Reblog: 37 Amazing Lessons I Learned About Investing From Jim Cramer

Each morning, at around 4:45, I think about what I will write as the subject of my opener for the day.

I typically contemplate the prior day’s market action and the overnight price changes in the major asset classes and regional markets around the world and I try to come up with something relevant, topical and actionable.

Something on my list, for many moons, is the subject of the lessons I have learned from Jim “El Capitan” Cramer.

Over the years I have written about the contributions that Jim has made and I have defended Jim as well against the wrong-footed criticism that he often faces in his role as a high-profile and visible public figure.

My defence of Jim is not done because I essentially have worked for him over the last two decades. Rather, it is heartfelt and done in the recognition of the contributions that Jim has made since he invented and founded TheStreet. I do this in large part because Jim has been my professor, an important contributor to my investment experience.

I have learned monumentally from his input to the right of my Diary. I read every single word he publishes, sometimes twice.

Stated simply I have never in my life, and that’s over four decades of investment experience, met someone like Jim who has such an immense reservoir of investment knowledge and who possesses the sort of insight into the markets that he has.

To be honest and direct, I have met and befriended many investment legends, but Jimmy is unique in many aspects. His ability to distil the rhythm of the markets into a few understandable bullet points, his general and specific insights, his keen sense of finding and adopting market leaders and explaining the rationale is unprecedented and borderline miraculous, and his understanding of the market’s subtleties are delivered in a succinct and well-articulated manner.

And, unlike the many, there is a strong sense of honesty and integrity in his writings. When he is wrong, he admits it, and when he doesn’t know, he writes that, too.

Jim is the supreme educator of all things investment-wise.

Importantly, Jim recognizes that the path to investment success is not made with phoney promises and superficial analysis. The road to lasting wealth is a road to be travelled carefully, with thought and analysis.

I often criticize talking heads and commentators in the business media as managers of memorized bullet points. At the core, however, their knowledge is typically miles wide but only inches deep. Their investment advice is too often uninformed and reckless. And typically there is little follow-up, especially from the “carpet sweepers” who sweep their investment boners under the rug, never to be heard from again.

By contrast, Jim’s three-and-a-half decades of investment experience — including a lengthy period of managing a hedge fund that delivered substantial excess returns — is coupled not only with insights but from many hundreds of direct interviews in which El Capitan goes belly to belly with company executives. In those interviews, mostly on “Mad Money,” Jim distills complicated issues that every company faces into concise questions that provide us with answers that often illuminate our understanding of specific investments.

He constantly follows up, on the winners and losers.

As our mutual pal Byron Wien has stated, “Disasters have a way of not happening.”

As Jim constantly has emphasized, the preponderance of days, weeks, months and years is for the gravitational pull of markets to move stocks higher.

Despite my protestations, 2017 has been a year of market progress. My fixations on President Trump (his inability to pass legislation and his dysfunctional administration), the economic message I interpreted from the bond market, my valuations concerns, the possibility of a number of adverse economic/market outcomes and so forth have been wrong-footed. I should have listened to Jim more this year — and for the last 20 years!. Like Jim, I should have played the odds, as stocks, over time, have a gravitational pull higher.

Today’s missive is long overdue.

In this opener, I discuss some of the many lessons I have learned over the last two decades gleaning over to the content to the right, in Jim’s columns. Among them:

• Always worry, but keep the worrying in context. Sometimes you can be too sceptical.
• In other words, optimism “trumps” pessimism in most markets. Rather than looking at potential headwinds and adverse outcomes, I should have been more upbeat.
• Spend time searching for superior company investments as the micro is often more important than the macro.
• Being long is inherently a better bet than being short, as one can make “only” 100% on a perfect short but one can make an infinite amount of money on a perfect long.
• A large portion of one’s time should be dedicated to isolating the one to two sectors that possess market leadership potential.
• Develop important investment themes and do not be afraid to participate in those themes regardless of your overall investment views.
• Delivering superior investment returns is critically dependent upon finding companies and sectors that will beat consensus expectations.
• Active management is far superior to passive investment management.
• When wrong, respond quickly.
• An important ingredient to good stock selection is one-to-one, belly-to-belly contact with company management.
• But a blind acceptance of management’s optimism is unacceptable. Move further. Talk to customer and competitors.
• Organic growth is more valuable than cost-cutting.
• Stocks move in groups.
• The first double usually leads to a triple. Let your profits run.
• If a stock goes down on great news, sell it.
• No stocks are too cheap to sell.
• Don’t violate your cost basis.
• “Breaking up is easy to do.”
• Don’t make investment decisions solely based on government releases.
• Pay little attention to buy and sell decisions of large, high-profile hedge-hoggers and other “big-time investors.”
• Don’t be fooled by contract wins; they are exciting but seldom move the needle.
• Relative valuations seldom justify a purchase.
• If the fundamentals change, just exit. Cut your losses when the thesis changes.
• Insider buying is not a reason to buy; clusters of buying deserve attention.
• Identify big-picture themes, as the right thesis can be a gold mine and can transcend the macro concerns and headwinds.
• Stock leaders, more often than not, overshoot.
• Typically buying the best of the breed is the preferable alternative.
• New age means investment leaders means superior investment performance.
• Determine what matters, what doesn’t and what we should care about.
• Listen to conference calls.
• Try to take advantage of the confusion.
• Be worried about sharp market declines — it’s not the time to be calm.
• Check your emotions at the door.
• Stick with your convictions.
• Change with the times.
• There is usually a reason why stocks are underperforming, especially for an extended period of time. Always and continuously test your investment thesis.
• Above all, do your homework; there is no substitute for research and there are no shortcuts.