Is Patience an Investing Virtue?
We’re always telling you to wait between two to five days before you buy a stock that we recommend on the show, and most of the time that’s a great rule of thumb. But last week if you did the responsible thing and waited, you missed on some huge gains.
So what’s the price of responsibility? Jim recommendedCaterpillar at $36.58, Martin Marietta at $77.48, Vulcan Materials at $56.71, and AECOM at $23.94 last Monday as plays on Obama’s infrastructure plan.
In the last week these stocks have all had huge runs. On Monday the 8th, CAT closed at $42.42, up 16%; MLM at $104.67 up 35%; VMC at $74 up 30%; and ACM at $30.50 up 27%. Of course, they all pulled back Tuesday, but not to anywhere near where they were when Jim recommended them. If we’d told you to buy these immediately, we’d be patting ourselves on the back for some massive gains. As it is, patience caused us to miss some truly spectacular moves.
Does that mean it’s wrong to wait the customary two to five days? No, in most cases you’ll be right to wait. And it’s still possible that these stocks will come back in and give you a better price.
What this does tell us, though, is that our rules of thumb are just that, rules of thumb. You have to use your own judgment when it comes to everything from our rules to our recommendations. And if you’d decided on your own that these stocks had to be bought early last week, you would’ve made out better than someone who dogmatically adhered to our rule and missed the move. Our rules are good, but that doesn’t mean you shouldn’t be flexible and think for yourself. Dogma is the enemy of profits, as we’ve seen very clearly over the last week.
Cliff Mason is the Senior Writer of CNBC's Mad Money w/Jim Cramer, and has been that program's primary writer, in cooperation with and under the supervision of Jim Cramer, since he began at CNBC as an intern during the summer of 2005. Mason was the author of a column at TheStreet.com during 2007, which he describes as "hilarious, if short-lived." He graduated from Harvard College in 2007. It was at Harvard that Mason learned to multi-task, mastering the art of seeming to pay attention to professors while writing scripts for Mad Money. Mason has co-written two books with Jim Cramer: Jim Cramer's Mad Money: Watch TV, Get Richand Stay Mad For Life: Get Rich, Stay Rich (Make Your Kids Even Richer). He is 100% responsible for any parts of either book that you did not like.
Mason has also had a fruitful relationship with Jim Cramer as his nephew for the last 23 years and will hopefully continue to hold that position for many more as long as he doesn't do anything to get himself kicked out of the family.
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