>> out in ireland, a lot of weird thing going on at wfd. >> i'm melissa lee, see you again tomorrow at 5:00 meantime, don't go anywhere. "mad money" with jim cramer starts right now. >> my mission is simple, to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere, and i promise to help you find it. "mad money" starts now. >> hey, i'm cramer. welcome to "mad money." welcome to krachler qaa. other people want to make friends, i just want to make you some money. my job is not just to entertain you, but educate you so call me at 800-743-cnbc. it's all easy to make yourself believe that this market is somehow under siege with a host of worries constantly battering at the gates. while an endless parade of

widely respected naysayers. >> sell, sell, sell! >> keep a system that stocks are doomed to go lower, perhaps much lower. a pessimistic drumbeat that gets amplified across tv, print and the web. regardless of where stock are trade or how the economy might actually be doing and it's totally out of sync with reality. in fact, sometimes i wonder if many of the professional bears are living in an alternate universe. one where they've actually been right rather than consistently been wrong and just the 20 months from mid-november 2012 to mid-july of 2014, the s&p 500 rallied 50% including dividends and a performance that's downright spectacular. if you simply bet on the market as a whole via the s&p 500 index fund. you've made money hand over fist. no time and inclination? fine. s&p fund. in the past, this bull run might have inspired some euphoria. these days it only seems to

inspire more skepticism. modicum of skepticism is always healthy, but i find the widespread fear and loathing of this market to be pathological. during a period when picking winners has been like shooting fish in a barrel and an overabundance is the one thing that's constantly kept you from making money. as i explain in get rich carefully, sometimes it's possible to get rich and that's coming from me, one of the cynical figures on television. as i was preparing to write the book, i was made by my charitable trust along with the bulletins that we send in with actionable orders.com where you can follow every move the trust makes and we get to buy ahead of when we pull the trigger and believe me, it's better than when we do it and as i was going over the charitable trusts trying to identify my mistakes so you don't have to repeat themselves yourselves, i notice that my good judgment may overcome by excessive

skepticism. sometimes they get too fearful or too negative because i didn't believe management would get time for the company that was capable of navigating the waters of a world economy. in short, there were moments when i didn't give the ceos of very well-run companies enough credit in the legions of professional naysayers and my skepticism cost the trust money. i guess you could say i was worn down by negativity. of course, you need a certain degree of skepticism to be a good investor, but in an era when we're bombarded with nonstop negativity that's impervious to the facts in terms of the long-term strength, in keeping this skepticism in check can pay off big time especially when you're dealing with high-quality companies that everyone else is overly skeptical about. in other words when a well run business hit as i speed bump, don't get carried away and act like it's slammed into a retaining wall and cause a 12 of

had car pile up. it's easy to have your fears overwhelm your judgment which is why there is a whole chapter explaining how to check your emotions at the door. let me give you a personal example so you can understand what i mean and you can remember them. >> 2012, do you remember walgreens picked a fight with express scripts? at the time i had been a huge fan of wags, wag is the ticker symbol. under the leadership the ceo greg watson especially after they bought duane reed and beautifully refurbished those stores including the one next to me when i do "squawk on the street" in the morning and after the tiff with customers that hired express crypts we s scri rivals got slammed to low $30s and in june of 2012, watson did the unthinkable. he shelled out $6.7 billion and the european health and beauty

retailer. wag dropped 6% on the news and at the same time, the company over the new duane reed, $150 from my own store and for me that was the last store right next to the first store. as walgreen's got pummeled down to the high $20 area and i said to watson they'd gotten too aggressive and had overexpanded and possibly bitten off more than they can chew with the alliance boost transaction. right after i made those comments watson called me and walked me through the alliance deal. he explained why he had to stick to his guns and defended opening the new duane reed location which was a different street with heavy tourist traffic and therefore he said it's not going to cannibalize the old store. as much as i admired watson there was no way he could pull this off and with wag at $20, telling viewers it was too risk toehold. as it turns out, that was almost at the exact bottom in walgreen's stock. shortly after i went negative,

watson settled the war with express scripts on terms that were wildly favorable to walgreen's. he announced a ground breaking deal with amerisourcebergen, another provider that gave this company a huge boost in profitability while lowering the price of drugs for its customers and plus the integration, fantastic. walgreen's hasn't looked back since and since june 2012, this stock has more than doubled and i was way too skeptical and urging people to dump the stock with excellent management after the shares had been crushed. i let my fears get the better of me. i knew he was a visionary, and i was too scared to see the opportunities. now these days, lots of people believe that you can't be critical you have in of executives and that you always have to doubt in order to make money and i'm telling you, it's wrong. sometimes skepticism doesn't pay off. one time i was a major on backer of shaw group and that's a huge engineering and construction company that was famous for

building power plants especially nuclear power plants and he was the shaw ceo back then and it was the ceo that we visited tulane university with. predictions i believe that because of his top notch track record, but then when the tragic fukushima nuclear disaster hit japan in 2011, the worst nuclear accident since chernobyl, i figured it would drive a host of nails into the coffin. shareholders should have faith in his company. i thought he was being a poll ana. what did i do? i pulled my buy recommendation. i was too skeptical and sure enough in the beginning of 2013, shaw sold has to cbi for $3 billion and it was a premium to where the stock was trading and well above where i told people to sell it. 72% premium. how could i have doubted this man? in short, i underestimated bernard's resolve and worse, his knowledge about what could

happen for his own business and i was playing the skeptical know it it all and because of it many of you may have missed out on an enormous swim. most ceos especially the good ones do know more about their companies than anybody else out there and you ignore the good ones at your own peril. here's the bottom line, remember not to let your skepticism run away with you especially in the case of high quality dumcompani. and i suggest you pick up a copy of get rich carefully about how to avoid the emotionally driven stakes that investors make. believe me, i've made plenty of them and now it's my job to stop you from repeating meyer rors. cecilia in new york, hi, jim, great show. thank you. can you help me as i'm retirement age, i'm interested in no load index funds, but when you look at the list, i don't

really know and i'm approaching retirement age. okay. >> so you should just, you can buy the etf, the spx etf and that will be fine and vanguard always had low fees and i like to give them credit. let's go to pat in michigan, please. pat? >> hi, jim. >> hi, pat. >> i'd like -- first off, i'd like to send a big boo-yah to you and your staff. >> thank you. >> okay. my question is i have a roth, and i'm looking to diversify into emerging markets. >> yeah. okay. i'm not a big fan of emerging markets because people tend to buy them high and they sell them low, but i am a fan of putting 10% of your money in a speculation, okay? emerging markets is a speculation that could qualify for the 10%, but that would be it it.

you can't do any other speculating if you buy emerging markets. doubting thomas? a bit of skepticism is healthy, but there is such a thing as being too skeptical. don't let your fears eat your potential for profits and i'm here to let you learn from my mistakes. "mad money" will be right back. don't miss a second of "mad money," follow @jimcramer on twitter. have a question? tweet cramer, #madtweets. send jim an email to madmoney@cnbc.com or give us a call at 1-800-743-cnbc. miss something? head to madmoney.cnbc.com. in a world that's changing faster than ever, we believe outshining the competition tomorrow

quires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. ♪

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. you want to rack up terrific gains as an investors, that's what "mad money" in the end is all about. investing, not short term trading and you have to be willing to stick by your guns or as i put it in "get rich carefully," you have to believe in yourself or at least in your own judgment in order to be a good investor. hear me out before you change the channel. i realize this sounds like i'm

dispensing a lot of, i don't know, let's call it new age mindful nonsense. actually, mindful is a good word, i'm trying to put it out there. there is prakt dal money managing advice. what do i mean saying true to your convicts and if you believe in the company don't lose your resolve just because the stock goes lower or the negativity keeps saying it's a sell. take a page from the tom petty playbook. don't back down. i know it it could be incredibly difficult to stick with a stock that's getting pounded. no matter how much research you've done and how much faith you have in the underlying can company, i know it because i've been there myself and i've made the mistake of backing down from stocks i believed in just when i should have been. >> buy, buy, buy! >> like i told you when i was preparing "get rich carefully" i looked back at the trades in my charitable trust, remember, it's real time over the previous five years. the the idea being that i wanted to analyze my errors objectively

and warn you about them so you wouldn't have to repeat these same mistakes yourself and that's the essence of what the product is about and one of the trust's biggest blunders was losing our nerve with bed, bath and beyond. letty moo give you a condensed version of what happened because boy, was it ever -- the house of pain. we had had the trust back in the fall of 2012 and it's a chain i've always adored and i love going shopping there and i love the regional national expansion story, but the stock was expensive so i said i'll weight for a pullback. >> bed bath reported a number that displeased wall street and the stock quickly plummeted from 75 to 59. but bed, bath and beyond's management said they would get the business back on track and i believed them. the fundamentals seemed solid, but by the time we were ready to pull the trigger -- bed bath had already started rebounding and rebounding like crazy so we took

a pass and decided that the next time bed bath and beyond sold off we'd be ready to pounce. >> buy, buy, buy! >> the stock ran back up to 71. but the next time bed bath reported, yep, another blah number from this company and people started talking that maybe there was something wrong. maybe the company is being amazoned, meaning that customers were using it as a showroom and ordering the products off the web and once again the stock knot pounded. the kind of thing you buy at bed bath and beyond like my one and springfield -- new jersey, they aren't the kind of things you order from amazon, for heaven's sake and they start the the position just as i promised myself i would. it's a large position for the trust and after a quick reality from 61 to 63, guess what? we started to hear the amazon rumblings again. at first i didn't let them bother me and i'd done the homework and i knew it was worth more than what the stock was

selling for. the charitable trust bought more order to get a better cost basis and dropped another two points. then the analyst picked up the bearish drumbeat and talking about increased couponing and how rusent acquisitions wasn't working. it seemed that someone had something bad to say about bed, bath and beyond and it soon became one of the largest positions and next thing you know it's november of 2012 and while the trust was beating averages, bed bath was weighing on us, trading at $55 and the lower cost basis and frankly, i just couldn't take it anymore. finally, we got some lift for a couple of days with the stock trading about half way back up to where we first bought it and we were so overjoyed, stephanie lang and i that we decided enough already! let's just take the darn hit and be happy we got out of this one alive! so we sold the whole position. i was so happy. like a piano had been lifted from my shoulders. i patted myself on the back for

not waiting to sell it at the low and instead of waiting for it. yeah! the numbers were up again and nothing to write home about, and this time the stock didn't go down. i knew. i knew. classic sign of a bottom. something i tell you about in "get rich carefully," but we ignored it and we didn't start a new position in the stock. we were too traumatized to stick to our bed, bath and beyond guns. next thing you know, yeah, it was are roaring and passing the price where we sold it and where we first bought it and after one analyst after another who downgraded it changed their minds and just what we wanted to try to catch it ran all of the way up to $80! before it peaked about a year later at this point the stock went to its old ways. there's more than one takeaway here. we liked bed bath when the analysts hated. that's all good and that's perfect as as you know the

company is on course for improvement and each time moving their stock higher and the continual upgrades moved the stock from undervalued to reasonable value and ultimately to overvaluation where it promptly collapsed back after the reports. we have had had the courage to ride more of that wave than just the first few points given the hard fought way we'd approached it and if we hadn't lost our nerve, bed bath would have been one of the trust's greatest hits for the year. as i look over the long list of stocks we sold since the book came out, national oil well and timkin. we bought them while wall street was lukewarm and then the stocks got hit. the analysts went decidedly negative and we bought more only to unload those shares when they got slightly above our average basis into profitability. yet we sold precisely when the fund was starting and as analysts recognize that the transformation at national oil

were real and the breakup's bountiful and by that time, sadly, we were long gone. let me give you the bottom line. never sell a stock just because it's going lower and you can't take the pain like the doubting analysts who seemed desperate to capitulate as the stock goes lower rather than partake in the opportunity. if you've done the homework as we did and if you keep checking as we did and if the story isn't wildly off the rails, stay long and continue to own, have some conviction based on your own homework and not the homework of scaredy cat and analysts and don't forget once it starts moving in your direction and stuck in the mud you might end up selling it at nearly the worst possible moment like my charitable trust did with bed bath and beyond and two stocks that remain strong buys today, that we seemingly battle forever tim kin & as well as the breakup progeny. it's always better to be patient, people, sometimes

letting it ride is the single best thing you can do. after the break i'll try to make you more money. from 2000 to 2011, on average 17 manufacturers a day shut down in america.

there's no reason we can't manufacture in the united states. here at timbuk2, we make more than 70,000 custom bags a year, right here in san francisco. we knew we needed to grow internationally,

we also knew that it was much more complicated to deal with. i can't imagine having executed what we've executed without having citi side by side with us. their global expertise was critical to our international expansion into asia, into europe and into canada. so today, a customer can walk into our store in singapore, will design a custom bag and that customer will have that american made bag within a few days in singapore. citi has helped us expand our manufacturing facility; the company has doubled in size since 2007. if it can be done here in san francisco, it can be done anywhere in america. the next time we get a broad, market wide pullback. >> sell, sell, sell, sell. >> or some scary geopolitical eve event, remember the sell-offs if they involve a decline of a

couple of percent could be terrific buying opportunities for the big picture themes i'm always telling you about. which themes? in "get rich carefully" i highlight sen of them that i believe are built to last. themes where i think you can keep going back to the well every time we get hit because the stories aren't going away any time soon. i spent a lot of time talking about the american oil and gas renaissance in the show and that's one of them, but tonight i want to single out a few that doesn't get enough attention. i'm referring to the rally, continual will rally and success of what i call stealth technology stocks. what do i mean by stealth tech? we live in an era where practically everyone believes in the power of technology for good or ill, but as i describe in qwest get rich carefully," i think they find tech in all of the wrong places. they want them in servers or the cloud. inon nations are the heart and soul of innovation. you find it, in products that

serve genuine needs to old school tech doesn't hold a tandem to. what's the difference between a tech stock and a stealth tech stock? it's easy. the market has no trouble spotting innovation of traditional tech companies, but it has a ton of trouble noticing the innovation from more hum drum areas like apparel, restaurants, consumer packaged goods and because the market doesn't recognize the innovation, the stocks of these companies are therefore traded at an undeserved discount. these companies with real innovation fueling the growth, that's what we need and it's why i keep thinking you've got to come back to these names even in the market takes a dramatic turn for the worse because they've had a history of turning back. more specifically, i'm referring to companies that are using proprietary technology to invent entirely new markets and giving them faster growth and expanded margins and ultimate leigh higher price earnings multiples

and therefore higher stock prices. who falls into the stealth tech category? >> who is innovating like crazy and not getting enough credit for it. >> i have one for you, how about colgate? i know. the classic consumer staple company is not a hot bed of innovation, but colgate trades at a premium to the rest of the consumer packaged goods names precisely because it uses technology to create products that are genuinely better than what the other guys are selling. they're not knockoffs and that's why despite intense competition in the supermarket aisles, colgate keeps taking share in many markets around the globe. the thing about colgate is that its innovation is entirely driven by insights the company gleans from its customers and let me rattle off a few of these. colgate has been winning the toothpaste wars thanks to optic white toothpaste which uses the same ingredients found in whitening strips. they have a palmolive dish

washing luck wid that cleans not only dishes, but the dirtiest thing in the house, washing off lingering, stinky residue. they sell science diet, a wellness food available with veterinarians and even better, colgate realizes that different regions have different preferences which is why the company has nine innovation centers scattered across the globe tailored to specific countries which is how, for example, they've managed to grab an astounding 69% of the brazilian toothpaste market. one company. who else falls into the stealth tech cat gory? >> these days the most fertile ground can be found in the apparel space. yeah, in recent years the apparel has become a hot bed of inon nation with new technology moving the needle for a number of these companies and the most aggressive innovator is longtime cramer fave. ♪ >> underam our. remember, ua first became a

household name by inventinga know entirely new cat gore of sportswear and the compression fit apparel made from dwanted synthetics keeping your body at a comfortable temperature. it's what kleenex is to tissues, but under armour didn't stop there. the company's founder and ceo didn't platitude about innovation. he devotes a huge amount of time on the conference call to explaining the company's latest scientific breakthroughs. highly unusual behavior for any consumer goods company and most conference calls management goes straight to the numbers. not plank. plank knows that under armour's numbers is driven by innovation and he wants shareholders to know it, too. in 2011, under armour rolled out charged cotton, an alternative to synthetic fubers so often used in sports apparel. it dries five times faster. five times and has the durable they you associate with polyester which i can't stand.

plank believes that this one invention could potentially quadruple under armour's total addressable market. it's huge, but i believe in him. how about storm? under armour's most recent line of water resistant hoodies and it detracts the bodiy natural motion and they've also got lightweight running shoes that use proprietary technology to keep your feet dry. i like them and i wear them and under armour's moved into the fitness space with the products that measures athletic activity. these are the kinds of inventions that give underdog under armour a fighting chance against colossus nike. without this i don't think they can take on any entrenched player or be featured in so many sporting goods sports. the individual stores have become destinations and even though the stock has been traded at elevated multiples and growth orient the investors have begun

catching on to the story that under armour is a technology factory. they never expected there could be anything so different about sweat pants, hoodies and sneakers that have actually moved the needle. here's another one. how about starbucks? you may think of it as a coffee retailer and it contains the most sophisticated payments, you can pay before you walk into the store, giving you the my starbucks rewards and 40% of china has a my starbucks reward. starbucks is so far ahead of the competition when it comes to mobile and social. this is a magnificent company buried within a coffee shop and howard schultz is triting to bring it out. their technology still helps them process many more customers. let's not forget domino's pizza. another restaurant that's also a stealth tech name thanks to the

ordering system which lets you order pizza via your facebook page and allows you to pay for it with your credit card. no wonder it keeps crushing the local competition and it's given us a monster gain since early 2010. there's one that we should be focused on so much more. snapon. the toolmaker that is in sync with its customers' needs making it pureless that it can write the innovative diagnostic equipment. let me give you the bot on am line upon. the next time something horrible happens overseas, use that for the exposure that i write about in "get rich carefully," things like the power of stealth technology stocks. colgate, undera remember armour, starbucks and sfap on. jim in arizona. boo-yah, jim. >> thank yous for taking my call. i want to thank you and your

staff for helping me turn my strategies around in terms of investing and i appreciate everything you do for that. >> it makes me feel good. what's going on? >> my question is how much cash i should keep in reserve and i often find myself where i find myself in a situation where i want to pick up a stock that's advancing and i have to sell something off in order to do that. >> that's why an actionable trust we rank one, two, three four in the quiet off the desk and not when the market's open so we can sell our force and constantly raise a little money and try to keep a cash position. 5% to 7% cash if you really like the market. 10% if we're starting to get lukewarm. we've taken the cash position up to 20% and we like exposure to equities and you should have them, too, but i think that you have to take stocks off if you don't like the companies. that's what you do and always have the stock increases more than 50% you should be playing with the substantial part of the house's money by mark in

tennessee. mark? >> hey, jim, how are you doing? >> how are you? >> good. good. hey, question for you. when you go on vacation how do you keep your nerves calm and not worry about your portfolio especially when you're -- >> it's actually a problem and the answer is i always do worry and i love to get to a point in my life when i don't and i'm running a charitable trust with stephanie link and i don't want to do that. i don't own individual stocks so i'm fine, but you know, i do think that -- go ahead, there's more to your question. i'm sorry. oh, okay. well it looks like, listen, the market can and does get hit, but when it does you have to be prepared to buy long-term themes that work. what's one to last? stealth tech. that's one story that's not going away any time soon. stay with cramer. your 16-year-old daughter

studied day and night for her driver's test. secretly inside, you hoped she wouldn't pass. the thought of your baby girl driving around all by herself was... you just weren't ready. but she did pass. 'cause she's your baby girl. and now you're proud. a bundle of nerves proud. but proud.

get a discount when you add a newly-licensed teen to your liberty mutual insurance policy. call to learn about our whole range of life event discounts. newlywed discount. new college graduate and retiree discounts. you could even get a discount when you add a car. call liberty mutual for a free quote today at see car insurance in a whole new light. liberty mutual insurance. >> if you want to becan come a better investor which i know you do if you watch the show you have to be willing to hold yourself accountable. in my hedge fund i kept boxes of

trading slips in my closet. i would constantly scrutinize them and search for example patterns or mistakes or bad habits that i know were costing me money. i think this ongoing axe tempt to hold myself accountable is a big reason why by the time i retired at the end of 2000 i had given investors a compounded 24% rate of return. after all fees for the 14 years i was running things and that was three times better than the s&p 500 over the same period. it's not to toot my own home and there's value for holding your own feet to the fire. fast forward to today and i still keep some skin in the became by running with my portfolio manager at stephanie link. you can follow along on e-newsletter at charitabletrust.com. i cataloged every trait that the charitable trust made for five years, the good, the bad and the ugly. in order to isolate the patterns to produce the best returns. of course, reality doesn't follow a pattern and not to mention, this is plain old luck,

good and bad. however, after feltering the one offs and i've come up with a hard and fast rule that i need you to institute and i think you can improve your portfolio's performance. what is this rule? it's simple. never buy any stock above your cost basis. the average price you paid to build up your current position. unless something truly transform tiff happened at the company and you think the market is not given enough credit for the changes. what counts as something transform tiff and maybe it spins off business to unlock value or something else that would provide a material boost to earnings and then i'm sanctioning you paying up and you should never, ever be paying a higher price for the stock than your cost basis. i know most of you will hate this rule and i understand why, there are so many cases when the stock is going higher and we don't have enough of it. so let's buy some more even if it's up big from the last purchase. i'm telling you stop it!

stop doing that. paying up for a stock that's roaring is simply chasing and when you chase you're likely to get hurt. >> no! >> think about the hideous declines in the once had had high-flying tech and biotech stocks in the ing from of 2014. those were the buys that crushed you. why do i give you such a draconian guideline? simple, my trust has lost money by chasing stocks because they were going up. the pattern, i would have a good sized position and when the stocks started roaring i would feel nationed and i started buying more at higher levels because what the heck? this one was going higher still and did you know that we would purchase the last bit of stock very near a short term stock. >> i would be buying more at precisely the moment when i should have been trimming the trust position. >> sell, sell, sell. >> this behavior feels satisfying when you're taking stock and it's produced some of the worst results. the records from the trades i

scrutinized and that's wall street for buying stocks that's above the cost basis wrong. it's a cardinal sin to buy above your basis unless the stock has made truly traumatic changes and sure, there will be times when the stock keeps climbing and climbing and you feel like you've missed out and trust me, by refusing to average up, you've been avoiding many, many more instances of regret and the stock quickly begins to roll over and go lower. ideally as i tell you in "get rich carefully," you want to make each purchase matter and make it it count. you should never pull the position and you buy it in stages and do it on the way down and the $25 stock and i would only buy $50 at the $25 level and let the the stock come down another point or better, down two points to 23 before you buy another 50 shares and that way you've appreciably lowered your basis and after that maybe you've saved ammunition if the stock in question gets pushed

down and then and only then should you buy your final 50 shares. if you buy before you get a meaningful pullback, i would tell you, you're being too aggressive and yes, if you only buy 50 shares and it jumps to 30 you won't have as much upside, but a smaller win is still a win and by building a position my way you'll be able to capitalize on declines and if you buy on the way up, any decline will make you pull your hair out because you'll feel like such a moron and you'll probably sell low after buying high. like i mentioned earlier there's one exception to my rule. it's okay to paya i higher price if and only if something's changed at the can company and it makes you ng that the market increased will dramatically. as long as you keep an eye on what you own then believe me, you'll be ready when something much better than expected happens. for example, if the company boosts its dividend by more than

anybody anticipated you have my permission to buy above your cost basis and if a company that will boost its earnings and the stock doesn't rally even though you know it should, you are free to buy above yours a basis and if there are insider buys and it's not the small volume buys, but a real capital commitment and again, you have my blessing to average up and i can tell you that based on my post great recession track record, the stocks had terrific moves ahead of them and none of these multiple insider buying situations were followed by a decline of any magnitude and aside from these exceptions where a company does something major and the company doesn't recognize it, you should never chase and never buy more of the stock that's trading above where you bought it. your cost basis. so let me give you the bottom line here. buying and owning high quality companies with inexpensive stocks is how the biggest money gets paid in this business, but you have to buy them correctly. once you start putting a

position you should have the shares, unless the company's done something radical to create value. this may sound like a tough rule to follow, but trust me, it's there for your protection and using the vast majority of cases by averaging up and nothing much has changed in the underlying business i am promising you you'll get burned and i know because it happened to my charitable trust far too often. please, please, don't let it it happen to you. "mad money" is back after the break.

you're never too old or too smart to stop learning. all night i've been telling you about the lessons i've gleened from analyzing the performance of my charitable trust.com and looking at every move they made before i wrote "get rich carefully" because some things you only notice in retrospect. let me give you another rule from "get rich carefully." this one is very simple. if you own a stock and it refuses to go higher when the market rallies, perhaps you should sell it. specifically on any day when the s&p rallies more than 1%, i

think you should examine your whole portfolio and get a sense of the leaders and the laggards. regular viewers know be that i worry when your portfolio is rallying too much. when you're outperforming too dramatically because that means you could be taking on too much risk. but when i look through my old action alerts.dom that i send out before each trade contemporaneously i notice something else. if you looked at the cohort of stocks that didn't go up in a big rally and you found that the vast majority of stocks and the same sector didn't go up either, then you had to redouble your homework and be sure you weren't missing something. chances are there's something awry that you haven't noticed and it could spell trouble down the line and it pays to sell the stocks and revisit them, although something invariably was wrong. i just didn't know about it. what justifies selling without more knowledge? the reason, when the charitable trust owns stock that disappointed on big up days where the market gained a percent or more, those stocks

tended to get absolute clobbered on the inevitable down days. >> sell, sell, sell. and at last this didn't just happen to the trust once or twice. it happened multiple times. therefore it was a pattern. the trust ended up taking substantial losses that could have been avoided by just following one simple rule. sell any stock in a sector that fails to go higher, that fails to go high or multiple big up days and multiple up days and not just one. one session of underperformance during a market-wide rally might be a one-off situation, it's an exception. maybe the group got downgraded by a you poorful analyst and it might not happen again, but when i ignore several days of underperformsance in a rising market the charitable trust losses were eye opening. all of the personal computers started to falter hard even on big up days during 2008 and 2009. in 2007 and 2008 we saw the same thing happen with the steel, mineral and fertilizer stocks and there would be days on end when the market would go higher

and they would either rally slightly or even do nothing at all. sure enough, that consistent weakness on up days and its relative weakness was a signal that these sectors were in decline and not just a cyclical downswing and it was because of the advent of the smartphone was making pcs far less relevant and a swoon that the computer business start red covering from quite recently. in the case of the steels and the fertilizers it was because they were being overwhelmed by cheap foreign imports that the analysts didn't see coming and that they couldn't compete against and in both stocks they were screaming sell me, sell me before the pain got too terrible. i know in many cases you may be reluctant to sell stock because they consistently fail to rally along with the rest of the market and maybe they've given you terrific gains and you don't want to part with and i get that and maybe the past earnings have been strong and maybe you think they're already undervalued and if the stock can't vrally, that

should be a red flag and that's a clear sign that you need to sell, sell, sell and do it fast. you can always buy the stocks back at lower levels and best of breed stocks can do real damage to your portfolio if they belong to a sector that's in a long-term sect lar decline. let me give you a bottom line when the portfolio is minting money, even the best investors have a tendency to get too optimistic and slouch into sloppiness and that's why you have to look at every stock in your portfolio after a big up day when the s&p rallies more than 1% and if you find that you own stocks that consistently refuse to budge and refuse to rally along with the rest of the market, i'm telling you, you have to lighten up and you have to sell and this rule is too important to ignore, and i know because i've made the mistake of hanging on to laggards in a winning market myself. don't repeat that mistake. you know better now. a stock that can't go higher when the market's rallying like crazy is a stock that often

deserves to be sold, trust me. it's not participating because others know more than you do and you can't wait around to find out what it is you're missing. you'll be too late and your portfolio will suffer the consequences. stick with cramer. [ woman ] the cadidillac summer collection is here. ♪ ♪ [ male announcer ] during the cadillac summer's best event, lease this all-new 2014 cts for around $459 a month

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>> you have to get some of the tweets you've been sending me @jimcramer madtweets. how you find time to research all these companies? #advice wanted smiley face. okay. okay. i'll be honest. i have a gift and the gift is i'm not bored by the stuff. so i literally can pound them

and start with a stack, and i go one after another and i start with the conference calls and if i'm intrigued by the conference call, then i pull the file and i go over the financials and i have to tell you, you have to have a facility for it it and if you have it otherwise you can do it otherwise you look at the companies that you own and do the research there. it has to do with the facility and the desire to understand the stats. what do you think it will take to get @jimcramer to speak with my investment 101 guest, my guest speaker days are number. as i get old are i want to spend more time with my family. i'm sorry. i try to do it when i do it and i certainly post it everywhere so youio a shot at coming to. our next tweet who asked the following, what is the most important thing while trading stocks, #, get a plan. discipline trumps everything. discipline trumps conviction.

know when you must buy because it's at the right level and don't chicken out. same thing when you must sell. have a bit of a place when you recognize you should be playing with the house's money and that's discipline. discipline means the most to trading and let's go to a question from @investsarasota. excuse me. what are the inputs that you use to trust the company that raises their guidance for sales and earnings at @jimcramer. i like to look at the models. it's boring, but what i like to find out is whether someone has gotten the beat so to speak through tax rate or actual revenues flowing down the bottom line with bountiful gross margins. it's the latter that moves the stocks. stick with cramer. over 20 million kidsds everydayn our country

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i like to say there's always a bull market somewhere, and i promise to try to find it just for you on "mad money." i'm jim cramer. see you next time. >> tonight on the profit... good morning, i'm marcus. >> nice meeting you. >> i go inside a. stein meat products, a wholesale meat supplier in brooklyn, new york, that does $50 million of revenue annually. >> good burger. >> it's the best. due to high operating costs and razor-thin margins, stein is hemorrhaging cash. >> everybody you order from, wants their money in ten days. we don't have the money to pay them. >> i can't turn this business around... this business is two weeks away from closing. this 75-year-old company will close for good. my name is marcus lemonis. i fix failing businesses. i make tough decisions. and, frank, you are no longer the general manager. and i back them up with my own cash. it's not always pretty. >> perfect flavor. >> but this is business. [bleep] is gonna change. i do i