CNBC’s Jim Cramer says investors shouldn’t just soak in gains when stocks start to rise. “It’s important to understand why a company is skyrocketing, and gains aren’t always for the reasons you think they are,” he said.
“It’s very helpful to understand why the stocks you like go up and down,” he said. “When you win, don’t just assume you made the right call. Think about what it means if you were just in the right place at the right time, and proceed with caution.”
Cramer said a company’s strong performance may be due to reasons unrelated to the business itself, as well as other factors, such as an economy-wide return to a particular sector.
For example, Cramer discussed residential solar stocks that soared in 2021 and 2022. Investors may have thought these companies were successful because of the popularity of renewable energy and government subsidies, he said. But by 2023, these stocks had crashed, but Cramer said that wasn’t because the companies were becoming less popular. Rather, he said, many of these companies were dependent on raising capital, and their stock prices fell when investors realized long-term interest rates were likely to stay high.
“You may be right. People say the right things about stocks every day,” he said. “But it may just be a coincidence. You’d better call the register before that coincidence disappears.”
