Wall Street is like a fashion show. Stocks fall in and out of favor quickly.
That is why Jim Cramer has become an expert at detecting an attractive growth story to hang on to, even when it's not the popular thing to do.
"Solid growth stories are hard to come by, and when you find them, you need to hang on for the ride," the "Mad Money" host said.
It might be hard to remember, but Facebook was once considered a disappointing company that failed to live up to its potential for about a year after it came public. It seemed to Cramer that Facebook missed the entire migration to mobile from desktop, and the stock was pummeled.
At that time, Facebook was trading in the $20s and Cramer started digging into the company's conference call transcripts. He found that the company not only reported a good quarter, but that as the company adopted the switch to mobile, advertisers were flocking to it.
Solid growth stories are hard to come by, and when you find them, you need to hang on for the ride.Jim Cramer
Cramer's charitable trust bought Facebook in the mid-$20s and was fortunate enough to catch a huge rally after that. He hung on to the stock because each quarter showed an improvement in the numbers and the stock's price to earnings multiple wasn't expanding.
"You were simply playing the same amount for even bigger earnings growth. That is the best kind of situation," Cramer said.
Then there was Cisco Systems, which recently changed CEOs and put Chuck Robbins at the helm. Robbins recognized that the company's core router and switching business wasn't growing as fast as it should, and it was time to handle all of the data emerging from the internet of things.
That meant Robbins had to transform Cisco into more of a software company from a hardware company, with a niche of cybersecurity. Even as Robbins has done all of those things and the stock has gained, Cramer is willing to bet that the transition is still in the early stages and could run higher.
"When everyone writes off a tech company with one of the best balance sheets … I say wait a second, aren't you just running from something that might be in a terrific transition?" Cramer said.
The top takeaway for Cramer is that one must recognize that companies can change, and when they do, it's worth letting gains ride.
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