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Second top well spotted, wow, WDC, Western Digital. I've often said that the club's purpose is to teach. And the charitable trust itself was part of a broader, long term investing recommended list. Obviously, we have so many restrictions, it's hard for us to do so many different things.

Jim Cramer: Yet, every once in a while, we decide to actually do a trade, not an investment. As we did with Western Digital, a maker of flash memory and disk drives. We said that as long as supply remained tight for the two product lines, the stock will go ever higher. But as soon as we thought it could loosen, before it actually loosened, we would have to go immediately.

Jim Cramer: Now these kinds of commodity tops are never easy to foresee, because the chatter surrounding the move is so antithetical to spotting one. As Western Digital stock plowed ever higher, rally, rally, rally, from where we bought it. We began to hear that the world had changed for the company. And the demand from [inaudible 00:17:44] of things, had made it so this time was different. And that a once commodity business now, it's suddenly changed and blossomed, not from boom bust to secular growth. We weren't buying it. Very few commodity companies can ever become secular growers, because usually there simply isn't enough that it's proprietary to them.

Jim Cramer: That's what's going on by the way, with AMD. That's exactly what it experienced. Now both flash memory and disk drive factories can be built rather quickly. Proprietary businesses have big modes. They have special intellectual properties. There's just not enough special in Western Digital. So we took a terrific gain right at the top, when there was so much hoopla about the move lasting forever, be it was secular.

Jim Cramer: Since then, the stock's been cut almost in half as the cycle played out as we said it would. That's why we said it was a trade, not an investment.

In the September Action Alerts PLUS members' call, Jim Cramer explained why their position in Western Digital (WDC - Get Report) was held as a trade -- not an investment.

"I have often said that the club's purpose it to teach and the charitable trust itself is part of a broader long-term investing recommended list. Yet, every once in a while we decide to actually do a trade," he said.

And that's exactly what they did with Western Digital, a maker of flash memory and disc drives.

Watch now as he explains the team's thought-process in why they bought it and ultimately sold it.

 

Do you want more exclusive investing insight from Cramer? Get 24/7 access to Jim's charitable-trust portfolio with a free trial to Action Alerts PLUS! You can also watch all of Jim Cramer's New York Stock Exchange live shows on YouTube.