4 million, 223. It was a good deal for all involved, and best of all, the stock immediately traded right back to where it had been before the secondary was announced. You only get the deep in the hole secondaries from full Service Brokers means you have to do business with them as the large corporate clients like to do these sorts of deals with their Investment Bankers who are part of full Service Brokers. When you see these deals almost always worth trying to get in on, last but not least, reached the moment when they are issuing secondaries. In the past i shied away from the indebted companies. These days thats too cynical. Thats right. I had to revise a lot of things to get rich carefully because a lot of things have changed. Some of the private equity firms have high levels of debt left over before the Federal Reserve cut Interest Rates a couple years ago and were able to raise rates from the capital they raised from secondaries. It means an immediate boost to earnings and subsequent lift of stocks. Weve seen performance after privatebacked deal, like dollar jen. Bottom line. Forget the conventional wisdom that says a secondary Stock Offering always means a company is in trouble and the stock will get poll waxed. Many cases where secondaries can make fabulous buying opportunities, like when Companies Use money to retire and refinance their high Interest Rate debt or when Master Limited partnerships raise money to expand or when you get secondaries from newly private public equitybacked names and, of course, when you get a deep in the hole deal where the price is actually too good to ignore. Mitch in california, mitch. Caller hey, jim. How you doing . Real good. How about you, mitch . Caller im doing well. My question is regarding adding tra options trading and i want to know how easy it is to implement options. In a book i wrote called getting back to even i have 100 pages that tell you exactly what to do in those kinds of strategies. In my book real money i talk about the very elemental options if youve never done it and getting back to even i talked about the sophisticated strategies you want to adopt in the option world. Tony in california. Booyah, or Something Like that. Something like that. Caller tony from Hacienda Heights in california. All right. Caller and my question is not about any one company. Its more like what mastercard did for its longtime shareholders and with the splits. I was wondering why other companies dont do that more often. Because its two words, two words, warren and buffet. Warren buffett decided not to split a stock and when he did that, people decided he knows more than we do. Knows its just artifice and eye candy, not going to split, were not going to split. They said were not going to split and salesforce. Com and vf corp said, you know what, got to make our stock more accessible to retail. Beauty is in the eye of the beholder in this one but a lot of people dont want to go against the rigor that is Warren Buffett so can i go to john. Caller booyah, cramer, from sweet virginia. Beautiful there. I wish i were there right now. Whats up . Caller heres the question. Ive been very fortunate thanks to you, and ive done my research and your crack staff. Im back to even. Great. Caller i retired at 62. I have a portfolio that im really pleased with, and now my question is how do i in retireme retirement, how do i protect it because i dont feel like i need to amass it. I just need to protect it so ive been doing my homework and i came up two options, and i just wanted to get your read on them. Sure. Caller one of them is the bond funds that are paying like 7 3 4, and when you dig down into them they are not theres a few bonds in there, but theres a lot of derivatives and a lot of other stuff. Okay. Caller anyway, thats one option is these bond funds at 7 3 4 with a monthly payout which will help my income flow, and the second if these Life Insurance products that cap the downside and the upside so you really can never lose your portfolio but, you know, you can be limited to 1 one year and 16 the next never want to cap your upside. Look, i think you should try to find yourself a bond fund thats very short term right now because Interest Rates are going to go higher and then youll look in some good cds. Thats the way have you to do that. Remember, thats because you cautious. I think youre way too young for that strategy, way too young, but i have to always accede to the wishes of the people that call. Otis redding said it best, we can learn from our mistakes. A secondary doesnt always mean a company is in big trouble. Many secondaries i want you in on and some that have been unbelievable to make a lot of money w. After the break, ill try to make you more monemake y. Yup, ever a musician who understood the stock market it was kenny rogers. Im not being glib, know when to hold them and when to fold them. Know when to walk away and when to run. Thats fabulous investing advice. After painstakingly reviewing the last five years of trades made my Charitable Trusts, ive got suggestions for when you should fold them if not walk away from your positions or even run. Before i get there though, let me remind you im not blowing smoke here. Not sharing my opinions. Opinions are like something unspeakable on national television. Everyone has one. They all stink. No, im sharing the results of my rigorous Empirical Research into what works and what doesnt, research i conducted when writing get rich carefully, my most comprehensive book yet about the stock market. So in the spirit of the gambler, i need to tell you that when it comes to picking stocks, cash is not always king, despite what youve heard. In fact, if you buy a stock just because its sitting on a mountain of cash you could get crushed. Think about it. What does cisco, microsoft and oracle all have in common . People were trying to buy their stocks at very high levels because they had so much cash on their books. You heard pundits say this or that stom stock has a gigantic amount of capitalization in cash and therefore its cheap. Must be bought, as if cash per se is somehow a bullish thing maybe in a high Interest Rate environment it might be good because then Companies Get some extra income. But unless rates are high, cash by itself actually means very little. What really matters is how Companies Put that cash to work. Sure intel, cisco and microsoft will give you nicesized dividends but those yields havent met much in terms of a floor, right, unless that kind of a floor. These tech titans bought back a lot of stock. Im not against stock buybacks but these companies have bought them badly. You can buy stock badly, often too high. Buy their own stock all over the place at any height, any time. Whether its attractive or not at the moment. In short, cisco, oracle, microsoft and intel may have a lot of cash but thats been wasted on a lot of undisciplined buybacks and when you see a company doing that you should pass on its stock. Time to walk away. Sell, sell, sell. One of the best performing stocks since the generational bottom in 2009, its called windham world wide run by steve holmes, one of the most shareholder ceos out there, buys back stocks aggressively and when it makes a difference, particularly in the ravaging downturns when most of the ceos seem frozen and are unwilling to step in and take advantage of the weakness thats market driven, not win theham driven, even though the declines truly, truly are obviously not stock specific. Plus, windham ratchets up its dividend far more than expected every year because holmes thinks its his duty to return his Company Excess cash to the shareholders. Its their money if all of windhams Business Needs havent been member of the i find that refreshing. He doesnt sit on it and do nothing except watch it grow at a ridiculously low rate of return thats slower than watching paint dry. No, holmes is part of a new breed of executives. He wants to fulfill his end of the social compact with shareholders. You stick with him, and you dont rent worldwide stock. You own wind hrm worldwide stock. In return, holmes makes sure you get your cut of the business. And he grows that business as fast has he can. Hes the very model what have intel, microsoft and cisco need at helm, someone who understands that the stock price going higher is very important and recognize that its part of his job to figure out the best way to make that happen. Let me tell but another sign that you should fold on a stock and leave the table. If you own shares in the company that starts blaming its customers for its poor performance. Boo. Its time to walk away. Sell, sell, sell. Oh, boy, i learned this lesson the hard way. My Charitable Trust decided to buy juniper networks, the making of network and communication equipment back in 2011. Juniper was trading in the low 40s when it had its first shortfall. At the time they blamed nameless japanese customers for lack of orders. I dont know, i listened. Frankly i thought the explanation plausible. Japans teleco companies were huge users of juniper products and the company and the country both got hit by the tsunami, right, the subsequent Fukushima Nuclear disaster dried up orders so it was natural to think there would be a pause in orders after the catastrophe. Soon the stocks dropped to the 30s. This time we heard orders were from europe and the United States. I stuck with juniper because the company had a ton of cash. Oops. Pretty clear europe had a lot of problems and i ascribed it to the mess and the fact that the u. S. Government had been a big juniper customer. We know the governments belt tightening. Not until the stock dropped to the 20s, now youre in half, that i realized juniper blame the customer act was a pretty darn lame alibi. Turned out major competitor cisco was taking market share the whole time, kicking their butt with a better mauss trap. The juniper customers were sitting on their hands. They were just they were buying elsewhere which i didnt realize until we dug deeply into ciscos quarters, not junipers. The information was indeed there to be had but only from a competitor, not from juniper itself. Theres a Pretty Simple moral here. When a Company Blames the customer, check to see whether the customer isnt actually still buying except from a different vendor. Heres the bottom line. Know when to hold them and more important know when to fold them. When a company is sitting on a mountain of cash and not doing anything with it beyond wild undisciplined buybacks thats a stock you do not want to own. When a company starts blaming the companies for shortfalls like juniper did in 2011, always be skeptical. Those customers may simply be giving their business to another player. Can i speak to layer in massachusetts, larry. Caller hey, jim, to prepare us for the next earnings season you hate companies that dont prewarn about bad news and chide those who always tell a downbeat story yet youre a big fan of underpromise, overdeliver. Since the headline number is often misleading, could you list some of the buzzwords we should look for on a Conference Call to sniff out a wall of shamer versus a conservative overachiev overachiever. Okay. You actually want to see right up front. Avon had one of these not that long ago where they said, listen, it was a bad quarter. You want to hear someone say a bad quarter is a bad quarter f. Quarter wasnt bad go right to the numbers and right before the q a begins give us at r an outlook of what you think the forecast is going to be for this quarter and next year it should be reasonable if you want to raise the forecast, dont go nuts but show us some conviction that business is going to be better next year or shut up. Lets go to tomy in maryland. Tome. Caller jim, thank you for taking my call. Of course. Caller how did i identify a bubble stock and if im positioned in one how can i strategically plan my exit . I like to own, if im going to own a stock that you call a bubble stock do it with deep in the money calls that cuts off my downside. Lets anticipate the upside. Bubble stock to mesa stock thats not defined by the four walls of earnings per share, a stock thats measured on revenues or some other cockamamy way to measure things. I like earnings per share. I accept the fact that when im not in an earnings per share environment im playing a bubble and do it with team in the money calls because all youre really doing at that point is playing the greater fool and thats okay. It can be played. Can i go to ian in new york. Ian. Caller hi, jim. Thank you for all that you do. Youre terrific, thank you. Caller i own Goldman Sachs and qualcomm and held on for 60 round trip on each stock because i believe in their stories. Jim, my question to you is what specific percentage decline in a stock would you accept or would cause you to automatically pull the sell tryinger . No, its always based on the fundamentals. When i was a trader, listen, down 5 ive got to go, because i dont want to turn a trade to investment by having it go against me, but these days im not a hedge fund. These days if i do the homework and the stock goes down, im just drawn to that decline, not against it. Remember, im not endorsing bubbles. Im not saying you should chase bubbles. Im saying if youre going to do the bubble thing, do it with deep in the money calls. Its not my thing. My Charitable Trust doesnt own any stocks that i regard as bubbles. As stock sage kenny rogers tells us, youve got to know when to hold them and when to fold them. Watch out when companies sit on heaps of cash doing crazy buybacks that dont generate any returns for you, and beware of companies that blame the customer. Stay with cramer. [ chainsaw buzzing ] humans. Sometimes, life trips us up. Sometimes, we trip ourselves up. And although the mistakes may seem to just keep coming at you, so do the solutions. Like multipolicy discounts from Liberty Mutual insurance. Save up to 10 just for combining your auto and home insurance. Call Liberty Mutual insurance at. To speak with an Insurance Expert and ask about all the personalized savings available for when you get married, move into a new house, or add a car to your policy. Personalized coverage and savings all the things humans need to make our world a little less imperfect. Call. And ask about all the ways you could save. Liberty Mutual Insurance responsibility. Whats your policy . A huge part of this business can be wild down to a simple thing, figuring out where a given tock is headed. Of course, that isnt always easy. Sometimes its a lot less obvious than the other times. As im constantly telling you most stocks most of the time trade on their earnings per share numbers when the earnings are heading lower, so is the stock and when the earnings are going higher, the stock rallies. Actually figure out the trajectory of the earnings might take serious homework but at least you know what youre looking at. Of course i said most. Most stocks. Most of the time. You didnt know that for some ministries earnings are not the most important metric and if youre only watching earnings per share you could end up being clobbered and miss fabulous opportunities. Thats why you need to keep track of the key metrics for everything you own. For example, when it comes to oil companies, Production Growth, not earnings is the key. For many tech stocks its the average selling price of their products, not the earnings, and these two sectors, these metrics are more important than anything related to beating the earnings estimates that are out there. Let me give you a case study. My Charitable Trust owned debit energy during a period when it repeatedly beat the earnings estimate but the Production Growth disappointed quarter after quarter. They were not producing enough oil so even though they classically beat wall street estimate production went down and the earnings per share number didnt matter. In fact, if they reported lower earnings and higher Production Growth the stock would have rallied. I know that because my Charitable Trust owned chevron at the same time and while chevron didnt hit the numbers it was projected, Production Growth versus what people were looking for versus its peers no. Wonder they have been one of the worst performing equities in the oil patch, but i believe devon has been undermanaged for a long time. Another exam. Totally missed the bottom in mike ron, the Semiconductor Company that makes memory chips back at the end of 2012. Why . Because i wasnt paying enough close attention to the real key metric here. Mike ron stock had been a dog for more than a decade so when the Company Reported one more terrible earnings number, i thought nothing, who cares. Then the stock jumped. What did i miss . Deram pricing, dynamic random access memory chips, and mike rons bread and but her a nice bump up in their average selling prices, asp, during the quarter, not down, but bumped up. That extraordinary but something no one expected. It happened because the deram business was so horrible for so long Many Companies in the industry had thrown up their hands and given up so supply had become really constrained, a rarity in this semiconductor business. Mike ron went on to buy a failing japanese competitor taking more capacity and its been off to the races ever since from december 2012 to december 2013. Triple. One more situation you need to be aware of, a metric that might not seem to be important but its actually all that matters. When a company is based in the United States and all we really care about is how its doing in emerging markets, particularly china, one of my best buys of my Charitable Trust ever was picking up yum brands. All of a sudden of declining chinese sales because of a tainted kfc scandal. Yum is a worldwide outlet with locations everywhere but the growth of this company isnt in the United States but in china so when the chinese kfc division had a shortfall and the rest of the company did well and the rest of the company got beaten, estimates were beaten and with endown. Soon after the company demonstrated it turned china around, yum let it be known that its earnings would be slashed as it boosted chinese advertising. In other words, eps coming down. No matter, even though the earnings were about to get hurt you had to buy the stock on the earnings shortfall. Not long after that the Chinese Business turned around and the stock headed right back to its 52week high because kfc sales growth in china is more important to yums stock than the actual reported earnings of the entire chain. In short as much as we like to keep things simple and focus on the earnings per share sometimes the truly important metric can elude us if we dont keep our eyes on the ball. All that said, lets not kid ourselves. With the most stocks, earnings per share the key number. Ever since the bottom in twn endless criticism on how averages rallied on bottom line numbers only without real Revenue Growth. Im telling you that analysis was and is absurd. Anyone that waited for Revenue Growth to kick in missed the whole move. The socalled experts think they are being careful when they tell you to wait for revenues but they are being reckless and kept you out of some of the best stocks out there. Bottom line. Earnings are not always all important. In some sectors like tech and oils, not to mention u. S. Companies that depend on overseas growth, key metrix matter more than earnings and those are the metrix you should watch, but for the bulk of the market nothing is more important than beating the earnings per share estimates. Still with cramer. Were moving our company to new york state. The numbers are impressive. Over 400,000 new private sector jobs. Making new york state number two in the nation in new private sector job creation. With 10 Regional Development strategies to fit your Business Needs. And now its even better because theyve introduced startup new york. With the state creating dozens of taxfree zones where businesses pay no taxes for ten years. Become the next business to discover the new new york. [ male announcer ] see if your business qualifies. If theres one lesson ive learned from viewing all my trades from my Charitable Trust, all the ones for the last five years, actually 14 of them and get rich carefully but the one i want to leave you with is this. When you have a core hold in your portfolio, a hot terrific stock with prospects that you want to own for the long haul dont sell it at the first little gain or the first sign of turbulence. If you really have a conviction in a stock, you do need to let it ride. Let me put this in sports terms because a lot of people will understand it. When a Football Team wants to keep a player no matter what, they name him a franchise player. That means he cant be traded to another team. I cant tell you how many times i wish i had that destination of franchise player of a great stock from my Charitable Trust. Instead when a core holding and say we want to own it thick or thin, say we want it, thats the word, operatives say, but so often we dont follow through with that, and its almost always a big mistake. The temptation gain is so palpable it can take every fiber of your being to fight against it. Its such a difficult task to keep a fabulous stock riding in your portfolio because you never wanted to let a gain turn into a loss but when i first penned a gain to loss rule many years ago, ten years ago actually i was really talking about trading winds, not investing gains. If you own a stock and think you can go up from the next few years, not next few days then by all means do your best to make it a franchise player. Stick the nontrade label on it. You wont regret it as long as fundamentals stay positive. All bets are off. No franz trade there. If thats the case you Must Immediately sell or youll truly be to blame with the gains. Thats the only case you rid yourself of a core holding or i suspect youll leave an enormous amount of money on the table as it climbs higher without you and all that Great Research you did out the window. Once the stock is dubbed a franchise player, stop giving it away please. Hold out for better prices and if it comes down to your spaces, guess what, buy, buy, buy. My record is Crystal Clear on this. When we own a stock thats clearly undervalued in the underlying enterprise i have to do everything i cannot to take the gain and eliminate it. That disparity between what its trading and what its really worth got to let it percolate. Sure im willing to part with some of my position on the stock but its vital you keep enough left in your portfolio so it will still be meaningful if the stock continues to advance. What makes me so sure of this rule . Because we rate stocks one to four every week in the Charitable Trust and one are meant to be core positions, franchise players and they are supposed to be hallowed ground. Want to get as many shares as we want but as i peruse the bulletins from the last five years its wonder how many categories of ones we sold, just because of some shortterm market turbulence. Looking for the stocks to continue to roar ahead after i sold them. Core position is what it sells, something intercabral to your portfolio. Not so easily dislodge. If we had been able to hold on to more core positions for the trust wed be able to donate a heck of a lot more to charity than the 1. 8 million weve given away since i started the project. Core openings are called that for a reason. Resist the urge to sell your franchise players no matter how tempting it might be. The only time it makes sense to blow out of a core holding is if the fundamentals take a nosedive, but aside from that, you need to try to let these winners ride, only trimming your position somewhat and keep it from getting too oversized versus the rest of your portfolio. Mad money is back after the break. When folks think about what they get from alaska, they think salmon and energy. But the energy bp produces up here creates Something Else as well jobs all over america. Engineering and innovation jobs. Advanced Safety Systems technology. Shipping and manufacturing. Across the United States, bp supports more than a quarter million jobs. When we set up operation in one part of the country, people in other parts go to work. Thats not a coincidence. Its one more part of our commitment to america. Got to get to some of the tweets youve been sending me jimcramermat tweeds. First one from brian gagnon. How certain is your exit strategy before you buy a stock . Thank you. If it is a trade, i have a catalyst. When the catalyst comes, no matter what i sell the stock. If its an investment, my exit strategy s multiyear. If i sign it as a franchise player, meaning a number one. You can read all about how i grade things and price targets and everything in actionalertsplus. Com in a weekly bulletin with stephanie link. And in tweet, andy asks the best piece of advice youve ever gotten. Actually from a friend Jack Shepherd who told me they dont all go up at once. I used to get very upset when i would have stocks that went down on an up date and it would just drive me crazy until he told me he was driving him crazy. Keep that in mind when you have a bad position. Maybe the others are good. Up next a tweet from sammyd1000 who asked are you a fan of selling puts in order to buy a stop position. I think its idiotic. When you sul a put you have unlimited downside and limited upside. Remember this was important. When i was in the 87 crash the people who did that strategy got wiped out and its indelible in my mind. Next tweet, jim, when you have a price target whats the time of fruition . Six months, a year . No, there isnt. I just want to own it and if the story keeps checking out, i will stay in it. If the story doesnt check out, if it starts getting worse, i will go. Our next question, my 4yearold son gets excited when i turn to madmoney with jimcramer. Hopefully all the stock advice will stick with him for life investing. Look, im a huge believer that if you get people in early they can make mistakes and they have the rest of their life to make up for the mistakes. Thats why im so passionate about early. Lets take a tweet from barney who asks is a buy order treated differently from a buy cover short order in the nyse system . What matters is what your broker does, if your broker has a different type for short and type for long then you have to desig name. I dont know what your broker has. Lets go to a tweet from katie who asks me the following. Thanks for everything you do for us homegamers. Love the show. Youre very sweet. I do pour my heart and soul into this one, ive got to tell you. Up next, how is the little guy supposed to get in on an im poe . Call four different brokers 2, 50 minimum and get a shot at some shares. It is up to the brokers, guys. I know it seems unfair. Its the way its been, and i dont think that you can buck the trend. This is for something thats good clients and the ones you cannot get for good clients tend not to be that good. Its a fact life. Life is unfair. Stick with cramer. Are you long america . We, ford, are competing with the best companies in the world. Lock at et competitiveness of any company by any measure. My life story can be your life story. You can start with nothing in america and create the american dream. Humans. Even when we cross our ts and dot our is, we still run into problems. 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