Mad Money

Learn From Cramer’s Mistakes


On what is the holiest Jewish day of the year, Yom Kippur, or the Day of Atonement, the faithful seek forgiveness and repent.

Jim Cramer

To mark the Day of Atonement, Jim Cramer sought to atone for his bad stock calls of the past year.

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“My errors are rooted in overconfidence, in arrogance of judgment and in too much belief in what has worked so well before that it has to work again,” Cramer said. “They are blunders I make because I sometimes feel like I have seen this movie before and I know how it ends, when the great challenge of investing in the stock market means that in reality it's much more like a close sporting event, where you don't know what the outcome will be, and just when you're sure you do that's when you get the big upset.”

The worst errors the “Mad Money” host said he made, though, was either trusting too much or not enough. He trusted some executives too much while he didn’t listen to other corporate leaders enough.

Time to Cut Your Losses? Listen Up!

Cramer admitted he wrongly suggested investors stay in Chipotle Mexican Grill’s stock long after it was probably time to sell.

Cramer: Admitting Defeat Is One Key to Success

In May, Cramer warned against First Solar’s stock, even though in hindsight, it might have been a great buying opportunity. At the time, he thought it was a value trap, meaning the stock appears cheap, but will probably go lower because the underlying company's business prospects are dim. He called it a "sell" all the way down to $13 a share, but as it turned out, First Solar got its groove back and the stock doubled. (Hear more from Cramer on First Solar here.)

"The business is not as horrible as I thought," Cramer said of First Solar. "Now that's no reason to buy it, but it's no reason to hate it anymore either."

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Cramer said he made a similar mistake with Darden in September 2011. At the time, he thought the Red Lobster and Olive Garden restaurant chain operator would struggle in the sluggish economy. As it turned out, though, Darden's stock has posted a gain of around 30 percent. (Get Cramer's full commentary on Darden here.)

In addition, Cramer recommended many speculative stocks and even though investors were warned they were speculative, he regrets that some of those speculative stocks fell.

To Cramer, there are a few lessons to be learned here.

Investing Can Be Frustrating, But Don't Give Up!

"When you own shares in a company that has a bountiful dividend that's easily backed up by cash flow, you can afford to be patient and wait for a turn," Cramer said. Even if a turn doesn't occur — and I could argue that it really hasn't happened at Darden — you didn't need to throw in the towel like I did at the same time everyone else did, when the stock had been overly punished for its sins.

"Be careful of asserting that something's a value trap simply because you feel trapped," he said.

(See: Cramer's Top Dividend Stocks 2012)

So what’s the bottom line here?

“If you want to be credible, you have to get rid of the incredible and it would be incredible if I were right every night or at least claimed to be,” Cramer said, adding that he did get plenty of things right in the last year, including the big picture over the last year, telling investors not to waiver in the face of troubling events and stay in the market. In turn, the overall market has pushed higher in the face of various economic woes, benefiting those who listened to Cramer and stayed in the game.

Even so, Cramer asked for his viewers’ forgiveness so “we can both learn from my mistakes and profit from them.”

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