Jim Cramer’s guide to investing: How to use the ‘new high’ list for stocks

CNBC's Jim Cramer explained how investors can use the "new high" list to identify high-quality stocks.
Cramer said the list can be a great place to start research and find stocks that might be worth buying during a temporary pullback.

Stream San Diego News for free, 24/7, wherever you are with NBC 7.

CNBC's Jim Cramer revealed one of the methods he uses to find winning stocks: The "new high" list. This list shows stocks that are hitting new 52-week highs, and Cramer said it can be a good place to start researching worthwhile investments.

"Watch for stocks that have pulled back from the new high list, especially due to a broad market sell-off," Cramer said. "Some of my best picks have come out of this process, and hopefully some of yours can, too."

Get top local San Diego stories delivered to you every morning with our News Headlines newsletter.

However, he cautioned investors against buying stocks purely because they are on the list. He said there is often more continuity than change in the market, but that doesn't mean these stocks will continue to climb. Investors must be ready for unpredictable factors that can change the market, such as interest rates or political events.

The best way to target stocks on the "new high" list is to be patient and find a high-quality stock that is seeing a temporary pullback, Cramer said. But if a stock on the new high list is seeing a decline due to problems with a company's fundamentals, it's best to stay away.

"Poring over the 'new high' list is a fabulous way to identify potential, and I stress that word, potential stocks to buy," Cramer said. "You only buy stocks that have pulled back from the 'new high' list if you're confident they'll make a comeback for substantive reasons unrelated to the broader market."