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Why Investors Should Be Wary of Multiple Expansion: Jim Cramer

In his Real Money column on Wednesday morning, Cramer touched on multiple expansion and why he's not a fan of "rallies based on nothing." "I don't trust multiple expansion, not that I am necessarily drawn to multiple contraction, lest I stumble on a value trip, although I think CVS's merger with Aetna doesn't produce a black hole as much as a rebirth," Cramer wrote in his column. "And if I didn't believe so strongly in the long term of those we are paying more for, I would probably do some trimming of those that have had rallies based on hope." "Take a look at the news flow and the analyst reports, are there earnings bumps?" Cramer asked. "That's the key." "If someone raises earnings, then you're good to go. That means that's not based on multiple expansion," he continued. Otherwise, Cramer said, investors are just paying more for the same estimate. "That's a suckers game," he added. Be careful, he warned. Want more exclusive tips from Jim Cramer? Lucky you, his next call kicks off March 14 at 11:30 E.T. Here's how you can watch. Related. Jim Cramer: I'm Not Buying This Tech Multiple Expansion How Much Money Will I Need to Retire? Want to learn about retirement planning from some of the nation's top experts? Join TheStreet's Robert "Mr. Retirement" Powell live in New York on April 6 for our Retirement Strategies Symposium. For a limited time, tickets are available for $99 for this full-day event. Check out the agenda, learn about the speakers and sign up here. Watch Jim Cramer's Daily NYSE Show and Replays Below

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