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Rule No. 20: Giving Up on Value Is a Sin

Editor's note: Jim Cramer's new book, Real Money: Sane Investing in an Insane World, is available in selected bookstores now. As a special bonus to RealMoney readers, we will be running Cramer's "Twenty-Five Rules of Investing." For more about the new book and to order it, click here. Today, we present Cramer's twentieth rule of investing. Read more about his rules:

  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. Don't Own Too Many Names
  12. Cash Is for Winners
  13. No Woulda, Shoulda, Couldas
  14. Expect Corrections
  15. Watch Bonds
  16. Don't Subsidize Losers
  17. Check Hope at the Door
  18. Be Flexible
  19. Quit When Execs Do


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

At the time of publication, Cramer was long J.P. Morgan and PNC Financial.

James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to jjcletters@thestreet.com. Listen to Cramer's RealMoney Radio show on your computer; just click here. Watch Cramer on "Mad Money" at 6 p.m. EST weeknights on CNBC. Click here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click here to get his second book, "You Got Screwed!" and click here to order Cramer's autobiography, "Confessions of a Street Addict."

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