Sneak Preview: Ride the Business Cycle

I was wrong. I tried to fight the cycle with the fundamentals, but the fund managers don't care about the fundamentals as much as they care about the cycle. It simply was not worth sitting through a 25 or 30 percent decline in UNH's stock price.

As I learned, and as you should learn, the right thing to do in this situation is sell the stock. Even when you like the stock's fundamentals, even when it's already made you a lot of money, you don't want to fight the cycle. We know buy and hold doesn't work, but neither will buy and homework if you don't take the business cycle and sector rotations into account. ...

It doesn't even matter if the big institutions misbrand a stock as secular or cyclical. The only thing that counts is their perception. Often they'll get it wrong, but if they get it wrong, there's nothing you can do about it, and you shouldn't try to fight them. I'd rather make money than be right, to butcher one of Henry Clay's greatest lines.

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If you really like a stock that the Street thinks is out of favor in the cycle, wait for better opportunity to buy it, when it's more in favor and it's more likely to get bought by the big players and go up. When I fought the cycle in UNH and CSX(CSX Quote - Cramer on CSX - Stock Picks), I lost. I'm not going to repeat that mistake.

On the show I say that when you go to the dentist to get a cavity filled you don't even think twice, you take the Novocain. That's stepping aside, selling, letting the stock drop, and then picking it up after the pain. Don't fight the cycle. Don't repeat my mistake, because it'll cost you.

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Editor's note: This is one of Jim Cramer's 10 Rules from New Mistakes, New Rules: Ten Lessons From My Bad Calls, a special excerpt from his newest book, Jim Cramer's Mad Money: Watch TV, Get Rich, in stores now. Check back tomorrow for a new excerpt.

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