How Cramer Got the General Electric Company Stock Slide so Wrong

Recommending GE stock on the way down was dumb

By Will Ashworth, InvestorPlace Contributor

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No Need to Rush Into General Electric Stock

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Mad Money host Jim Cramer’s recently admitted that he was wrong about General Electric Company (NYSE:GE) and that he shouldn’t have kept recommending GE stock as the GE stock price fell to levels not seen since 1997. 

“Sometimes, you just get had, and I got had. I was wrong about GE. That’s my fault. I shouldn’t have recommended it on the way down,” Cramer said on Mad Money Dec. 19. “We’ve got a new guy in town, [CEO John] Flannery. I think he’s trying to put it together, trying to get it together, so I would not sell it. But I cost people money because I believed, and I’m ashamed.”

They say what doesn’t kill you makes you stronger. If that’s true, Jim Cramer is the world’s strongest man because it takes guts to admit when you’re blatantly wrong about a stock recommendation — especially one as high profile as GE stock.

Cramer’s got a lot of critics; I’m not one of them. His job is nearly impossible to be successful at given the number of stocks that are thrown his way on a daily basis.

A Difficult Task

Consider Tom Brady’s job. While the hits are painful, he usually has a full week to prepare for 11 opponents, most of whom he knows in advance. Cramer, on the other hand, faces that many stocks each day of the business week with little or no warning.

Talk about having to think on your feet. Very few people could do what Cramer does and be right even 10% of the time. It’s a talent to be entertaining and informative at the same time. I’m sure his bosses at CNBC would agree.

The thing about investing is it’s a lot like being a PGA Tour professional. Every week these talented independent contractors go out there and compete for four straight days, primarily against themselves, with no one except their caddy to keep them from imploding.

Don’t get me wrong.  People who love the markets feel strongly about them in part because stocks are the ultimate real-time scoreboard telling you exactly how you’re doing at any particular moment in time. There’s no hiding from your mistakes.

You’re Going to Be Wrong

I’ve said many times in articles for InvestorPlace and other publications over the years that in this business you’re going to be wrong about stocks almost as much as you’re right whether it’s GE stock or some other supposedly unbreakable industrial conglomerate.

“I’m not saying this to toot my own horn; in the prognostication game, you’re doing well if you’re right more than 50% of the time,” I wrote Oct. 25 talking about Nvidia Corporation (NASDAQ:NVDA). “That suggests flipping a coin isn’t the worst idea in the world.”

In 2011, my first year writing for InvestorPlace, I went through a list of winners and losers from August of that year, the first month I’d been writing for IP, through the end of December.

It’s entertaining to look back at some of my missteps along the way such as American Tower Corp (NYSE:AMT).

On August 18, 2011, I recommended that investors go against the grain and sell AMT stock despite the fact it was one of the most popular stocks of the time. It gained 19% in the final four months of the year and another 158% over the next six years for an annualized total return of 20.3%.

If you own AMT, congrats for hanging in there. I definitely blew that one.

Bottom Line on GE Stock

I don’t believe my missed call is in the same league as Cramer recommending GE stock, but whenever we’re wrong about a company, it hurts. We as investment prognosticators are just trying to help people become better investors and hopefully, make a little money along the way.

To be a successful investor, you need humility and confidence in equal measure. You can’t have good performance for an extended period — think Warren Buffett — if you possess a God complex.

Like baseball, investing will humiliate and embarrass the overconfident.

Jim Cramer’s admission about GE stock is refreshing to hear. I fully expect this episode to be one of the building blocks to more success in the future.

If you’re not learning, you’re dying.

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/12/ge-stock-slide-wrong/.

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