Stick with good companies even when facing short-term losses

CNBC’s Jim Cramer on Thursday said investors shouldn’t be treating their portfolios the same way that large hedge funds do. Instead of trading in and out of good companies, they should invest long term and be prepared for declines, he said.

“You need to think about these kinds of challenges before you buy any stock, and most certainly before you sell any stock,” Cramer said. “You don’t need to swap in and out of stocks constantly like a hedge fund manager, you just need to figure out which companies deserve your confidence and you stick with them.”

Inevitably, even really solid companies will see their shares decline, Cramer said. But he cautioned it’s not wise to jump out immediately. Stocks can sell off for a variety of reasons, he said, adding that it can be hard to get back in before they rebound.

Cramer reviewed Nvidia, Apple, Amazon and Tesla through this lens, saying they are “four companies with riveting stories and temperamental stocks.”

He stressed the long-term potential of Nvidia’s products and the stock’s history of huge growth. Cramer admitted that owning Apple recently hasn’t been easy, but expressed confidence in CEO Tim Cook and noted that its recent quarter was solid.

Amazon, he said, has been difficult because its business has so many moving parts that can hurt its stock — Prime, Amazon Web Services, advertising, delivery costs, antitrust concerns. But he said each of these metrics has improved over the past year. Cramer admitted that he is less confident about the fourth company, Tesla, saying it’s hard to have faith in the stock when its sales and estimates are declining.

In addition, investors shouldn’t stick with stocks if their reasons for investing don’t continue to hold up.

“As long as the thesis hasn’t changed, you must resist the desire to give up on your favorite stocks — no matter what you hear from the billionaire class and the hedge fund managers who want to cut their losses because they can’t spare a spot on their portfolio sheets for what feels like a do-nothing stock.”Cramer said.

Amazon and Nvidia declined to comment. Apple and Tesla did not immediately respond to requests for comment.

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Disclaimer The CNBC Investing Club Charitable Trust holds shares of Nvidia, Apple and Amazon.