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Cramer On 'Broken Stocks': Opportunities Galore!

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Cramer On 'Broken Stocks': Opportunities Galore!

A "broken company" is not at all the same thing as a "broken stock," CNBC's Jim Cramer explained during his daily "Mad Money" show Friday. In fact, there is one big distinction between the two: A "broken company" contributes to a stock market correction, as they are "directly in the blast zone and certain to be obliterated."

Consider, for example, the 2012 market selloff in reaction to economic uncertainties and a debt crisis across Europe, especially Italy. Stocks with exposure to Europe that are directly in the "blast zone" got punished — and rightfully so. But at the same time shares of the casual fast food restaurant chain Chipotle Mexican Grill, Inc. (NYSE: CMG).

"How can a Mexican restaurant chain like Chipotle get hit off of Italian bonds?" Cramer asked. "Well, it happened."

So, what should investors do when a broken stock is mistaken for a broken company? The obvious answer is to avoid broken companies because once they break it is very difficult to put it back together. Patient investors will also be rewarded because, as it stands, broken companies will be sold off first and then followed by broken stocks.

You want to look for stocks in areas that are independent of what's ailing the market," Cramer added.

These are the stocks that investors need to "gobble up" quickly to take advantage of a correction, Cramer concluded.

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