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 [music] starts

now.

Hey, I'm Kramer. Welcome to Mad Money.

Welcome to Craig

Friends. I'm just trying to make you a

little money. Now, my job is not just to

entertain, but to teach you. And that's

what we're doing tonight. So call me at

1800743 CNBC or tweet me at Jim Kramer.

Yes, tonight I'm letting you in on

something big. The method to my madness.

I believe that you can do everything I

do at home if you're willing to put in

the time and effort. Investing,

specifically investing in individual

stocks, but running your own portfolio

rather than dumping your money in some

buy and forget index fund is something I

am confident all of you can do by

yourselves. I always emphasize the

homework and I help you do the homework

for my charitable trust stocks if you

join the CBC investing club. In the old

days, my rule was that you need one hour

per week per stock. These days though,

the research is so readily available

online that I'm willing to count and

it's less than an hour a week for a

portfolio of five stocks. Say a few

hours if you own 10 stocks, unless you

belong to the club itself, and you'll

have a much easier time and cut down how

much more homework you have to do

because we do it with you. Investing is

more in more than just 10 stocks. H then

I get worried because that can be

difficult unless you're managing money

full-time. Of course, if you don't have

the time or the inclination to pick

stocks, then you are better off parking

your money in a lowcost index fund that

mirrors the S&P 500. And I like those.

They're good. I'm in some. But if you're

willing to put in the work, regular

people can trounce the averages as long

as you're disciplined and you follow the

rules. Rules we constantly highlight as

part of the CNBC Investing Club. How do

you start? Well, that's what we're

talking about tonight. Like I said, the

show is all about the method or methods

to break from strictly quoting the bard

to my madness. How do I pick stocks?

What gets on the show? How do I tell you

some stocks are worth buying in a dip

and some aren't? Those are the questions

that people constantly ask me. Tonight,

you're going to get a piece of the

answers. The truth is that I've got far

too many methods, far too many ways of

picking out great stocks to ever cover

all in one show. But I want to give you

some of the tools of my trade enough so

that you can start to pick stocks like

me on your own. Remember, I want you to

be a manager, a great manager of your

own money. Uh because you can focus on a

smaller number of names while I have to

follow practically everything for the

lightning round. At the end of the day,

this show is about educating you, giving

you the ultimate insiders perspective on

how the market works and how it can help

you try to make money. I'm not here just

to dole out stock picks like the

proverbial fish you give a man if you're

too lazy to teach him to shop for fish

at Whole Foods. What I'd really like to

do is empower you. And that starts with

me teaching you all the many tricks I

use to pick out great stocks and invest

in them like a pro. Methods that have

served me well for more than four

decades and that allowed me to generate

a 24% annual return after fees for 14

years my old hedge fund. Not bad, three

times better than the market. These

skills are what refresh this show and

guide me as I managed my own travel

trust. Now, a learning exercise that you

can follow, of course, by joining the

club. Now, let's get rolling. One of the

easiest ways to identify potential

Kramer names, the stocks that could

possibly uh I should possibly own but uh

not necessarily end up on the show is by

watching a list that comes out every

day. It's called the new high list.

Stocks in that illustrious list, the

highest of the high obviously has

something going for them. And that's

especially true when the market's in bad

shape as only the best of the best can

hit new highs when the averages are

falling apart. So what does it tell you

when a stocks on the new high list?

either that it's part of a broader bull

market because its sector is on fire or

the company itself has some serious

earnings or sales momentum. No matter

how they get there, many stocks in the

new high list often keep going higher

because it's a kind of [clears throat] a

list of A students that are worth

betting on. They tend to keep getting

straight A's on every quarter just like

the real smart kids in school in a great

bull market. We see this over and over

and over again. The same stocks would

hit new high after new high after new

high. and following them was a terrific

way to make money, even as the bears

claimed endlessly that the bull market

was false and couldn't be trusted.

Listening to the bears has caused you to

miss out on some of the greatest rallies

in history. Of course, I'm not saying

you can just chase any stock that's

hitting new highs because they'll keep

going higher. That would be the ultimate

and foolishness, true bozo, the clown

behavior. I am saying that if you want

to identify potential winners unless

there's been a stunning sea change in

the market caused by changing interest

rates possibly the political environment

then a good place to start a wonderful

place to start is the new highless

emphasis on start see that that's the

thing about the market it's not always

that that hard to play once you

understand that there's often more

continuity than change things pretty

much keep going the way they were going

until something major shifts and then

you have to order your course those

courses of Of course, changes, they can

be pretty radical, though, and that's

why you always have to be re-evaluating

your ideas. And you should never dig in

your heels when the facts change.

Something I emphasize over and over

again when I send out these investing

club bullets. Now, I rarely recommend

buying stocks straight off the new high

list unless there's some special

circumstances. Circumstances I'm going

to talk about later tonight. What I like

to do when I'm hunting for stocks and

what you should do is wait for something

to pull back from the new high list

because that is the best place to start

by

>> when you're buying. New high list is not

a shopping list. It's an inspiration

list. You keep an eye on those names

then wait for them to come down so that

you can pull the trigger.

the pullback ideally 5 to 8% 5 to 8%

gives you a good lower price entry point

in a stock that likely has a lot of

positives going for it that maybe it's

been pulled down by an overall move in

the stock market that's been the optimal

level I found less than 5% you're

probably too early more than 8% and it's

more likely that something's gone wrong

very wrong maybe even with the

underlying company pouring over the new

high list is a fabulous way to identify

potential and I stress that where

potential stocks to buy you only buy

stocks that have pulled back from the

new high list if you're confident

they'll make a comeback for substantive

reasons unrelated to the broader market.

Okay? Unrelated to the broader market,

but related to your stock. You need to

do all the same homework you ordinarily

do before buying a stock. You absolutely

must have conviction. Even if it's a

cynical conviction, stocks going higher,

that it deserves to go higher. And the

biggest caveat of all, when you're

shopping for stocks that have pulled

back from their highs, make sure they

haven't pulled back for a good reason.

The selloff needs to be extraneous to

their business. Don't go buying a home

builder that's down because interest

rates flew up because that could

genuinely hurt the numbers. But if a big

pharma stock gets hurt by higher rates,

there's nothing to do with their

earnings. So maybe it's worth buying. Be

certain you're dealing with a

momentarily damaged stock and not a

troubled company that's going down,

down, down. How can you tell the

difference between a damaged company,

damaged stock? The fundamentals haven't

changed. The stock probably hasn't

fallen from grace. It's pulled back for

mechanical reasons, profit taking or

some panic in the market in general.

Now more [screaming] than ever, stocks

are traded like commodities by ultra

leverage funded head ultra levered hedge

funds frequently causing huge sell-offs

that make no sense whatsoever. So you'll

see highquality stocks pull back off

their highs for unrelated reasons to

their core business. But if the

fundamental picture changes, if whatever

made that stock attractive as it climbed

its way up to the new high list goes

away, then that stock is no longer a

candidate for your portfolio. The story

has to be intact or this method won't

work. Here's the bottom line. That's the

first method to pay mandis. Watch for

stocks that have pulled back from a

pre-selected list. The new high list,

especially because a broad market

selloff is sometimes a great

opportunity. Some of my best picks for

the club have come out of the process

and hopefully some of yours can too.

Let's take some calls. Let's go to

Andrew in Georgia. Andrew,

>> hey Mr. Kramer, how you doing today?

>> Ah, good day. How about you, Andrew?

>> I'm doing well. Thank you for asking.

So, I'm a fairly fairly new investor.

I've only been investing for about three

years. Um, one, I just want to say I

appreciate everything you do for the for

the uh, you know, the new guys who don't

really know what they're doing.

>> Thank you. Thank you, Andrew. That's

terrific. How can I help you?

>> My question is about earnings and IPOs.

I want to know after earnings

announcements, how long typically wait

like when you know you say smoke clear

and when it come

um, you know, the IPO is the same thing.

And with uh like percentage like what do

you look for when it comes

up down

you know?

>> Okay.

>> How long to wait after an IPO?

>> Um okay. So you know I find that after

an IPO you really have to be very

careful because what you've got are a

lot of analysts who kind of want to say

positive things and they tend to lose

their critical faculties. My advice is

very clear that when you get a stock

that's down substantially from where it

opened, that's how you look at it.

Because a lot of times the opening is

controlled by people who are just way

too enthusiastic. A company with actual

earnings and a good balance sheet that

trades at a premium to the stock market

but has a premium growth rate. That

might be okay, but otherwise, no thank

you. I'll find better stocks. How about

Drena in West Virginia? Drena,

>> well, good evening.

>> Good evening. Thank you first of all for

everything that you do. I think you're a

national treasure. I have learned so

much from listening to your show.

>> You're very thank when you want to

generate cash, how do you decide what

stocks to sell?

>> Okay, we talk about this a lot in the

club and I tend to rate my stocks one to

four about following their fundamentals.

Always willing to to sell a four or even

a three on any lift. What I try to look

at is I look at like paintings. I'm like

cading a collection. I don't want to buy

a new painting without selling an old

painting. I don't want to have a museum.

And what I look for are companies that

reported a bad quarter, okay, that was

disappointing to me, that have a little

bit of lift that I can start lightening

up from because I don't want to sell a

company that just reported good quarter.

I'm looking for companies that

disappoint. They're already always

there. And you have to have the

discipline to sell, sell, sell.

>> As hard as it might be. Timothy in New

York. Timothy.

>> Yeah. Hi, Mr. Kramer. Thanks for taking

my question.

>> Sure.

>> I uh I want your opinion on quants. My

understanding of quants is that they

screen dozens of parameters on thousands

of stocks and use algorithms to rank

them in terms of valuation, growth,

momentum, profitability, revisions, and

so on. Outcomes are graded buy, hold, or

sell recommendation.

Some quant portfolios have a very good

except a repeatable performance. It

seems to me that at a bare minimum,

these are a valuable tool. On the other

end, why wouldn't an investor use them

exclusively?

>> H that's a great question. Look, I I

happen to I think that a lot of times

the quant go up and down, trade too

much, they recommend stocks and then the

the chart says no or the numbers say no.

I like to buy great companies with great

management that have good secular

tailwinds behind them and the quants

don't necessarily catch those but I do

think that everything whether it be

quants whether it be charts whether it

be everything that is from research I

like to include it all and if some

[music] quants have some great records

and they share us with what they share

us data that they're using I'm I'm a

buyer too okay so now you know the first

method in Kramer's mandis [music] watch

for stocks that are pulled back from

that pre-selected list of good companies

called the new high list, especially

because of [music] a broad market itself

and not because of something happened at

the company itself. Some of my best

picks have come out of this process.

Hopefully, some of yours can too. On man

tonight, I'm giving you an in-depth

[music] look at many more methods to my

madness. From watching shorts to trading

around key positions, [music]

if you want a better, more well-rounded

sense of how to curate your own stock

portfolio, [music] you do not want to

miss the rest of this show. So, stick

with Kramer.

[music]

Don't miss a second of MadMoney. Follow

Jim Kramer on X. [music] Have a

question? Tweet Kramer #madmentions.

Send Jim an email to madmoney@cnbc.com

or give us a call at 1800743CNBC.

Miss something? [music] Head to

madmoney.cnbc.com.

Welcome back to tonight's methods to

madness special where I'm revealing some

of my best tricks for buying and selling

stocks. Trying to give you the real sure

ones. You could call it truly timeless

investing wisdom for the ages. But I'm

too humble to say that if my audience

were older, I'd tell you to think of me

as the pen and teller of the stock

market with a physique that's a whole

lot more like teller than pen. I want to

pull back the curtain and show you how a

professional looks for stocks to buy and

knows what to sell. There's no magic

there. There's no hidden talent, just a

bunch of disciplines. Disciplines that

can help you try to make mad money if

you master them. You don't have to be a

genius. You don't even have to be all

that smart to be completely honest. You

just need to know what the heck you're

doing and put in some homework. And

that's where Kramer the sad but wise

clown comes in. Maybe less of a sad

clown these days and more like the fool

from King Leer. Something to think

about. Enough Shakespeare. Let's move on

to more important things like how to

find stocks that are great buys. Now,

earlier I was talking about picking up

off some stocks that have pulled back

from the new high list because you get a

cheaper entry point, something that's

already been a proven winner. I said you

rarely want to buy names right off the

new high list because you're paying too

much for them. You usually get a better

chance, better deal if you're patient

and wait for some a weakness, you know,

5 to 8%. Given how volatile the market

can be, even when things are going well,

there are very few occasions when buying

a stock right off the new high list can

be justified.

have some patience. But sometimes the

stock's so hot that you got to buy it

even whenever you can as soon as you can

because it's not heading lower anytime

soon. I've felt that and you've felt it.

You won't find these often, but when you

find them, you have to remember not to

buy all at once. You want to buy a 100

shares of a stock and you think it's got

so much mojo that it won't get a

pullback from the high. Hey, how about

this? Buy 25 shares. Worst that happens,

it goes higher still and you don't get

to buy more. So, you grab a quick profit

and find the next one. And believe me,

there is always another one coming down

the pike. Now, I got one exception where

it's okay to buy stock that's hitting a

new high. If you see insiders buying a

stock when it's already up a great deal,

that's a total green light. Don't laugh.

It does happen. It's rare, but it does

happen. In my experience, it's rare

still that this method of picking stocks

doesn't work out. I love it when I see

insider buying after decent run. That is

a terrific sign of the confidence that

the insiders have that the rally may be

just beginning or that there's a big

runway ahead and they sure think it's

going to be long lasting. FYI, insiders

can't flip a stock that they buy

immediately. They have to wait at least

6 months otherwise the government takes

away the gains. That's the law. So these

people are seeing positive things that

likely aren't going to disappear in 6

months time. Boy, do I like that.

Normally insider buying ranges from

meaningless to a small but on its own

insufficient reason to buy a stock.

Sometimes you'll catch insiders buying

their stock because they want to give

the impression of confidence, create an

illusion that they're doing better than

they really are. Insiders aren't stupid.

They know if they if they're seen buying

their own stock, even small mouse, and

the market will smile upon them. So,

occasionally they game the system.

That's fair, but it means we ignore most

insider buying that is not substantial

because it could be pure flim flam. Not

a word. That said, when you get truly

colossal insider buy, even if it's not

all at at at the high, but you're then

you might want to take another look at

the stock in question. When the insiders

buy a whole lot of shares, what a

powerful endorsement. Crucially, if the

volume of the insider buying that that

really does declare its sincerity, but

we're only focusing on one sort of

insider buying right now, the kind you

see in stocks that have been running and

aren't perceived as being historically

cheap or low dollar mplays. Those

sometimes can be down there for a

reason. See, there's nothing more

arrogant and yet telling than when an

insider backs up the truck for their own

stock when it's been rolling along at a

good clip. Think about it. What they're

saying is, "Yeah, we know we rock. Our

stock has been in fuego and we're so

darn confident it'll keep going higher

that we're going to buy shares right now

handover fast."

Arrogant, sure, but this it's rare, but

it is bankable hubris. Corporate

insiders aren't fools with some notable

exceptions occupy the may have money

wall of shame. Plus, if their stocks are

already on a tear, there's probably a

good chance the executives know what

they're doing. Of course, not everyone

deserves the benefit of the doubt in

this business. And after so many

investors got burned by the 2021 boom in

IPOs and spaxs.

I know that a lot of people assume most

CEOs and execs are really a bunch of

liars, frauds, crooks, mouth banks. But

look, that's the wrong lesson to draw

from the IPO implosion. Healthy

skepticism is one thing. A total

unwillingness to believe anything

positive is something else entirely. If

you're going to invest in the stock

market, you need to be willing to extend

some measure of trust to the people who

run the companies that you own shares

in. Otherwise, why bother? Just go buy

the index fund. What else could be going

on? Just burnside buying. Even when the

FTC and the Justice Department antitrust

division are hostile to mergers, you

still get some takeovers. Sometimes

executives will buy their own stock

because they hear footsteps of a

potential acquirer. They've been told by

bankers there's a lot of companies

interested in them without anything

specific. Maybe they've been contacted

by companies and they turn those

companies down. spurned over happen all

the time. And if executives expect that

they they may be next, well, it's a it's

a healthy and honest reason to buy

or maybe they realize that the business

is indeed worth more than they thought

and can be broken up by bringing out

some value. All different generations

have seen them. Altria, Tao, even

Dupont. We've seen tons of these

breakups over the years, and they

genuinely produce long-term gains

because Wall Street likes smaller, more

straightforward companies that are

easier to get your head around. Think of

think about it. Think about about

Carrier, about Otus, about the old

United Technologies. Maybe the

executives see the ability to create

value and they want it on themselves. Or

maybe the stocks run just a bit, but

they don't think the run is over because

they recognize how much better the

business will be once it's broken up.

For me, buying after a big rally can

certainly feel uh a little reckless and

even lazy. Most investors are smart

enough to wait for a pullback before

they pull the trigger.

But insider buying after decent run

tells me that one of the people who

knows the business best doesn't believe

there will be a pullback. And there's

nothing more bullish than that. Sure,

ideally you want to wait until the stock

sells off after the insiders have

bought, but that's the best of all

possible worlds. It doesn't happen all

that often. I've seen it happen in some

red hot tech stocks that cool off very

momentarily. And that's a terrific sign

to buy. Bottom line, one more method of

Kramer's madness. When you see insider

buying in a stock that has already had a

solid run, admittedly a rarity, you

might want to do some buying, too.

Everybody's back [music] after the

break.

Coming up, need another tool in your

belt to [music] help identify the right

time to buy a stock? Kramer's revealing

how short interest in a name could be

your telltale sign to buy it next.

Booya for the [music] Emperor of Crime

America.

>> Honorable James J. Kramer,

>> you got me jumping around my office

[music] right now.

>> Thank you so much for all you do for us.

>> I enjoy your show and I find it [music]

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. [music]

>> Don't miss Mad Money every night at 6

p.m. Eastern. Plus, join the CNBC

Investing Club and stick [music] with

Kramer around the clock.

>> [music]

>> You're in luck because you caught Kramer

on a good night. I'm not going home to

sip that cheap scotch on my dirty

Lenolium floor. And by the way, I

apologize to doers, which I once

suggested was Lenolium floor scotch of

choice. It's actually pretty good stuff,

especially that boutique 18-year-old.

Hey, any guys ever tried the 18-year-old

Jameson?

Sweet. All right, don't waste that one

on the dirty little floor either. Nope.

I'm in a great mood. A manic mood even,

which is me at my best because, well,

let's just say I'm pretty darn

productive and preent when I'm in high

gear. I'm so revved up that I'm

revealing many of my secrets, the

methods to my madness. Better than

giving me a stock pace. I'm giving you

some of the best ways I know to pick

stocks. I'm teaching you invest and

trade like Kramer, if not to be like me

because I have some emotional issues

that frankly you probably would prefer

not to emulate. Somewhat off track. So

far, I've given away two of my precious

secrets, two of the tools that I use in

my hedge fund, and still use my travel

trust, which of course you can follow by

joining the CBC Investing Club, where

unlike Lady Gaga, I play with an open

hand, not a poker face, allowing

subscribers to see all my trades before

they happen. What I'm teaching you

tonight are really what I call tells.

There are signals that a stock might be

worth owning, that it's worth your time

and effort to go through the often

boring process of reading through the

conference call transcripts and

quarterly filings to do the necessary

homework. There are thousands of stocks

out there and any method we can use to

narrow down the ones that might be

attractive to us is a method worth

having. I've talked about insider buying

near the high and while I don't usually

use insider buying is the only way to

determine whether or not a stock has got

it going. There's one other scenario

where insider buying makes for an

incredibly bullish tail. And that's when

a stock has a heavy short position.

Meaning a lot of people out there have

borrowed shares, sold those shares, and

are now waiting for those shares to go

lower before they buy back the stock.

return them to the bank they borrowed

them from and collect the difference

between the price they sold them at

first and the price they bought the

stock back later. You can think of

shorting as like regular investing only

in reverse. We try to buy low and sell

high, right? Is that what we do? Shorts

just turn that around. They try to sell

high and then buy low. When a stock has

a high short position, that means a lot

of smart people have serious conviction

that the stock's headed lower. In fact,

it takes more conviction to short a

stock than it does to go long. Because

when you're short, the potential

downside is infinite. When you're long,

a stock stops losing money when it hits

zero. Shorts lose money when stocks go

higher and there's no lid on it. Right?

The other thing about short sellers is

that if there's a lot of them and a

stock all of a sudden get some great

news, we get what's called a short

squeeze. And it sounds exactly like what

it is. In order to close out the

positions, the shorts have to buy. This

is called covering, short covering. When

a lot of shorts cover at the same time

in a panic, the stock will surge because

what you really have is a lot of people

desperate to buy the stock to cut down

their losses. A lot of demand. They have

to buy unless they want the performance

to be wiped out. This process is so

predictable that sometimes concerned

buyers will fment a short squeeze. Hey,

listen. That's what GameStop was all

about. That's what AMC was all about.

That's what the meme stocks were all

about. So, where does insider buying fit

in the shortselling equation? Okay,

let's say you have a stock with a high

short interest. Then some of the people

who run the company start buying shares

for themselves. Or maybe an outsider

takes a more than 10% stake in the

business and indicates it wants more.

It's almost like drawing a line in the

sand for the short saying, "Our stock

goes this low and no lower." This is an

explosive combination, people, and one

that often leads to a short squeeze that

sends the stocks much higher. Shorts are

smart. In fact, they often tend to be

smarter than regular longside investors,

but they usually don't know more about a

business than the insiders who run it.

If a lot of people are shorting a stock

and management starts buying it in

sizable amounts, you start doing your

homework right then, right down really.

See, usually it makes sense to side with

management. Then you can ride it higher

and higher in true Jackie Wilson style.

higher and not lifting me up as the

shorts panic and push shares higher in

their desperation to cover their

positions, cut their losses and move on.

Similar when a company with a heavily

shorted stock announces that you gun the

buyback bigger than any previous one.

That's another line in the sand

situation where management's

contradicting the shorts. Companies

often repurchase their own shares. And

and while not all buybacks are bullish,

some of them are just outright waste of

money, a substantial new buyback in the

face of the shorts is often a good

reason to take a closer look. Now, a

note of caution here. You need to be

very careful when dealing with a company

that's in the crosshairs of the short

sellers, especially when people are

nervous and the market's in bad shape.

Know the landscape. The shorts have the

ability to wreck a stock, even if the

fundamentals, the underlying business

are fantastic. These days, stock owners

no longer have the benefit of rules.

They used to slow down short selling and

make it harder to create bar rates. When

I got started in this business, it was

much harder to bet against stocks. But

the SEC gutted those rules under both

Democratic and Republican

administrations, all name of creating

more efficient markets without these

protections where you can't smash the

stock down. The shorts can easily

assassinate stocks. They smash them down

anytime something goes wrong. We see it

during the financial crisis back in

2008. Oh my god, that was so such a

horrible period. And we saw a smaller

version of that during the mini banking

crisis of 2023. For the shorts, it was

like shooting fish in a barrel. So many

regional banks traded like they're going

bankrupt. But other than a few near

wells like First Republic, they were

fine. Of course, in recent years, the

short sellers have found themselves

targeted by bull raids facilitated by

social media platforms. So they have to

be careful. But only when the meme stock

crowd goes after them in force, you

never know when that's going to surface.

These are highly unusual situations,

though. You can still find great

opportunities in stocks where the shorts

have overreached and the insiders are

buying. But before going into one of the

situations, I have to warn you that the

balance of power still favors the short

sellers. That means even if the short

sellers are wrong about a company's

prospects, they can still demolish its

stock, especially if they mount highly

visible campaigns against the stock. And

look, many times the shorts are right.

The stock deserves to be slaughtered.

Just don't underestimate the amount of

damage the shorts can do to the stock.

In the end, the best protection against

bare rates are stocks that pay good

solid dividends. Because when you short

a stock, you have to pay those dividends

to whoever you borrow the stock from.

That's a terrific deterrent. When you

see a stock with a big dividends being

attacked by shorts and the yields going

higher, that's often a terrific place to

be, especially when the insiders are

snapping up stock, too. So, let me give

you the bottom line here. Insider buying

plus heavy short interest can equal

raging bull buy as long as you avoid

situations where the shorts are

determined to crush the stock at any

cost. Now we're going to go to Vincent

in New York. Vincent,

>> hey Kramer, how are you?

>> I'm good. Vincent, how are you?

>> I'm well. What advice would you give a

26-year-old that's been day trading for

about two years and is um looking to,

you know, do better and go as far with

this as he can? All right, but let's

look. If you're day trading, that's a

full-time occupation. So, what you want

to do is put some money in the Vanguard

total return fund and put some money in

the Vanguard S&P 500 fund and just keep

putting money away every single month.

If you have some good day trades and

you've made a lot of money, put take off

some of that capital and put it in those

Vanguard accounts. That's the way I

would suggest do it because I want you

to have exposure to the broader market,

not just to the stocks you're trading.

[music]

All right. Look, in most cases, a stock

with insider buying and heavy short

interest equals buy. As long as you can

avoid situation [music] where the shorts

are determined to crush the stock that

you own, much more we had money ahead. I

still have some tools in my belt that I

want [music] to share with you,

including my method of trading around a

core position. So, stick around.

>> Hey Jim, your mission has been very

successful in our family.

>> I listen to your show multiple times a

week for investing knowledge.

>> I just want to say thanks. I love your

show. Oh, thanks for always looking up

for the little [music] guy.

>> A huge thank you for all you've done to

make me a better investor.

>> I got to call Kramer because I can't

make a move without this guy. I want to

make people better [music] investors. If

they make money, fantastic. Let's go to

work.

Regular viewers know that this show is

all about investing, owning stocks for

the long haul, not really short-term

trading, because it's much easier to be

a good investor than to be a good

trader, especially when you're doing it

part-time. However, knowing how to trade

makes you a better investor. And trading

around a core position is one of the

most basic and useful disciplines out

there, especially in markets that often

get hit by wild swings. And that's most

markets in recent years. So what does it

mean to trade around a core position?

Okay, let's go through it step by step.

First, you need a stock. Pick one that

you like, one that you got an opinion

about, one where you have a bias, a

stock you believe is headed higher over

the long term. What you're really

searching for here is a great company

with shares that might get tossed around

by market volatility, even as you

believe they'll ultimately go higher if

you're patient. Now, if you were just

investing, then you just set up a

position in the stock. buy in gradual

increments because we all know that

buying all at once is just pure

arrogance and uh that be it. By the way,

this whole process of buying in

increments is something that we're

constantly showing you how to do if you

belong to the CNBC investing club. We

also talk about trading around

positions. Take something like Nvidia.

That's a chipmaker with fantastic

long-term story because they make the

most powerful semiconductors on Earth

that'll be needed for cutting edge

applications like artificial

intelligence. I love Nvidia for the long

haul, but it's got an insanely volatile

stock. Now let's say you want to own a

100 shares of Nvidia over time. Then the

way to set position would be buy 25

shares four times over a period of weeks

or even months. And that's your core

position as an investor. But let's say

you want to trade something that's hard

to do but also cheaper than it's ever

been because home gamers can now fit in.

They can flit in and fit it out. No

stock commissions. Now I wouldn't

recommend pure trading something like

the Nvidia. My stance is own it, don't

trade it. But trading around a court

position, different story. So let's go

back. you own the 100 shares of Nvidia

and let's assume it's sitting at I don't

know how about $50 $500 for the purpose

of it it's 500 every time the stock

jumps another 5% you could sell 25

shares a quarter of your position you

shave a little off to bring in some

profits so once Nvidia hits 525 you own

75 shares you keep scaling out of the

same way on the way up but don't ever

sell the final 25 because that is your

core position then you wait until

something happens to knock the stock

back down and as long as nothing's

changed with the underlying thesis you

use that weakness to stock up more

Nvidia we've done this for the for the

trap trust it's going to happen pretty

often see since we're in a world where

stocks can get crushed by all kinds of

factors nothing to do with fundamentals

that's what happens now as the stock

comes down the original cost basis you

buy it back in increments since we

started with 100 shares let's keep using

increments of 25 to buy it back every 5%

decline you can go beyond 100 shares if

it comes down low enough too. Now, this

might appear to be small potatoes. Up

5%, sell 25 shares, down where you

started by 25 shares, and repeat the

process on the way back up. But over

time, your profits will add up, and

that's what trading around a core

position is all about. Now, a lot of

people think trading is incredibly

exciting, and it can be, but if you're

good at trading around a core position,

you should be pretty bored. All you're

really doing is watching the stock move

and then tra trimming or adding your

position accordingly. Contra to the

image of trading is something that's

reckless and irresponsible. Trading

around a court position is really the

height of prudent portfolio adjustment.

Boring by the way is good in this

business. Exciting. Save it for the

stadium. Obviously, you can scale these

numbers depending on how big your

position is. But the base idea is avoid

putting yourself in a spot where you

have too much on the table in case the

stock gets swatted down or too little on

the table to take advantage of any

upside that comes your way. Trading

around a core position is an important

basic strategy that everyone can use.

Even those of you who find the notion of

trading totally abhorent because it's

less trading and more just a supplement

to investing. So here's the bottom line.

Now you know the basics of how to trade

around a core position. Yet another

method to my madness. One that allows

you to generate lots of small gains that

I am telling you [music] will add up

over time. We have money is back after

the break.

Coming up, Kramer's revealed his tools

to the trade of buying a stock. But what

about selling them? Kramer's breaking

down how [music] to get out of a stock

at the right time when Mad Money

returns.

>> Booyah. Jimmy Kill, your 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 [music] 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.

[music]

[music]

I've got one more trick to teach you

tonight. One more method to my manners.

And this time I wanted to talk to you

about selling. How do you know when to

sell hot stock? You ask about that all

the time. How do you get out before the

party ends so that you're not one of the

last people around who gets stuck

cleaning up the mess? Now, this is a

question that needs to be answered

because there's a lot of money to be

made by owning hot stocks with lots of

momentum. But when you play the momentum

game, you need to know when it's time to

leave the table. There [snorts] are

always naysayers and eventually the

naysayers almost always proven right

because sooner or later virtually all

hot stocks implode. Remember to talk

about the hot stocks here. Remember

everything that roared in 2021 collapsed

in 2022. That's what I'm talking about.

But the collapse usually occurs later

rather than sooner. And all the negative

talking heads who kept you out of the

momentum stocks with a recklessness

disguised as prudence actually cost you

a great opportunity to make money.

People shy away from these stocks

because they don't know where they're

going going to stop. They don't know

where they're going to top out. It's

understandable. And I I'd be afraid to

buy them, too, if I didn't have a

discipline that let me know when to get

out. Lucky for you, I do have one and

you're about to learn it. First, when

I'm talking about hot stocks, I really

mean hot speculative stocks. Stocks of

companies, but with fairly low market

capitalizations. Usually, these stocks

begin with very little research coverage

from major Wall Street brokerage houses.

They often don't even have earnings.

They may not even have sales. Now, I

would never buy these for the travel

trust. We're not talking about that.

These names can go up for a very long

time. They can catch fire and stay on

fire for years when they have the wind

at their back. The key to figuring out

when interest has peaked and it's time

to sell is not from the stock. It's by

watching the analyst coverage. You have

to use your own judgment here. But a

good rule of thumb is that once one of

these hot stocks has at least a half

dozen analysts covering it, the run is

going to peter out because the stock in

question is becoming too wellknown. It's

the rare speculative winner that can

keep getting keep winning after it gets

big. You can find out how many guys are

on a stock by looking it up online. This

isn't hard to find information. This

formula has worked for me for as long as

I can remember. As far as I can tell, it

works because the number of analysts on

a stock is a good gauge of how much

awareness and interest there is in the

name. Hot stocks get tapped out when

there's nobody left to be attracted to

them to to go buy more. When all the

people would be interested in buying

have already bought, they come out of

nowhere attracting more and more

attention, more and more backers, and

eventually everyone who wants a piece of

this stock has a piece of it already.

When that happens, the run's over and

it's time to go home. Oh, and if the

meme stock guys get their hands on it,

take advantage of their enthusiasm to

ring the register. That's a great sign

that you want out because they can only

push a stock up so much before they run

out of firepower. Of course, there are

other situations where speculative

stocks go out of favor all at once,

regardless of how much attention they're

getting. In 2021, we had a huge run in

anything related to electric vehicles.

Think car makers, battery plays,

charging stations. Same goes for

enterprise software stocks. Now, a lot

of this was fueled by an easy money

environment with near zero interest

rates. There was a lot of liquidity

kicking around back then and it had to

go somewhere, which is why so many money

losing companies had red hot stocks. But

then the Federal Reserve declared war on

inflation back in November of 2021,

letting you know that the age of near

zero interest rates was come to an end.

At that point, we knew that the

speculative froth was about to be

drained out of the entire market because

that's what always occur when they

tighten rates. Now, I very quickly told

you we're in a new environment where

anything speculative was toast. And

instead, you wanted to own real

companies that make things or do stuff

out of profit. Now, I know it wasn't the

most elegant way to phrase it, but these

names held up much better than

speculative plays that got obliterated

in 2022, but putting aside the interest

rates issue, when the Fed's not

tightening and it's safe to speculate,

you need to watch how many analysts are

following these little speculative

stocks to know when the run's going to

end. Bottom line, once a red hot

speculative stock gets too much

attention, it means the rally is likely

on its last legs because there are only

so many people who are willing to buy

these things [music] and eventually the

bulls, they run out of firepower. Stick

with [music] cra.

[music]

I always say we [music] have some of the

smartest viewers in television. And I

love taking your questions, listening to

your pitches, and hearing what crime

Americans want to know about. So joining

me today just to do this is Jeff Marks,

portfolio director for CNBC Investing

Club. We're answering some of your

burning questions and your hashtag

MadMentions. Jeff does a great job

helping out with the trust, tossing

around ideas, doing some great analysis

for MadMoney viewers and members of the

trust. If you're not a member already, I

mean, what are you waiting for? So let's

start right now with Tim in Alabama. Uh,

and I think it's a really question. He

goes, "How do you decide whether to take

profit rather than keep a stock longer

to receive capital gains tax treatment?"

These are always hard issues because I

think that you have to worry about that

kind of thing with your accounting

professional because what I care about

is whether stock's going to go up or

down. And I believe that if a stock's

going to go down, you should take it off

the table even if you have a big game.

That's what matters to me. Of course,

you want to see qualified advice for

something like that. Uh but for the

charitable trust uh that uh you could

follow along with at home, we don't

really play the the tax game too much

because everything gets donated the

gains gets donated to charity uh at the

end of the year.

>> Yeah. I mean, look at I think it's I've

always felt from Real Money, my first

book about investing that never fear the

tax man, fear the losses. All right.

Next up, we're taking a question from

Russell, who asks, "I always try to

follow your uh advice to buy stocks in

portions rather than all at once." Very

good. Often these stocks never pull back

enough to buy more. I end up with small

positions in lots of different stocks

make it hard to manage. What would you

recommend? Okay, this is another one

where uh this is a discipline that I

came up with which says that it's a way

to figure out whether you missed the

move or not. Like if you come in and the

stock keeps going up, there's no doubt

about it that you are late. There's just

nothing you can do if you don't get it

all in. I've accepted that consequence.

If I'm late, then all I do is I have a

small gain. That's just the way I look

at it.

>> Yeah, it's a high quality problem to

have. Um if you can if you're able to

continue to do the homework, then you

can still hold them, especially if the

prospects are quite good. But yeah, it's

a it's a challenge because you don't

want to spread yourself too thin with a

whole different number of stocks. Uh but

look, if they're going higher, um you

know, yeah, it's a it's a it's a quality

issue that we deal with sometimes.

>> It's a discipline. I mean, you know,

what happens if you buy it all at once

and it goes down? I mean, that good

chance that that could happen. And we're

trying to avoid that. That's the real

worry. All right. Now, let's take a

question from Randy in Ohio asks, I know

that when bonds sell off, the rate goes

up. If bonds do sell off, what why would

it impact stocks? Okay, there are many

different ways you can answer this. One

is is that if interest rates go up for

something that is riskfree a bond uh

then that has greater appeal than a

dividend which may be equal because the

dividend well you know what that's only

part of the equation of what a stock

returns and if the stock goes down big

then you wipe out the whatever gain you

get from the dividend and then of course

there's long-term considerations as you

know about just about the value of a

bond versus stock further out

>> right it's competition for dollars like

you brought up uh but you mentioned, but

uh interest rates are also used uh to in

a in a discounted cash flow model where

uh investors they look at the cash flows

out, they estimate them, they discount

them back and when the interest rates

higher, they get discounted discounted

at a higher rate that lowers the present

value that lowers the value of stocks.

Uh but there's also uh things like

financing costs. If it's used uh if a if

a company relies on financing uh to uh

sell their their products, higher rates

might hurt their business as well. You

just have to just think stocks aren't as

competitive in many different ways than

bonds if rates go up. I mean, it's

really that's the way you have to look

at it. Even if you don't finally

actually understand discounted cash

flows, you kind of have to take it for

granted that that's what occurs. Next,

Lynn in Virginia wants to know, "If I

only have five shares or something

remaining, and you recommend taking some

profits, should I close out the position

or let it ride?"

These are just questions that are so

hard because you know five shares

reminds me of like the tail end of when

we have some win you know it's like a

tail end and what do you do and the five

shares is really so that if you if the

stock goes down you can buy more. Uh so

if the stock goes up and we recommend

sell I would just get rid of it. I

really would I would just say let's move

on and find something better. Uh because

there's always something better.

>> No it's it's absolutely a fair debate if

they are growing the dividend growing

profits. the outlooks are bright, maybe

you could sell one or two, but you also

don't want to fall into that trap uh

from the earlier question that we just

had about managing too many positions.

So, there's always cross disciplines

happening right now.

>> And that's one of the things that people

don't understand about investing

>> is that there is no right or wrong.

There's often two rights that compete

against each other. Now I have a

question from Kyle who asks, "Do you

have a similar approach to investing in

index funds as you do stocks where you

would wait until the oscillator is very

oversold or would you just dollar cost

average in index funds?" Now this is

very funny because this is where I've

got two disciplines. What I like to do

if I'm putting money in every month uh

if there's a month that's down more than

10%. I double and put like if like let's

say August is down 10%. I take July's

contribution uh is keep that August

contribution and then I take uh

September's contribution and I take the

September and August together and I just

feel like that's a good level. So you

might be let's say you have 112th 11

12th 112th 12th 12th 12th 12th 12th 12th

12th 12th 12th 1212th.

>> Well there you go. Well, I mean, look,

stocks generally should be more

attractive as the prices come in, right?

You wouldn't run from a a sale at a

department store, but on the other hand,

what I would say if it's index funds,

um, it's more about time in the market

than necessarily trying to time it

oversold, over bought. Um, you just want

to be invested in the

>> Absolutely. And I and I think that

that's a really important issue. We do

not, by my method, try to imply that

we're necessarily timing the market.

just trying to put a little more money

in at that one level, but certainly do

the rest because it's 1212. That's the

way you should do it. Well,

>> what can I say? Like I said, there's

always a bull market somewhere. I

promise I'd find it just for you right

here on Man Money. I'm Jim Kramer and

we're going to 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 CNBC 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

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