Sell Block: In Investing, Stay Flexible

Just because Cramer likes a stock doesn’t mean he’s married to it. He understands investors must stay flexible as the market changes. So if a certain play isn’t working at the moment, he’s not afraid to drop it.

Case in point: As much as he’s touted agriculture’s strength, last week the sector was a sell, he said. The leading stocks – Deere and Monsanto , to name a couple – had climbed too high, and it was inevitable they’d come back down to earth. Homegamers who didn’t take profits when they had the chance probably lost some sizable gains.

“This is why we always keep price in mind,” Cramer said. “Price comes first.” There’s nothing wrong with buying a stock at $70 and selling it $100 – even if it means you buy back your position later at a lower price and pocket the difference. Apple and Mastercard were great examples of this. Cramer loves the companies, but the stocks were just too hot.

Cramer said his willingness to bend and move is often mislabeled flip-flopping. But to him, it’s just smart investing. And all that talk about paying more in commissions and taxes for the constant trading is wrong, he said. In the end, buying low and selling high is the best investing strategy no matter how often you do it.

This works on the buy side, too. Just look at Cramer’s index of some of the worst stocks in the market before Tuesday’s rate cut: the homebuilders, mortgage lenders, mortgage insurers and banks. Two weeks ago, Cramer rated these stocks a buy because, as bad as they were, they’d gone too low. Now, just like he predicted, these companies are up.

So what’s the takeaway here? Don’t let your enthusiasm for a stock get in the way of your investing discipline. When it’s time for a stock to go, let it go.

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