Always be learning.
Facebook missed on earnings expectations, and slashed its full year outlook. The stock tanked more than 20% in one day. Not many folks on Wall Street expected those things to happen.
“Why did we keep all that Facebook [position] instead of scaling out as we would normally?” Cramer asked on his latest Action Alert PLUS member club call. “I believed in what the company said. I believed that they were out of the woods, unlike what the conventional media was saying,” he said.
He was referring to the impact the Cambridge Analytica scandal had on user additions and therefore advertising revenue – and there ultimately was some negative impact to revenue as a result of the scandal. Keep in mind though that Facebook’s first earnings report right after the scandal showed good results, suggesting no big longer term impact.
So much for that.
Here’s the valuable lesson: “Therefore the lesson is two fold. First, sometimes you just get had, that’s all there is to it. And we got had. They [management] weren’t as honest as they should have been. Lesson number two, far more valuable is that you have to build in the possibility that you could be had,” Cramer said.
“You have to say to yourself, wait, this stock is going up and up and up on nothing, on not a peep. That’s not right. That’s not worth betting on. That’s what’s worth trimming on.”