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LivestreamMenuEditor’s note: This is an excerpt from the CNBC Investing Club’s August Monthly Meeting, which was held Thursday. In his own words, Jim Cramer talks candidly about two big stock mistakes and what the late Hollywood legend Gene Hackman would have said. Jim recalls how Hackman was a client of his hedge fund, and how he leaned on the actor over the years for his advice. Those of you who have known me the longest understand that I am far more concerned about avoiding mistakes than I am about getting things right. Winners take care of themselves. Mistakes don’t. They throw you off your game. They can detract from performance. They can wipe out your gains. You manage your profitable positions, terrific. If you fail to manage your losses, you can be history, as we found out earlier this summer with Situational Awareness, a wayward hedge fund that blew up from a lack of discipline and a dearth of judgment matched with no risk controls. I study every mistake over and over to be sure that they never happen again, and we avoid the fate of Situational Awareness no matter what. Sometimes, though, it doesn’t matter. I would like to, as a prelude to this meeting, talk about two mistakes for which you deserve an explanation. I am always conscious that when I started this project with my Charitable Trust, as a real portfolio to teach people how to get rich, more than 20 years ago, it would only be successful if I swallowed my pride and let everyone see — open-handed — what I was doing ahead of when I actually committed the money. I knew I would make mistakes — and unlike a hedge fund or mutual fund manager, I would not be able to hide them. You can never learn from those kinds of managers. They don’t want you to learn. They just want your money. I, on the other hand, don’t want your money. I want to be your money coach. I want you to be better than I am at this business, and I want you to make more money than these paid managers can do for you, and do so, in part, with individual stocks. I encourage individual stocks because they can — and have — made fortunes for Club members, whom I hear from almost every night. It should be no secret that I could make more money if I went back to managing money professionally. But I don’t want to. This task is more important. As I say at the beginning of my book, “Real Money,” I want you to be rich, really rich; and I am going to do my best to make it happen. Where Nike went wrong That is why I want to talk about two colossal errors: Nike and Honeywell Aerospace . Both are painful to the touch, wounds that take a real long time to heal, and not enough distance has passed between them and now. We got involved with Nike after former CEO John Donahoe hit the road, and a terrific, engaging old hand, Elliott Hill, came back to run the company. Unlike Donahoe, I liked and respected Hill. I think he’s doing the best he can. What I didn’t realize is that this Nike is not like the Nike before Donahoe came in nearly seven years ago. Nor is the sneaker business the same as it was. I knew that outfits like Hoka, owned by Deckers , New Balance, and On Holding had made inroads, but I also thought Nike was the best brand and no matter what Donahoe may have done to almost ruin the company, including his fanciful move into direct-to-consumer (DTC) in a world where people want to try on $200 Jordans before they buy them. I thought Nike’s stature was too unassailable both here and abroad. That was wrong. Under Donahoe, Nike had languished; it had stopped innovating. It had become more of a lifestyle brand, which commoditized the swoosh and put it head-to-head against lots of fresh new brands that had sprung up in that category. It had cheapened itself by signing a licensing deal with Fanatics, damaging its good name and its reputation for quality. It had crushed its relationship with outfits like Foot Locker (now owned by Dick’s Sporting Goods ), a necessary outlet for those who want to look at and feel expensive sneakers before they buy them. Others moved in to take their place. The damage was far greater than anyone realized. When the stock started going down while we owned it, I thought Elliott was doing his best to right the ship. But it turned out there was way too much inventory that had to be discounted, ruining gross margins. Each quarter, Elliott seemed confounded by that problem. I didn’t like that and complained about it to him. But again, I had faith, faith that was augmented by a key indicator I have always relied on: insider buying, specifically, one by Elliott, 16,388 shares in the open market for $1 million, and one by one of the most brilliant business minds in history, Apple CEO and Nike board member Tim Cook, who purchased 50,000 shares for $2.95 million. Holy cow, I said to myself, how bad could things be if these two straight shooters, the Nike CEO and Cook, who also serves as Nike’s independent lead director, had purchased that many shares at $58.97 near the end of December 2025. What could be a more forceful exhibition of confidence than that? It didn’t matter. The leftover inventory continued and proved to be a huge distraction. More importantly, the China business, long a stalwart, started a sickening double-digit decline. No matter what Hill did as he worked to stabilize the U.S., he couldn’t counteract all of these problems. We were going to bite the bullet and take the hit after still one more bad quarter, a large unrealized punch in the gut. But we felt that even though Hill had been on the job for a 1.5 years, he deserved more of a chance from us. We didn’t cut our losses as the stock sank through the $50s to the $40s. Then in April, with the stock in the mid-$40s, both Cook and Hill bought more stock in the open market: 25,000 shares for Tim at $42.43 and 23,660 by Elliott at $42.27. Do you know, right then, I was tempted to follow them, to buy more? Could they really be such gluttons for punishment? Could they be so wrong, again? But that would be too reckless given how poorly the company was doing. The buys did give Hill another chance with us. That, too, was wrong. The next quarter was horrendous. The U.S., which had shown some glimmer of hope, had slowed back down again. China was an unmitigated disaster. So we sold the stock of Nike just a few points from where it is now. I regard it as a black mark. There is no consolation for a bad loss. But I will say this: I believed these insider buys were so important, so dispositive, that I let my discipline go. The simple fact is that the problems may be bigger than anyone thought, including two gentlemen I respect tremendously. Hill is doing his best, but this business has changed, and I worry that a weakened Nike has been bypassed by a new generation. In the end, I just got it wrong. I put too much faith in insider buying, and I let their buys sway me. I cannot recall any other time when these high-level buys executed by two terrific people with a history of success didn’t signal a tradable or investable low. It didn’t this time. I hope it works out for them. No animus. But Nike just might be a broken company in an industry that is no longer a growth business. Blindsided by Honeywell Aerospace Now to the second one: the blunder that is Honeywell Aerospace. I am furious about this one. We stayed on top of this every step of the way. We monitored the split between Honeywell Aerospace and Honeywell Technologies as closely as anyone. We did a gigantic amount of homework on the company, and we had owned Honeywell for ages. The conglomerate’s old CEO, Dave Cote, is a close friend. We just came back from Tarpon fishing together off Trinidad. The split Honeywell was going to make us a lot of money. We were intrigued by the Technologies side, a catch-all company that I think has promise if we see more deals to shape its growth and accelerate it. Right now, it’s growing too slowly. I think we will see that. CEO Vimal Kapur is hungry to make this a fantastic company. It has some excellent assets. Changes can be made. But the one side I wasn’t worried about, the one I thought didn’t need any self- help, was Aerospace. All we heard over and over again was that things were going great. On three occasions, management appeared on CNBC and told us things were going terrifically. I am a huge bull on the aerospace industry. I knew Honeywell has a giant share of parts on both Airbus and Boeing planes. I chose it over the remarkable GE Aerospace because I thought it had a chance to shine. And what happens? We get the stock, and right out of the chute, it guides down gigantically. I am willing to say that this was the single biggest earnings disappointment of mine versus expectations that I can recall in my 46 years of picking stocks. That’s right, the worst. Honeywell Aerospace is doing awfully; the supply chain issues are monumental. The loss we took? Horrendous. Horrible. Revolting. Infuriating. I am sick to my stomach thinking about it. Talking about it. But I have to call out the CEO, Jim Currier, for what he did to us, which was one of the single most ill-advised and cowardly acts I can ever recall. There is no way he believed he could clean up the problems when he was talking about things; they were monumental, as big as the guidance cut he dumped on us. What would Gene Hackman say? Let me give you the coda on this escapade. Years ago, when I had my hedge fund, I had a great client and, much more important, an incredible friend, Gene Hackman, the legendary actor who passed last year. Gene was a quiet, sincere, thoughtful soul, not much at all like the hard-ass characters he so often played in the movies. I confided everything in him, and he had so much quiet wisdom for me. One time, I had a situation not unlike this one — although certainly not this bad — where someone knew that things were worse than they were but couldn’t bring himself to admit it to the shareholders. By the time he decided to come clean about how the estimates were way too high, it was too late; the stock got clobbered, and we lost a decent chunk of money. I called Gene; needed to see him. Needed to confide in him. Needed his help, his advice. Get some Geno wisdom. He was going to be in town at the end of that week. We got together at a burger joint, and I ran through the whole thing with him, every step of the way. He deserved to know why he lost money from my mistake. After I finished, he lifted the baseball cap, which he always wore, peered down at me, and said, “Well, Jim, sometimes you just get had.” I was taken aback. Is that it, I asked him? Was that all that occurred? He smiled his pixie smile, and he repeated, “Yes indeed, Jim, sometimes you just get had.” Bottom line Ladies and gentlemen, Club members, sometimes you just get had, and we got had by this Jim Currier, the newly minted CEO from Honeywell Aerospace. Notice the difference between the two mistakes. I didn’t get had by Hill and Cook. I got it wrong because they and I both underestimated how damaged Nike really is and how the firmament shifted so quickly. Highly unusual. You sell stock for many reasons, but you only buy it for one: to make money. Hill hasn’t made money. Cook hasn’t made money. And I lost money, largely because I believed management knew more than me about turning the ship. They didn’t. But I just “got had” when it came to Honeywell Aerospace. Which means you got had, too. Discipline has to protect you, has to kick in at some point, because the stock of Nike told you that something that was very wrong, something that even eluded management as smart as it might be. Honeywell Aerospace? Nothing, nothing, I could have done could have changed this. Yes, that was just management bagging us. I tell these disparate stories because I want you to know the kinds of mistakes people can make. Honest mistake versus something that can’t be prevented. Something that’s going to happen. I miss Gene. He was my friend. Geno, I got had. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.Read More
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