As an investor, it is hard not to like Jim Cramer and if you read his books you will gain plenty of ideas on not losing money and more importantly how to make money. He wrote a book called Get Rich Carefully published by Penguin Books, New York, 2013. One of the wonderful things Mr. Cramer does is tries to ensure you do your homework before investing. You have money and what to invest in is the question – if you are not sure try a low fee S&P 500 Index which is the bench mark all the money managers are trying to beat and if they do not you have done better. If you want to invest in individual stocks, then you will need to do your homework.

The first stage of homework is using the great amount of information which exists on the internet. Mr. Cramer believes first you should with a macro or wide view and then narrow it down. Ask yourself where do see the economy going in two years time? How about one year? In the area where you gain your income – what about that area?

After determining where the world is going – you can listen to some conference calls from company’s whose skill is in making that judgment will determine their success. For example – if you been by a construction site – you likely have seen the yellow CAT signs; it turns out that company is called Caterpillar and they are very good at selling heavy equipment and truck engines around the world. Why is this important? Caterpillar’s conference calls will tell you how they are doing around the world – are they selling more in China? (one of the world’s biggest economy) or is slowing down? What are the big miners of the world doing? Selling more truck engines – the domestic economy?  There are other companies which give you a great indication of what their customers are doing with their money. Are margins being squeezed or they are making less money? In the book Mr. Cramer lists Alcoa for insights into the aircraft business; GE for energy savings, health care and aerospace; United Technologies for its elevator service – are high rises being built? 3M has a global glass division which many laptops use.

Each sector of the market has a core metric at its heart:

Aerospace  – what is the backlog?

Agriculture – what does future contracts for the individual crops

Airlines –  fares, fees, seat miles and fuel costs

Apparel – raw costs and inventories

Asset Managers – assets under administration

Autos – their percentage of seasonally adjust annual rate of cars sold

Banks – net interest margins – how much can they make off their deposits

Brokers – employee compensation – how much is the firm sharing with their employees

Casinos – the handle or total amount bet and the drop which is total amount exchanged for chips

Chemicals – raw costs and volume growth

Coal – inventory, if increases stock goes down

Consumer Packaged Goods – margins and organic growth

Cruises – net yield

Defense – backlogs

Diagnostics and Devices – approvals from the FDA

Drinks – sales volumes

Drugs – what is in the pipeline?

Engineering and Construction – backlog

Food Stocks – cost of the package; new successful launches

Footwear – future orders which underlines growth and product orders

Gold – finding and developing costs

HMOs – the medical loss ratio: the ratio of total losses versus total premiums paid

Hospitals – the reimbursement fates from the federal government

Hotels – the revenue from available room or hotel’s average daily room rate x occupancy rate

Housing – backlog numbers, sales and how much they make per home

Insurance – the combined ratio (payout ratio) and the quality of assets the company owns.

Internet – traffic acquisition costs

Media – advertising and subscription dollars

Minerals – cost of extraction and cost to send to the market

Oils – oil cost replacement

Oil Service – the Baker Hughes rig count

Paper – the price of contertainboard

Pipelines – can it raise its dividend?

Telecommunications – focus on the churn rate – winning and losing customers

Utilities – the yield

Linking to dividend paying stocks, Mr. Cramer strongly suggests you stay with the best companies if you want to get rich carefully. Always choose the best companies and in the long run they will make money for you through the cycles.

There are more questions than answers, till the next time – to raising questions