Jim Cramer's 2-Year Return Fails to Beat S&P

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I know there are already too many threads on Cramer in BF&I, but I guess one more can't hurt. In Barron's this week, there was an article talking about his track record over the past two years. Here are some of the main points:

1. Over the past two years, viewers holding Cramer's stocks would be up 12% while the Dow rose 22% and the S&P 500 16%.

2. Over the past six months, his Mad Money picks (3,458 in total) were flat compared to the market, EXCLUDING commissions.

3. When shown to CNBC, they made a lot of excuses, such as what stocks to consider as his picks and when to buy them. CNBC analyzed his picks under these commissions and said that if held for one month, they beat the S&P by 0.8%. CNBC did its analysis incorrectly, however, and the stocks beat the S&P by 0.4% in one month. The stocks fell short of the S&P 2.2% through last week.

4. On average, the stocks jumped 2% the day after he mentioned the and over the following month moved sideways or down.

I don’t think any of these points come as a huge surprise. He’s giving out too many recommendations from a long-term, value standpoint. Traders will definitely be able to take advantage of his picks (especially shorting them in subsequent months), but obviously the majority of his 100K daily viewers aren’t traders. Even though CNBC says the show is mostly for educational purposes, in actuality this is far from true – most viewers tune in not to learn, but to make money.

[hlacheen]

How has his pay-for-picks service performed?

[johndenver]

his show is entertainment and is not a realistic measure of his skill, if he was runnin his own fund he wouldnt be buying 5-10 different new stocks every day like he does on his show

he went from busto to balla through stocks so i think it is still worthwhile to tune in and listen to his reasoning behind things

[DesertCat]

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his show is entertainment and is not a realistic measure of his skill, if he was runnin his own fund he wouldnt be buying 5-10 different new stocks every day like he does on his show


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RU Sure?

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If Mad Money offers unconvincing proof of Cramer's long-term stock-picking prowess, so does his account of his hedge-fund activities. His memoir suggests that some of Cramer Berkowitz's profit came from clever trading. The $300 million fund might execute hundreds of trades a day, some of them a bit gimmicky. Cramer describes how they'd find a stock in which selling had petered out, then build a position. Next, they'd hunt up some bullish news on the company and feed it to sellside analysts and reporters. On the subsequent rise, Cramer could profit by selling out his position. "Buzz merchandising," his book calls it. Smart and effective, but definitely not in the fuddy-duddy style of Graham & Dodd.


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he went from busto to balla through stocks so i think it is still worthwhile to tune in and listen to his reasoning behind things

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How valuable is his thought process if his best trades involved pump and dump schemes the average joe doesn't have the media contacts to pull off?

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In December, Cramer made a video for TheStreet.com describing the ways his hedge fund had used tricky trading techniques. He said hedge funds could pass negative rumors to "bozo" reporters. When the video circulated through Wall Street and caused an uproar. Cramer said that he'd only been talking hypothetically, to blow the whistle on the hedge-fund industry's bad actors.

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Of course his show is all entertainment. If you could really trade successfully off it hundreds of millions of dollars of hedge fund money would be devoted to tracking his every recommendation and beating the amateurs to the punch.

[pig4bill]

I don't know if he was ever busto. Most people that go through Harvard Law are not busto.

I wouldn't consider any stocks he pimps as being longterm value. At the most hold maybe for a year. More often it's till the next earnings report or two.

[johnnylovescandy]

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I don't know if he was ever busto. Most people that go through Harvard Law are not busto.

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Most people that go through Harvard Law don't host their own TV show, either. Not only was Cramer busto, but his show is only accelerating the number of speculators that are going busto...

[Kirkrrr]

In his defense, the one thing he repeats over and over on his show is "Do NOT buy the stocks I recommend as soon as I mention them, simply use them as a guide and then do your own homework." I don't think you can possibly deny that the guy is very knowledgeable about investing and you can learn something because he tries to explain his thought process much as he can within the time constraints and the format of the show.

I genuinely do not understand all the hate being piled on the guy. Would I buy a stock just because he recommended it? Of course not. But that doesn't make the show worthless, either.

Kirk

[johnnylovescandy]

Jim Cramer is a smart guy, but the success of "Mad Money" lies purely in its entertainment value. Imagine Lou Dobbs having 100x Jim Cramer's knowledge of the stock market. You think Dobbs would get Cramer's ratings? No way, and CNBC would drop him in a heartbeat.

Meanwhile, true investment advice is better found at the local library, imo...

[Fishhead24]

Cramer is laughing all the way to the bank......like many of us.

[kagame]

Cramer was loaded pre-Mad Money