CNBC’s Jim Cramer suggested that research could give investors an edge, stressing the need to educate yourself about stocks before adding them to your portfolio.
“You should never buy anything you don’t have personal knowledge of, unless the stock in question is from a well-known and best-in-class operator,” Kramer said. “But for most stocks, don’t even think about buying them unless you actually know the underlying company.”
When Mr. Kramer first started trading, company information was harder to access than it is now, making investing more difficult, he said. But at the same time, he continued, it’s easy to gain an advantage by finding data that is “buried in places no one looks at it.”
Kramer said most of the material is on the internet, and investors can use search engines and chatbots to access relevant information.
Mr. Kramer reflected on some of his early stock picks, including Florida-based citrus grove developer American Agronomics Corporation and women’s fashion company Bobby Brooks. But he continued to say he suffered losses on both investments, noting that the former dropped to nearly $0 after a flash frost in Florida and the latter went bankrupt. Kramer said his big mistake was not doing enough research. He selected these stocks based on an article he read in Forbes magazine, but that information alone wasn’t enough reason to buy.
A little later, I learned from a friend that Standard Pressed Steel, a local fastener company, was hiring. Kramer bought some stocks and managed to make some money. Kramer said what he learned from his friend was important. That’s a good sign if a company has a lot of business and needs to hire more workers.
“What did I know to win at SPS? At least I knew things that weren’t widely known at the time,” he said. “I knew I had more business than they expected. It wasn’t the whole story, but it was something that was largely unknown outside of my neighborhood. I had an edge.”
