"Down but not out, I took the remaining capital and bought seven shares of Bobbie Brooks, a clothing outfit I had read about. Almost immediately the company reported bad earnings, and my money halved again," Cramer said.
Never one to enjoy losing money, Cramer looked at those events reflectively and asked himself a few key questions.
"What did I know about growing oranges? Very little. What did I know about woman's fashion? Less than I knew about oranges."
It may sound simple but the concept had profound impact. Cramer realized he had invested in companies without really understanding their businesses.
Despite the losses, the "Mad Money" host was undeterred in his belief that the stock market presented substantial opportunity. And at the time Cramer was on the road quite a bit.
"I fell in love with the breakfast at Bob Evans Farms. And service was good."
Opportunity presented itself.
Now understanding that a smart investor was an informed investor Cramer went to the New York Public Library and devoured everything he could about the company including information which showed it had a long tradition of good service. And he knew the food was good.
"I realized I was onto something and I bought twenty shares. Stock went up immediately on a good quarter," said Cramer.
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That lesson is something Cramer has carried with him across his career. That is, know what you own inside and out.
"The best investment ideas come from what you know melded with information gleaned from public sources," Cramer said.
