People often say it pays to be skeptical. Jim Cramer can't help but wonder if skepticism might also cost you.
Now make no mistake, "You need a degree of skepticism to be a good investor," Cramer said.
However, after the financial crisis, around every corner there always seems to be a chorus of naysayers, casting doubt on anything and everything involving stocks.
Cramer believes that kind negative thinking can be contagious, if not downright dangerous, "especially when the skepticism involves high-quality companies."
That is, it can cloud your judgment and result in missed opportunities.
The "Mad Money" host learned this lesson the hard way.
York Christoph Riccius | Stone | Getty Images
"Remember in 2012 when Walgreen picked a fight with Express Scripts, the gigantic pharmacy benefit manager? At the time, I had been a huge fan of Walgreens—I thought it was a terrific value play with excellent management," Cramer said.
"But after the Express Scripts tiff, got slammed from around $40 down to the low $30s. Then in June of 2012, Walgreen CEO Gregory Wasson shelled out $6.7 billion for a controlling stake in Alliance Boots, the European health and beauty retailer. Walgreen dropped 6% on the news."
That's when Cramer's skepticism kicked in.
"I said that Wasson had gotten too aggressive, had over-expanded, and possibly bitten off more than he could chew with the Alliance Boots acquisition."
As it turned out, Cramer's skepticism blinded him to opportunity. Although the Walgreen CEO had explained his strategy, Cramer didn't think it through. Sure Cramer heard about all the benefits of the acquisition – and yes Cramer heard about the Express Scripts dispute – but he didn't really listen.
He just let skepticism prevail.
"With trading at $29, I told viewers that it was too risky to hold," Cramer admitted.
Not long thereafter, the company settled the dispute with Express Scripts on favorable terms. And successfully leveraged its stake in Alliance Boots generating synergies and more.
The stock doubled in about 18 months.
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"I was way too skeptical, urging people to dump the stock of a well-run company with excellent management," Cramer admitted. "I let me fears get the better of me and I missed opportunity because of it. I hope you'll remember this lesson and make a resolution not to be too skeptical about high-quality companies with fabulous CEOs. You have to check your emotions at the door in this business."
*The preceding insights are discussed in far greater detail in Jim Cramer's new book Get Rich Carefully.
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