Developing an investment thesis

On a recent 'œMad Money' show (April 17), James Cramer explained why he was bullish on minerals companies such as BHP, FCX and RTP. According to a big picture investment thesis ('œMaximum Minerals') developed by Cramer, rapid economic growth in the BRIC nations (Brazil, Russia, India and China) will impact demand in the world's mineral markets over the next few years, creating bullish market conditions for mining companies and mining equipment companies. By selectively choosing 'œbest-of-breed' companies poised to capitalize on this trend, it's possible to turn in some impressive investment returns. As Cramer illustrates on nearly every show, it's important to be able to develop these types of investment theses when investing in specific sectors.

While many portray Cramer as simply a 'œmad man' who picks stocks out of thin air, it's actually interesting to see Cramer at work as he processes mountains of information to come up with big picture 'œstories' about global trends. By being able to stay one step ahead of these trends, it's possible to make 'œmad money' (his words, not mine).

The next time you're thinking about whether or not to invest in a specific security, then, why not take a moment or two and consider whether it fits into a 'œbig picture' investment thesis about how the world works? In this specific example, Cramer developed an investment thesis around the idea of BRIC, which was first elaborated by economists from Goldman Sachs during the time of the first emerging markets boom. While noting that he doesn't adhere to any sophisticated ideas of how countries industrialize, Cramer simply points out that countries like Brazil, Russia, India and China will have enormous demand for raw materials to fuel their future economic growth. That's why he likes the prospects of companies that will help to 'œfeed' the growth of these nations: companies that own minerals and companies that help to extract these minerals out of the ground.

For those of you who missed the 'œMaximum Minerals' show, Mad Money Recap has the full details:
'œI HAVE A CATEGORICAL IMPERATIVE; A WORLD HISTORIC MISSION TO MAKE YOU MONEY!

TONIGHT'S DIFFERENT.  LET'S LOOK AT THE MARKET BROADLY.  YOU NEED TO UNDERSTAND THE UNDERLYING SECULAR GROWTH TRENDS THAT MAKE SOME STOCKS WORK, AND OTHERS FAIL ABYSMALLY.

THAT'S WHY, TONIGHT, I WANT TO TALK TO YOU ABOUT ONE ALL-CONSUMING TREND.  AND THE STOCKS THAT COULD HELP YOU MAKE MONEY OFF OF IT.

THE TREND IS SIMPLE.  I WANT TO TRY TO HELP YOU MAKE MONEY OFF OF THE BULL MARKET IN PILLAGING THE EARTH!

I WANT TO EXPLAIN WHY THIS BULL MARKET EXISTS; IT'S NOT JUST ABOUT OWNING THE RIGHT STOCKS.  SEE, YOU REALLY DO HAVE TO UNDERSTAND WHY THESE STOCKS ARE GOING UP, AND WHY THEY'RE NOT DONE GOING UP.

I'LL GIVE YOU THE STOCKS THAT COULD MAKE YOU MONEY OFF THIS MOST VIGOROUS, RED-BLOODED BULL MARKET.  AND THESE ARE GOING TO FALL INTO TWO CATEGORIES:  THE ONES WHO OWN THE MINERALS AND THE GUYS WHO MINE AND PROCESS THE STUFF; SO TWO CATEGORIES:  MINING COMPANIES AND MINING EQUIPMENT COMPANIES.

AFTER I GIVE YOU THE COMPANIES, I AM GOING TO TELL YOU HOW YOU KNOW WHEN IT'S TIME TO RING THE REGISTER!'
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