Mad Money w/ Jim Cramer 9/24/26

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1:00I'm here to level the playing field for all investors. There's always a more market summer, and I promise to help you find it. Man money starts now. Hey, I'm Cramer. Welcome to Man Money. Welcome to Cramer, Ark. I've been with my friends. I'm just trying to make a little bit of money. My job is not just to entertain, but I'm doing some teaching tonight. So call me at 1-800-743-CBC. Tweet me at Jim Cramer. Let me tell you why I do this show, and why I wrote How to Make Money in Any Market. For most of my life, pretty much everybody in America recognized that picking individual stocks was a fantastic way to get rich. As long as you did it, right? Not everybody agreed on the right way to do it. But practically, everyone accepted that it was certainly worth doing. Then the dot com bubble burst in your 2000, and picking individual stocks suddenly went out of style.

2:00At least for regular people. Something that was a new conventional wisdom and Wall Street, the conventional wisdom of index fund supremacy. Almost overnight, leashes of experts backed up by an endless parade of non-investing journalists came out of the woodwork making a pernicious argument that you were either too stupid or too imprudent to manage your own money. They claim that it's more or less impossible to consistently beat the market. So you might just as well park all of your money in an index fund that mirrors one of the major averages, like the S&P 500. The more extreme index fund absolutists like to say that no one can consistently beat the market. And if anyone looks like they can or say is they can, it's pure luck. That means picking individual stocks is nothing more than gambling, where you have no edge. So why not settle for an index fund that can consistently give you 8% to 10% and return? Sure, you won't get rich, but you'll steadily make money over time. I like that. After the dot-com bus and then the financial crisis that already became pretty darn compelling, this is the ideology that is absolutist.

3:02And for that, I think it's wrong. I've been fighting since Mad Money first went on the air. Why? Because as I explain how to make money in any market, it doesn't work. If you're willing to do the homework and it's never been easier to learn about the companies behind your stocks, individual stocks can change your life. They can make you rich in a way that no index fund ever could. And it happens. I have seen it endlessly with my own eyes. And hey, it's absolutely possible to beat the averages. Take the S&P 500, the benchmarkable benchmarks. There are 500 stocks in the S&P. Most of them are not all that good. In fact, at any given moment, I don't think there are 500 good stocks in the entire market. So when you buy an S&P 500 index fund like this SPY, the SPY, you're buying the good with the bad. Which brings me to the unbornness truth. You will most likely not get rich just by owning index funds. That's why I still recommend putting 50% of your savings in index fund. I'm a believer. But that's purely as a hedge against the mistakes that do inevitably occur when you manage your own money.

4:04Picking stocks is higher risk than owning an index fund. So you need the index half as backup. But at the end of the day, an S&P 500 index fund is really an amalgamation of a few good stocks with a lot of mediocre ones. And plenty of flat out bad ones. The stocks of fresh-faced wonders regularly get out of the index, but they're still outweighed by everything else. And that's the crux of my argument. If you follow your nose, eyes, and ears, if you know how to look for opportunities, then I believe you can trounce the indices. But if that's the case, how did index fund supremacy become the conventional wisdom? Simple. There's a whole industry of financial advisors who can't afford to waste time focusing on you, focusing on regular people. That's not where they make their money. So the most responsible thing they can do is tell you to park your money in an index fund. You'll think, okay, certainly better than you would keep it in cash or check your account on the money market fund. And the financial advisor never has to hear from you again. I'm not saying this to blame those guys.

5:04I was one of them. It's not like the professionals are out to get you. Even if they wanted to help you, they can't. Because you see, you're not rich enough. In my years at Goldman Sachs, I spent a lot more time trying to find billionaires to advise than helping regular people with their money. We called it elephant hunting. We were looking not for families with hundreds of thousands or even millions of dollars. But with hundreds of millions of dollars, and this is back in the age when a million bucks went a lot further than it does now, it takes just as much time to service someone with a small pot of gold as it does to help the oligarchs, which is why these firms devote so much time to helping the extraordinary wealthy, so little time to help everyone else. Unfortunately, our financial regime in this country is actually a lot like our healthcare system. It's impanageable and it caters to the wealthy. Anybody else has to hope that the provider has an ounce of knowledge and enough empathy to share it with you. The difference is that it takes years to become a doctor, but it's much easier to become your own portfolio manager. An index fund is what the financial doctors prescribe when you don't have top

6:07tier insurers. It's the best they can do under the circumstances, but you can do better on your own, as long as you're willing to put the work in. While I respect the index funds for what they are, they'll never give you enough juice to get you to really where you need to go. Consider them insurance against your individual stock portfolio boiling up your face. They're a bit of a safety net. Your real gains though will come from the other half of your holdings, which I recommend putting in five individual growth stocks, of course, a diverse-wide set of industries, and one non-stock hedge, like maybe gold or even crypto. The SB500 is the average choice. The stocks of the index are not selected for their greatness. They're selected because they mirror American business. The keepers they index don't put a premium on growth stocks, even though growth stocks have historically been the best performers. Again, I don't blame them because that's not the point in the SB500, but I do blame the people who insist that index funds are the best you can do. While there are some growth indices out there, I don't want you to own good growth and bad growth.

7:08I only want you to try to find the best growth companies. Those are the ones that historically speaking are most likely to make you rich. Sticking purely with the index funds will only make you average. Of course, it's better to be average if broke, which is why I still advise putting half of your savings in an index fund like the SPI, but you need to use the other half to go after bigger gains. Unlike most professionals, I see the world is divided between two kinds of risks. The very real risk that comes from losing money in a bad stock, and that just is real risk of missing out on a great stock that could give you a 1,000% return over time and transform your entire life. Unlike the index funds that Vangelis, I think you can walk with an index fund and chew bubble gum with individual stocks at the same time. Here's the bottom line. Like I explained and how to make money in any market, putting some money in an index fund isn't bad advice. It's a good way to play it safe, but most people can't afford to purely play it safe

8:08unless they're already rich, which is why you have to put the other half of your holdings in the mix of individual stocks that you choose and a non-stock hedge. How to pick them? Stay tuned and you'll find out. Let's go to Jacob in New York, please. Jacob. I'm in a show for a long time now. I'm from Long Island, New York, and then my sophomore year at Penn State as a financial accounting major at the field business school. I'm hoping to bring him to Wall Street one day. That's true. You're the one that got me excited to start investing, actually. Well, Mr. Schmiel got me excited to invest in. Come, sorry, but he was a great man. He was a great man. How can I help? Yeah, so I have a question for you. I want to hear your advice on how should a young retail investor structure their portfolio to take advantage of long-term growth through ETFs and solid stocks. Well, still leaving some room for risk your short-term trading to keep things exciting. Okay. I'm not so interested in short-term trading. I understand you might want to do that. I think you go with the highest growth stocks. You just really have your whole life ahead of you to be able to make a lot of money.

9:10So let's load up within the index fund, but then the highest growth stocks and then pick one stock that you think is really speculative and it doesn't work. You get another one. But we're going to go for Gusto. We're going to go for the best early one and let him cop out. I want to go to Glen, no one will know. Glen. Jim, my question is, a number of times in the past, if you say that you really like buying individual stocks and you seem to kind of dismiss the idea of being in mutual funds or ETFs, I was curious why you feel that way. Okay. Well, let's be sure. I have a huge amount of money and index funds and ETFs. I am not against them. I am saying that I am a throwback to the way it always was before people went nuts with index funds. I like to have a mixture of both. I can't own stocks myself. So of course I own mutual funds and I own ETFs. But I just think they're part of the mosaic, not all. That's my bias. The people who like only index funds, I call them into question. I am willing to coexist with them,

10:11but they're not willing to coexist with me. Kelly and Florida, Kelly. Thank you for taking my call, Mr. Kramer. I have a question on your philosophy on stop cell orders and trail stop orders. Right. When do you use them? And what percentage you should set them at? Well, I am always reluctant to use stop orders because sometimes what happens is you just blow right through your levels and up with the worst price of the day. You're at the mercy of the market. I like to do set limit orders and I think that that way you will never come up with something that says how the heck did that happen to me? Right. I'm not saying only an index fund isn't a good idea. I love it. But you only make real money if you pair that index fund with some high quality stocks, like we used to do where people went nuts owning just mutual funds that are indexed, that lever only to be indexed. Oh, man, money tonight. I'm teaching you all about how to make money in any market, starting with how I came up with my famous investing acronyms and how you can find out some of these on your own.

11:13Then if you pick your own stocks, you have to have an edge. I'm giving you one mantra to keep in mind that will save you from embarrassment and losses. And there's plenty of stocks you can buy but there are definitely others you should avoid. I'm running through the list pitfalls that you should stay away from when looking for names to add to your portfolio. So stay with Kramer. Don't miss a second of mad money. Follow at Jim Kramer on X. Have a question. Tweet Kramer. Hashtag mad mentions. Send Jim an email to madmoneyatcnbc.com. Or give us a call at 1-800-743-CNBC. Miss something? Head to madmoney.cnbc.com. The world is transforming faster than ever. And standing still isn't an option. At Oppenheimer, we're working at the forefront of the innovation economy to invest where progress begins, finding opportunities that build and protect wealth

12:14for individuals and institutions that want to seat at the edge of tomorrow. Put the power of Oppenheimer thinking to work for you. Wealth management, capital markets, investment banking. If you're a small business, the right hire can be maker-break. Indeed, sponsored jobs gets you quality candidates when you need them most. Join the 3.3 million employers worldwide that use indeed to connect with quality talent that fits their needs. Listeners of the show will get a $75 sponsored job credit to help get your job the premium status it deserves at indeed.com slash podcast. That's indeed.com slash podcast. Terms and conditions apply. Hiring now? Then this is a job for indeed sponsored jobs. With the Discovered Cashback card, it's payback time when you earn cashback on everyday purchases. Activate and earn 5% cashback at different categories each quarter on up to $1,500 in purchases. That's 5% cashback at different places each quarter, like grocery stores, on gas, and at restaurants.

13:18It pays to discover. Terms applying. See Discovered.com slash 5 for details. Like I told you before the break, we live in a time where picking stocks is stigmatized. Most respected experts in the industry are always telling you to own index funds. But the most part, the big boosters of individual stocks often love to promote the most speculative stocks and existence. Insanely high-risk stuff that all blows up in your face. Tonight, I'm coming out here to advocate something very different. Good old fashioned growth stock investing. Today, this is widely considered heretical. But for most of my life, time it was the most orthodox opinion on investing and it didn't well. I'm just trying to teach you what generations of investors need to be self-evident. Unfortunately these days, this sophisticated operator has loved to tell you that people are too stupid to manage their own money. I find it insulting. But I've got to tell you, when you look at the history, it's not that hard.

14:20As long as you know how to stick to your guns. This is my thesis, by the way, and how to make money in any market. In every market there are leaders. These are what I call hero players. We must strive to find and man sometimes they're incredibly obvious to find. Of course, I've had plenty of clonkers my day. But with the power of observation, some curiosity. Those are the two things you need. You can absolutely identify some of these phenomenal winners. And when you find a hero player, even if it's just one stock and your five stock portfolio, that's enough to produce some tremendous life-changing returns. And maybe far I'll pace in the SB500. Let me give you a little history of us. Back on February 5th, 2013, on this program, I introduced the term Fang. That was Facebook, Amazon, Netflix, and Google. And I urged people to invest in the four Fang stocks right then and there. And I really pushed it so hard. And I pushed it many, many days, many, many years. The acronym was the culmination of my DI-developed, with the trader and analyst Bob Lyon, who worked with me at TheStreet.com. We were searching for a way to shine a spotlight on the best close stocks of the time.

15:20We wanted everyone to buy it. decade later, when Bank of America strategist Michael Hartnet coined the term Magnificent 7 for the slightly expanded and adjusted group of Alphabet, which is the old Google, Amazon, Apple, Meta platforms, that's the old Facebook, Microsoft, Nvidia, and Tesla. I went all in. I tried to trust it, Oriones, six of the seven, seven, safe, Tesla. So it seemed only sensible. You can now follow the trust by joining the CVC Investing Club. So you have to ask, how did I spot Fang or Fang, which was how I integrated Apple? And why was I so quick to embrace six of the Magnificent 7 years before the term was coined? Simple. My eyes were open. I'm always hunting, not just for Amazon, but for the next Amazon, or the next Netflix, next Nvidia. If the Magnificent 7 lose their magnificence, then there are another seven out there, believe me, they're just waiting to be found. And they too could be very obvious. But as long as I think these proven winners can stay strong and deliver, I'll stick with them. That said, look, I'm confident there are many, many more amazing growth companies with incredible stocks around.

16:24I hear about that every day. I hear about that every day. I hear them from you and the white around. Here's the thing about Fang and the Magnificent 7. They were obvious. They were in your face. You can see them moving higher day after day for years. Your kids can tell you all about them. In some cases, these went up for more than a decade. You didn't have to be a genius to make money in these things. In fact, being a genius might have heard you. A lot of people in this business are too clever by half. They see a good thing and then they overthink it, scaring themselves away from phenomenal winners. Let's say that on the day I introduced Fang, the Fang acronym. Remember, this is when these companies were already established, and already the big ones you knew about, no one queried to discover. You required. You decided to put $1,000 into each of the four of them. Let's do the math here. Then you put an equal amount, $4,000, because there's four, into an S&B 500 index fund. From that day, in early 2013, to the end of 2024, your $4,000 in S&B would have been terrific. It would have turned in $19,400. That's a 14.2% annual return. Not bad.

17:25Let me ask you. What if you invested $1,000 in each of the four Fang stocks, like I suggested? Adding a lot of Fang would have given you your $4,000, $82,655 from 2013 to the end. You would have had, right? What would you prefer? In the 2000, those four-year-old stocks were less than $20,000, the SB 500 index fund. It is a choice. It's your choice. It really is. When Apple, which hadn't been added to Fang at that point, would have turned in $1,000 into $17,994. So, double A, Fang was also a winner. Does this prove anything? I'm sure that some people say, hey, listen, it's backdated. Others will be saying it's cherry picking, because they'll survive the greatest taxable time. Yet, here's the deal why that's not true. I was coming on air practically every night and recommending Fang. They were hiding in plain sight, like Edgar Allan Poe's Proloin Letter. They were companies that you probably interacted with every day. Why can't you find them? They were there for you. You knew them. They were available and obvious to anyone who cared to pay attention.

18:26In fact, before I aired the segment on Fang, way back in 2013, you know what I did? I wonder if it was a waste of time, because these four stocks were so obvious. Everyone knew them. Was I really bringing anything new to the table by highlighting them? In retrospect, it was good to pay attention. It still is. But let me put my personal examples aside for a minute. A couple of years ago, an economist from Arizona State University, a fellow president of Hendrick, Besenwinder, published a paper on the difficulty of picking individual stocks. Now, he's another possible index funds, because he found that only a small number of individual stocks produced the vast bulk of the market schemes. I look at the same numbers and come to a very different conclusion. Looking at data from December 31, 1925 until December 31, 2023, Besenwinder sought to examine how well you could do with stocks, providing you reinvested dividends and didn't sell. His first finding is historically the majority of the 29,078 stocks he looked at did not make money. Now, it shouldn't shock you. I'm not telling you to invest in just any old stock.

19:26Most stocks have zero pedigree and their gains are often the product of an overthusiastic public and greedy investment bankers trying to feed the maddening law. His second finding, there were thousands of stocks that would have absolutely made you money, but perhaps not enough to justify investing in them instead of an index fund. Now, a decent return, but an average return for average investors who want to see average gains, index funds, they're fine. But they're not the heroes we're looking for, and remember I still advocate them. His third finding, 17 stocks delivered two unit returns of more than 5 million percent, or $50,000 per dollar invested. That means a thousand dollar investment would have yielded upward of $50 million. Alright, these were all relatively well-known companies, a Boeing, IBM, CoCo, a dear Johnson and Johnson. They could have made you fortune. Best and minor things to that, that's like finding a needle in a haystack. Do you think that? Do you really? The bottom one. It's only hard to find these heroes stocks if you're picking randomly. For anyone with eyes to see, we're talking about obvious winners that tend to keep looking for you for years and years.

20:28Those are the stocks I'm always looking for, and when I find them, I'm never going to shut off of that. Nip on his back, get to the right. With the Discovered Cashback Card, it's payback time when you earn cashback on everyday purchases. Activate and earn 5% cashback at different categories each quarter on up to $1500 in purchases. That's 5% cashback at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to discover. Terms applying, see Discovered.com slash 5 for details.

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22:41All might have been making the case for picking individual stocks, rather than parking all of your money in index fund that mirrors the SP500. As I put out and have to make money in any market, very few stocks generate tremendous long-term outperformance. The ones that do rarely come out of nowhere. They tend to be obvious high profile, usually in the kind of business that you regularly interact with in your everyday life. But this is a big but. If you're going to pick your own stocks, you need to have an edge. When I got started in this game, it was much harder to access information, which made investing a real headache, very time consuming. At the same time though, it was also much easier to get an edge to know something that other investors don't, because there was all sorts of data buried in places that no one would ever look. These days, everything is on the internet. A few search queries, maybe a little dialogue with one of the chatbots. And you can access most of what's relevant that you need to pick a stock. You barely even need to think about it. My day was very different. When I first started picking stocks, I was working at a thing called the American Warrior in New York City. I moved from the backseat of my Ford Fairmont to my sisters' catch. I was able to put away a little money.

23:45So I opened a brokerage account and started reading articles and business publications back then. I was always keeping an eye on stocks with low dollar prices, single digit names. Because I assume I get more bang up for my buck if I could buy more shares at once. God, I was young. But back then, you had to speak to a human when you placed in order. And I didn't want to embarrass myself by saying I wanted to buy seven shares or something. I could imagine the broker when the other and snickering to herself, laughing at me, while I was paying my 2% of the trade during commission. A couple of bucks, perhaps. Now most brokerages charge you no commission at all. And you can do it all without ever speaking to a human. Of course, I had no idea what I was doing when I got started. My first stock, stock called American Agronomics. It was a Florida based company built around orange groves. The American Warrior had 4% to its library and I figured nobody knew stock better than Forbes, right? Forbes recommended a stock. What could be better than owning an orange grove? People are always going to be drinking an orange juice, right? Keep in mind this was a few years before trading places. And all time great comedy with Eddie Murphy and Dan Acquoid. We're the big guys who lose a fortune trading orange juice futures.

24:50But I don't think Eddie Murphy was even once in a life at that point. So I bought 10 shares of American Agronomics for 10 bucks each. Then I sat back to watch the magic happen. Well, almost immediately Florida had a rare flash for us in the stock almost went to zero. That's pretty to make, buddy. I dug deeper until I can find a stock that sold for even lower price again. So I can buy even more shares. I returned to Forbes. And this time I found a stock called Bobby Brooks. It was a woman's fashion company. As little as I knew about growing oranges, I knew even less about women's fashion. Didn't matter. It's just two bucks a piece. I mean, I bought 100 shares. How much can I lose? How about everything? Soon after they bought the stock and started slinking lower and then lower again. Bad selling season, wrong clothes, bankruptcy, yikes. I remember thinking that the saving grace of the stock market was that the declining stock can't go below zero. In retrospect, given that I knew nothing about women's fashion, I deserved to lose everything. Didn't I? And that's why I decided my mistakes was not knowing more, much more about these companies than what I read in Forbes.

25:50These articles were meant to be a starting point. Yet I was treating them as an end point. The last thing I looked at before I pulled the trigger. I had no research on either stock and I couldn't figure out where to start. I was closely giving up until I got a call from a childhood friend who told me that there's some hiring going on in the neighborhood that I was in Philadelphia. He told me that a local fastener company, Screws Boltz, was looking for workers, was called Standard Press Steel SPS. Almost a years in business at the time. He suggested maybe I should take a job. It was much better than money I was making as a journalist, although that's a little bar. I didn't take the job. But you know what? I recognized what my friend was telling me as useful information. Standard Press Steel was hiring. That must be doing well. The stock was at 35. I had to wait until I could replenish my coffers enough to buy five shares. Before pulling the trigger this time I decided to learn a little more about the company. Was it making money? Was it losing money? There's a simple lesson. When a company has got so much business that it needs to hire more workers to meet the man, that's a good sign. But that was all I knew so I decided to hit the books. I found a kind librarian in New York City's giant flagship library who passed me off to a second librarian who knew something about business.

26:58She's planning to meet a public company's hadn't to file anything important that they did with the Scurries and Exchange Commission in RSDC. She said it was a separate library and a separate building that had those filings. There was no sexual index of anything back then. No search query. No recent information. I was flying by. Blind. All I knew was this company, SPS needed more workers. I decided, you know what? That's enough. I bought my five shares. Stock immediately jumped and I made 15 bucks. That didn't make up for my previous losses. But I decided it was stripping to make some money and stocks. I sold it. Looking back I should have stuck with SPS was eventually bought by precision cash ports, which in turn was bought by Borkshire Hathaway. After I sold my shares, I analyzed what I'd done right and what I'd done wrong on these first three trades. Something that's become a ritual for me on every trade. On the first two American agronomics and Bobby Brooks, I was basically just relying on journalists who were relying on sources who wrote articles that they thought were right. I liked the orange gross topics I figured the people always freak orange juice. What kind of edge was that? I also liked it was only $10 but that was irrelevant.

27:58As for the flash frost that wiped out the orange harvest, I lived in Florida. I'd even covered a couple of these freezes for the Tally Sea Democrat right out of school. No excuses there. My Bobby Brooks tram was a pure revenge trade because I was trying to make back the money I lost but it turned out to be revenge against myself. I knew nothing about women's clothes, nothing about the car. Nothing at all. I didn't even know how to read the numbers. Not that I looked at them. What did I know to win in SPS? I knew something that wasn't widely known, at least back then. I knew they had more business than they expected. It wasn't everything but it was something that few outside my neighborhood would have known. I had an edge which brings me to the bottom line. As I explained it how to make money in any market you should never buy anything that you don't have some personal knowledge about unless the stocking question belongs to a well known best-of-breed operator. But for the vast majority of stocks don't even think about buying them unless you actually know something about the underlying company and remember it's never been easier to find out. Let's go to Lois and Massachusetts Lois.

28:59Hello Jim. Hello. How are you? I'm good. Do you like to buy 29 plants to save for college? Should I waste the stock market to go down before we invest? Okay. I like any plan that gives you any tax benefit. I talk about that and how to make money. It's really important to take advantage of anything that the government does to make you so you pay lower taxes. And that's why I like that plan. Let's go to Dean and Florida, please. Hey Jim. Big deal. Dean, how are you? From the Southwest Coast to Florida. Excellent. Been there. Love that. Thank you. So I had a question for you. You've always said there's a difference between retirement money and bad money. How should I invest in each bucket? Well, I have a list of stocks in the halibag money in any market which is a switch from companies that are growth companies and companies that have some growth with a very nice yield. And that's what you have to switch with. What's really important is you don't just go into cash because cash won't earn you enough and you'll end up having to work until the day you die.

30:05I'm trying to prevent that with a group of stocks that can give you growth but not add a cost to you growth with yield. That's what I like. Everybody. Never buy something that you don't have any personal knowledge about. You don't even think about buying a stock unless you actually know something about the underlying company. And you can explain it to someone. Question where man money at I'm giving my criteria to pick false stocks to avoid when you're voting for folio. Then there's two key words to keep in mind when you're looking for a stock to make money in any market. I'm revealing what they are and later I'm opening my tweets and texts and emails and taking some of your questions. So stay with cream. Bob Bob Furrier Jimmy Kiel. You're a wisdom and teaching has been amazing. You have a talent that is superior plus educational. Yours stands out as being one of the best. I can't help but say thanks for all the good years of teachings. You know why your show is top around the world? It's because you do your homework. And that's why you make everybody money. You do your homework.

31:16All might have been making the case for my new investing playbook. Put half your money in a cheap index fund. And then put the other half in a portfolio of five individual stocks and one non stock hedge like gold or Bitcoin. This all laid out by the way and how to make money in any market. So far we've been talking about why it's worth picking individual stocks. And now I want to talk how you do it. As in what the heck are you supposed to identify the five stocks that are worth owning in your portfolio out of thousands of stocks that trade in the United States. What's you want? Big picture are stocks that meet two criteria. They need to be observable meaning you can see what the companies do. And they need to be doing something that you're genuinely curious about. Is it really that easy? Of course not. But those are the first two questions you need to ask because if it's not observable and it's not something you're curious about. And how you ever put in the time to find out if it's even worth owning believe me you'll stop. Now say you're getting started and you spot a company that jumps out of this winner.

32:18You can feel it in your bones. But let me be blunt odds are you're wrong. Right here is where most people make the worst mistake. They somehow feel that they know more than the market does about a given stock without doing any research whatsoever. The truth is you'll never know more than the market does unless you have insight information but if you trade on some information you're going to go to prison. Like I mentioned before the break though you should have an edge when you invest in something. But these days that edge like who won't come from knowing information that others don't. So again you're never going to know more than the market but that's not necessarily because the market's constantly making mistakes and judgments. See your edge comes from being right about something that Wall Street is wrong about. Before we dive into the details though I want to help you steer clear of some pitfalls. Frankly you can make the process of stock picking a lot easier by first filtering out what's not worth owning. And at any given time there are a lot of groups that we don't make the cut. For example you've got these cyclicals those are the boom and bust companies that are more or less hostage to the broader economy. They're earning fluctuate like crazy.

33:18Think the full price retailers that the suppliers are building materials or discretionary entertainment companies. If the economy is good they thrive right. But in bad times look at the materials companies the ones that make steel or copper or chemicals or paper. There are earnings per share incredibly volatile because they're jointed with the broader economy. I don't like that. The stocks in these cyclical companies are worth buying when the economy is real ugly and then we're selling when the economy is red hot. And in the end though I see them as two way stocks and as I explain how to make money on the market we want one way stocks that can thrive even in a bad economy. Even the best of the cyclicals are hostage to these economic forces. They're not what we're looking for long term. Second group companies that are meant to go up slowly over time but might be overcome by sudden churns and interest rates of the fed policy. Think the banks insurance companies lenders we call them the financials. Again there are times the financials can make a big money but they can also be overthrown by events that they have no control over. Financial institutions can vanish overnight like they said. Like so if somebody did during the Estonian crisis from 1988 to 1992 they're the first stocks to get crushed in a downturn because they have exposure to credit risk and can suffer equipping the faults.

34:25When borrowers lose their jobs they can't repay offward repay. They're the first to sink during inflation scare too because that causes the fed to slam the banks in the economy. In other words the financials are not stocks that can make you money in any market. Third group devoid fleeing companies with no earnings that are strictly conceptual. Typically a third of the stocks they get asked about falling into this category. Most of them lose gobs of money and will never amount to anything. But when Wall Street's in love with speculation their stocks can soar. Unfortunately these alters back to their place always come right back to earth when the stock market takes the term for the worse. They are stocks that work only in bull markets. Fourth group of stocks that present themselves as growth vehicles but suffer from a severe case about a call LSD. Not the drug LSD. LSD is Wall Street's peak for low single digit as in low single digit growth rate. Many consumer back to its goods companies fall into this category. In the old days we called them safety stocks because they tend to have high dividends that would protect you during a downturn. These days though they don't seem to protect me much from protection at all.

35:27Or you get this mediocrity. Finally they are accomplished with fixed costs that are so darn high it takes a perfect storm of positivity for them to make good money. Here I'm talking about the department store change the automakers, the airlines. The automakers and the airlines especially have insanely expensive labor contracts and a lot of heavy duty machinery. Again there are times when these stocks work but they only work temporarily and you always know that you'll have to completely ring the register before the business piece. So here's the bottom line. As I said before the only real defense in the stock market is consisting grown. So when you're building a portfolio for the long haul you want to steer clear of companies that can be too rail by inconsistency. And honestly that is most of the market. You take those poops off the table and it's much easier to find something that you can stick with for years and years. You have money back after the break. Ooh yeah for the Emperor of Cray America. Honorable Jay Jay Craymer. You got me jumping around my office right now. Thank you so much for all you do for us.

36:28I enjoy your show and the kind of very entertaining and informative. I watched your first ever episode of Mad Money back in 2005 and I've been watching every single episode ever since. Don't miss Mad Money every night at 6 p.m. Eastern. Plus join the CNBC investing club and stick with Craymer around the clock. Like I told you before the break there are all sorts of stocks that only work under certain situations. There's nothing wrong with that. But when I wrote how to make money in any market I meant that title literally. For example the boom and busts cyclicals that are hostage to the border economy have an expiration date. When they can make you good money and expand you for a year or two or even three sooner or later the economy is going to peak and you need to sell. Sets, sets, sets, sets. Because owning the cyclicals into a recession is a recipe for disaster. So what cohort can make money in any market?

37:28What we're looking for is something called secular growth. Now that has nothing to do with separation of churches. It's an economic or scientific context. Secular just means extremely long term. You want companies that can put up strong revenue growth year after year after year with expanding gross margins that translate into terrific earnings. You want something that can do that for years or even decades regardless of the economic backdrop. These are the companies that can survive a dramatic uptick and interest rates or severe slow down the economy. Which is what usually comes after those high those rate likes. What exactly allows a business to survive a massive rise in interest rates is simple. If your company doesn't need to borrow money and its customers don't depend on financing to make the purchases then it doesn't have to worry about interest rates. When the meme stock guys pushed AMC, the movie theater chain, as a turnaround play, I knew the stock would have a limited shelf life because the balance sheet was heinous. And the company needed to borrow too much money to get back into growth mode.

38:28That doesn't mean I'm against all companies that borrow money that would be absurd. Amazon and Tesla borrowed vast sums of money when they were getting started but they both had massive opportunities in front of them. Very different from say in AMC which was borrowing money just to stay afloat. For that you need to examine the balance sheet and the cash flows. You can look this stuff up yourself but honestly if you ask the AI chatbots, they're surprisingly helpful when it comes to doing just that to balance sheet questions. That said, better use point than one chatbot to play and save because even the best of them are still are totally, they're not totally reliable. I find that in the case every day. That aside, I told you secular growth stocks need two things. The ability to survive high interest rates and the ability to survive and even thrive during recession. So let's talk about the recession style of the story. If you want to know how business handles the slowdown, just check the history. How did it do during the great recession if the financial crisis? How did it do during the brief COVID recession that came out long when the Fed started aggressively raising interest rates in March of 2022?

39:31Even if the stocking question got clobbered, I'm not too worried as long as it was able to bounce back rapidly once the stock market found its footing. And look, once you find a company that can handle higher rates or weaker economy like the Magnificent 7, you've got my blessing to buy those stocks even if they look expensive with high-priced earnings multiples. Wall Street is willing to pay through the nose for consistently strong earnings growth and you know what? You should too. Finally, when you identify a company that's rate proof, rate high proof and recession proof, you want more quality, the ability to scale. Meaning, does it have the capacity to grow into a much, much larger enterprise? Let me give you my favorite example here because it's where I got my viewers and one in on the ground floor. And it's really emblematic of what I'm talking about. It's a company called Regeneron. When CEO Len Schleifer came on May of May, in April of 2005, he was one of our first guests. At the time of General, I was an early stage biotech that was developing potential cancer treatments that might maybe have been useful for age-related macular degeneration too.

40:33Back then, the stock was trading at less than $5. And I told you, it was worth speculating on. Hey, maybe better than an index fund. Turns out, Regeneron's macular degeneration drug was a blockbuster, eventually doing nearly $10 billion in annual sales in his piece. This is the great thing about biotechs. When they had a big, they can transform a tiny development stage company into a pharmaceutical powerhouse. If you invest in just $1,000 in your Regeneron when Len first came on the show in 2005, you would have had over $1,500 by the end of 2024. And that's what I mean by having the ability to scale. So here's the bottom line. When you're searching for stockpicks as I tell you and how to make money in any market, you want great secular gross stories that could handle high interest rates or weak economy and have the ability to scale. Meaning you can see how they might eventually grow into something enormous. Those are the kinds of stocks you can own for years or even decades. Bracking up tremendous gains as long as you regularly do the homework so that you can fail if something ever goes really wrong or stay long for the glorious compounding ride.

41:40Stick with Kramer. I'm a first time caller. I have to drop a member. I want to thank the people's champion of the desert. Thank you for helping me become a millionaire. I always say my favorite part of the show is answering questions directly from you. Tonight I'm cracking out my emails from investing club members answering all your investing questions. If you like this, please don't forget to join the CBC investing club. First up, we have a question from James. We have Jim. I am 65 years old and investing my portfolio for growth and income for the next 25 years. Is it time to start allocating more investment dollars into dividend paying stocks or stay with 65% growth value and 35% dividend equities?

42:42My total equity portfolio is 4.5 million. Well, first of all, congratulations. You've invested very well. Second, because of that amount, what we're going to do is we're going to put 50-50. We're going to make it so that you've got some great slower growth, high dividend plays that can compound and generate that income you need. I agree with you. Let's keep them growth for the rest. But you do have to cut back on pure growth because I like the idea with that amount of money that you never lose it once you get rich. Well, let's just say you only need to get rich once. Next up, we have a question from Albert who asks, when, if ever, might it be appropriate to protect multi or upside gains that are significant but unrealized with protective calls or other options strategies? Let's not fool around with them. I know a lot of people want to do that. A lot of people want to sell cover calls. A lot of people want to get involved in the options market. I like to keep it simple, especially because you know what? You don't want to ever have, let's say, all your stuff more than one piece of paper. I have a firm believer that one piece of paper is the way to go. And you can't do that if you kind of mess it up with a lot of options strategies that I don't think you're going to do that much for you.

43:42Now let's go to Thomas who wants to know, how can we strike the proper balance between building a new position while respecting our cost basis on a profitable and fundamentally sound stock headed higher? Okay, you always have to think, should I sell one to buy another? I don't like to have a huge number of stocks. I don't want you to be a mutual fund. So what you have to do is you have to look at your portfolio. You have to say this one's come to fruition. There's not that much more. And I'd like to put a new one on, but don't put a new one on until you sell another. Now let's go to Zachary and Nevada who has with a five core stock portfolio. Thank you. That's what we do. That's what we recommend. What should we do when stocks are all outperforming the market? Do we keep buying them on a set schedule, even though they're consistently going up? We're just new deposit allocations from 20% evenly to a more weighted allocation. I like to be a little bit more on autopilot when it puts more money to work. All the studies that I did, we had just, Ben Stoto and Jeff March went over and over and over again. The best thing to do is just to continue to put money in those stocks and less something's wrong.

44:48And then you can change up our next question is from Michael in New York who asked why do stocks tank when a company barely misses earnings? For example, estimates say $2 billion in revenue that post 1.9 billion stock gets smoked in the grand scheme of things. Does a tiny miss like that really matter? And why does Wall Street punish those really? Wall Street has what's known as a whisper, okay? There's another another set of numbers that are far better than the ones you're looking at. And when a company can't do those far better ones, if they over promise to under deliver, then there's just no place for them and the big institutions will sell. Is it right to do that? There are sometimes they throw out babies with bath water, but for the most part I've got to tell you, if they can't hit the whisper and they can't hit the higher number, you know, sometimes you do have to take action. I'm not against what they do. Next we have a question from Mimi in California, what is the best way to avoid riding a long-term investment all the way up and then all the way down? Look what we do in the club. When we have a parabolic move, when we have a stock that is well above our basis, we trim. That gives us the flexibility to be able to buy back. I call it trading around a position. Is it something I do very often when we get a parabolic move? The answer is yes always.

45:58Now, on to Dave Narkin-Sahiss. I am fortunate to retire my mid-50s for significant IRA and taxable accounts. What's the best investment strategy? Hold high growth in beta stocks in my IRA to avoid capital gains. All of them taxable. So if they drop, I can take the loss. Appreciate your advice in this. It's the former, not the latter. You want to be in the, keeping them in the IRA. And I like your spirit. I want you to keep investing for the long term. And don't feel like when you get to 60 or something, it's time to cash out. We don't like that. Next question is from John of Virginia. How often do you review targets and what makes you sell at a target versus raising the target? This is something that I go very closely with Jeff Marx and Zephylma. And anytime we have to raise the target, we will talk about it and try to figure out exactly what it makes sense. We don't want to over promise ourselves and under deliver. But we also know that there are a lot of situations where it's just not worth it to raise it. If we think that there is, of some hesitation for us, we want to wait till the stock comes back down before we take from the two to one. Our last question comes from Jack who asks, when does it make sense to buy dividend stocks versus growth stocks? Okay, depends.

47:02I mean, look, I've, there's some, there's some dividend stocks. I just love like growth stocks. And there's dividends. There's lots of growth stocks that pay dividends. But as we get older, I do want to have more income coming in. And that's something you consider. And by the way, I address that directly. And I think I don't want to cut it short, but I address it directly in how to, really, in how to make money in any market. And I really try to give you a list of the types of stocks you need to switch to as you get older. I'd like to say there's always a book in summer. I promise I'd find it just for you right here on Mid-Money. I'm Jim Kramer. See you next time. All opinions expressed by Jim Kramer on this podcast are solely Kramer's opinions and do not reflect the opinions of CNPC or its parent company or affiliates. And may have been previously disseminated by Kramer on television, radio, internet or another medium. You should not treat any opinion expressed by Kramer as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Kramer's opinions are based upon information he considers reliable. But neither CNBC nor its affiliates and our subsidiaries warrant its completeness or accuracy. And it should not be relied upon as such.

48:05To view the full Mad Money Disclaimer, please visit CNBC.com forward slash Mad Money Disclaimer. Something amazing is happening. This agency is experiencing a cyber attack, but no one is panicking. That's because CDW government secured, optimized and future-proofed their data with the Dell Technologies Power Store solution. It increases cyber resiliency and improves end-to-end performance. For a secure, scalable solution that doesn't require more physical space, Dell Technologies and CDW government, make amazing happen. Find out more at cdwg.com slash Dell Federal.