Investor Prudence

On Tuesday's show, Jim said it was time to start scaling out of some of the stocks we've been recommending lately.

These are the names that are trading close to their cash – think Bebe and KBR, newly high-yielders like Nucor and recession-resistant stocks – here think food stocks and soft-good plays like Kimberly-Clark.

This does not mean that Jim no longer likes these companies. It does not mean he's "giving up" on the stocks. His call to start taking profits was all about one thing: price. The Dow has now rallied 1,850 points from its intraday low on Oct. 10. It's rallied 1,450 points from its close at 8,175 a week and a half ago on Oct. 27. That's a 23.8% rally from the Oct. 10 lows, and a 17% rally from the close on Oct. 27.

Anyone who doesn't take some profits after moves of that magnitude is simply not being disciplined. I know it doesn't necessarily feel like we're up all that much, since the Dow Jones Industrial Average was 1,000 higher than it is now a month ago, but that fact, as important as it may seem, is irrelevant. We were telling you to sell before the huge declines, then we recommended buying stock near their cash, the newly-high yielders and the recession-resistant names after these stocks had already taken enormous hits. Now they've had major rallies, but aside from taking the Great Depression II off the table, the fundamentals haven't really changed. The estimate cuts are still coming for a lot of the newly high-yielders that no longer yield so much because of their recent gains. We liked them for the yield, but when the yield gets smaller and the price gets higher, we have to like them less.

Jim didn't turn his back or flip flop tonight, he recommended prudence. When your stocks are up big, you have to take something off the table.

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 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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