Rule No. 20: Giving Up on Value Is a Sin
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Patience is a virtue -- giving up on value is a sin.
I see so many people throwing in the towel on companies that have real assets and real worth just because they aren't working now, and it angers me. The other day I interviewed the CEO of Superior Industries (SUP), a wheelmaker for auto companies. Its stock is at a 52-week low. It has a big short position. It's lumped in with companies like General Motors (GM) and Delphi (DPH).And I ask myself, "Why sell that one? It's already down so much, it has a clean balance sheet, it can make acquisitions, buy back shares, do so many things." But people don't want to wait until the cycle turns to get the profit that most certainly will come to those who wait for Superior. That's because it is cheap and good. It's cheap because it sells at book value; it's good because it has plenty of business. Or take the situation I see developing in banks like J.P. Morgan (JPM) and PNC (PNC). If the Fed doesn't tighten forever -- which it won't -- at a certain point, the value in these banks will be realized. Great brands, great branches. But no one cares. At any given moment, I like to have a portfolio of what's working now and what will work in the future. I think that after seven tightenings, you have to start thinking that the Fed will have an impact and when it does, the Fed will be through. When the Fed is through, you are going to want to own the financials. I think they are a lot easier to own now than Phelps Dodge (PD) or U.S. Steel (X) are. It takes patience. Most don't have it. If you don't, frankly, I think you should let someone who has patience run your money. You don't deserve to. And by the way, stocks like EMC (EMC) and Cisco (CSCO) and Sun Micro (SUNW) don't qualify. They are expensive, not cheap. They don't represent value ... at these prices.
|1.||Pigs Get Slaughtered||2.||It's OK to Pay the Taxes|
|3.||Don't Buy All at Once||4.||Buy Damaged Stocks|
|5.||Diversify to Control Risk||6.||Do Your Homework|
|7.||Don't Panic||8.||Buy Best-of-Breed|
|9.||Defend Some Stocks||10.||Don't Bet on Bad Stocks|
|11.||Own Fewer Names||12.||Cash Is for Winners|
|13.||No Regrets||14.||Expect Corrections|
|15.||Know Bonds||16.||Don't Subsidize Losers|
|17.||No Room for Hope||18.||Be Flexible|
|19.||Quit When Execs Do||20.||Patience Is a Virtue|
|Check back for more of Cramer's Rules|
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