How have Jim Cramer's stock picks performed?

[jwblue]

Has JC done will with his stock picks? Is it documented?

There seems to be a lot of numbers out there concerning his picks. The general opinion seems to be that he
is nothing special.

No sarcasm please and all jokes aside.

There is plenty of bashing of JC on the internet. I am looking for a factual and educated discussion.

[WatchinU]

I've noticed when he mentions a stock in the sense of "backup the truck" way that somehow influences the price to go up. Probably because folks are buying based on his recommendation. However, the price does not stay there. I think he puts on a show for entertainment and has been successful from that stand point. There was one time I purchased a stock after his recommendation and it was an epic fail. He can walk folks through what seems like good logic to buy or sell a particular stock but that does not mean he knows anything special. He is often wrong. Others say you have a 50-50 chance of being right when you pick a stock. I think he has performance data on a charitable trust that he manages but even that is suspect.

[thebogledude]

the wall street cats will hold onto the stock or they have the opportunity to buy it after hours. once JC mentions it on his show, the main street cats will buy it the next day causing the stock price to go up.
as soon as the price goes up, the wall street cats sell for a profit causing the stock price to drop. the main street cats are then left holding the bag.

[InvestorNewb]

Stock picking is for losers.

[umfundi]

Has JC done will with his stock picks? Is it documented?

There seems to be a lot of numbers out there concerning his picks. The general opinion seems to be that he
is nothing special.

No sarcasm please and all jokes aside.

There is plenty of bashing of JC on the internet. I am looking for a factual and educated discussion.

How would you measure his picks? One stock that did well six months after he recommended it? All his stocks, cap weighted, compiled into something like a mutual fund?

If you are looking for a factual discussion, please define the measure. And, the metric for comparison.

To give you a hint of the answer: A stock picker (active manager) will likely not outperform the S&P500. Yet, it is easy to construct a portfolio that will outperform the S&P500.

So far as JC is concerned, follow his picks in theory for a few months, in a way that floats your boat. Then, decide for yourself.

Past performance ...

Keith

[Mrs.Feeley]

I watched his show once, only once and only briefly because all the shouting, jumping up and down, and frenetic activity practically demanded that one turn off the TV immediately before the pandemonium spread. In that brief span he mentioned three times that he lived down the street from the CEOs of two companies whose stock he was recommending and that's how he knew their stock was going to do well. Uh-huh.

[EyeYield]

Has JC done will with his stock picks?

The past twenty years or the past 20 minutes?

[DualIncomeNoDebt]

The first thing that turned me on to "Vanguardism" and Mr. Bogle: the reassuring advice I should turn off the daily financial talking heads, because the minute-by-minute and daily analysis is pretty useless. "Noise," as so many like to say.

I've nothing against CNBC or Cramer, they are entertaining for what they do. But I am so very thankful the prudent course is to ignore it.

[ualdriver]

Has JC done will with his stock picks? Is it documented?

There seems to be a lot of numbers out there concerning his picks. The general opinion seems to be that he
is nothing special.

No sarcasm please and all jokes aside.

There is plenty of bashing of JC on the internet. I am looking for a factual and educated discussion.

http://www.cxoadvisory.com/gurus/

There's some Jim Cramer stuff on there. Don't know how valid the analysis is.

[Valuethinker]

I watched his show once, only once and only briefly because all the shouting, jumping up and down, and frenetic activity practically demanded that one turn off the TV immediately before the pandemonium spread. In that brief span he mentioned three times that he lived down the street from the CEOs of two companies whose stock he was recommending and that's how he knew their stock was going to do well. Uh-huh.

Bring back Louis Rukeyser (sp?) I say.

[Valuethinker]

Has JC done will with his stock picks? Is it documented?

There seems to be a lot of numbers out there concerning his picks. The general opinion seems to be that he
is nothing special.

No sarcasm please and all jokes aside.

There is plenty of bashing of JC on the internet. I am looking for a factual and educated discussion.

http://www.cxoadvisory.com/gurus/

There's some Jim Cramer stuff on there. Don't know how valid the analysis is.

You have got to reckon, had he talent, that he'd be running some hedge fund somewhere, or advising people who run hedge funs, for very big bucks.

If it's being aimed at cable TV audiences, it is far, far, far too late.

I make the analogy between an interview with a pilot on a science channel, and going and taking flying lessons, to learn how to fly a 747. Which instructor would you trust more?

What you want off cable TV is interviews with obscure analysts of the 'Behind the Numbers' type. You might have even found out about the US credit crunch before it happened.

http://www.behindthenumbers.com/

Nowadays of course with the web it's far easier to get hold of those views than it used to be. Think Calculated Risk and the US housing bubble-- called it long before most commentators (except Shiller).

[ualdriver]

You have got to reckon, had he talent, that he'd be running some hedge fund somewhere, or advising people who run hedge funs, for very big bucks.

Apparently he did, and retired in the early 2000's 100M richer. He's either lucky or good. I'm sticking with my boring index funds.

[Valuethinker]

You have got to reckon, had he talent, that he'd be running some hedge fund somewhere, or advising people who run hedge funs, for very big bucks.

Apparently he did, and retired in the early 2000's 100M richer. He's either lucky or good. I'm sticking with my boring index funds.

*did* not *does* . .

[MekongTrader]

In today's WSJ there is an article called

2012 Was Good for Stocks, Bad for Stock Pundits

It's online.

They mention JC.

MT

[nisiprius]

I'm not sure about his track record, and it is always hard to be sure how the rules are to be set in keeping score, but I was very impressed with Jon Stewart's attack on him, in which he reproduced video clips of various things Cramer said on his show about Bear, Stearns. The point here is that to me, it is legitimate to notice not only the accuracy of his picks but the intensity and certainty with which he expresses his opinions.

What he said about Bear, Stearns went far beyond a simple recommendation, far beyond "despite the news this still has potential" or "contrarians might be interested in this as a long shot that might pay off." His language was certain and unequivocal. He told viewers explicitly to buy Bear Stearns and days before it collapsed he said "Your money is safe in Bear Stearns."

People listen to him because he presents himself as a knowledgeable source. When he said "Your money is safe in Bear Stearns," he was either

a) pretending to knowledge he didn't have about the financial condition of the company, and relaying as accurate information that was utterly wrong, or

b) he was using plain language with some private crossed-fingers-behind-back technical or restricted meaning, not bothering to explain, and encouraging users to infer a meaning while maintaining deniability that he actually said it.

[nisiprius]

Also, what needs to be tracked is not the total performance of all of his stock picks. What needs to be tracked is the performance of investors who follow his advice. The reason why this is important is he recommends against holding more than a handful of stocks. His followers are instructed to limit themselves to a very small portfolio and spend at least "an hour a week" following each of them. This is captured very nicely in this statement, which is a quotation from "Getting Back to Even":

How many stocks does it take to be truly diversified? I have found that it takes a minimum of five to capture true diversification and protection from the undesirable elements…. [ten would be terrific but] if you insist on more than fifteen or more stocks, you might as well hand off your money to one of those mutual fund fellows, although the costs, in fees, will be prohibitive unless you select a passive model, such as an index fund.

[Taylor Larimore]

JW:

In March 2000, at the very top of a long bull market, I attended a Financial Convention in Miami where Jack Bogle and Jim Cramer were keynote speakers.

Mr. Bogle was first to speak and warned the large audience of the risk in stocks and to held a large percentage of bonds. Cramer told us to write down the names of 10 (technical) stocks and "buy now."

Three years later Mr. Cramer's 10 recommended stocks had all plunged over 80%.

Best wishes
Taylor

[tadamsmar]

This gives the impression that you should buy his "sell" picks:

http://www.cxoadvisory.com/4811/individ ... rotection/

But I personally would not bet on that system.

[sscritic]

I don't get cable. Is he still on?

If you are worried about what Jim Cramer says, you should drop cable and increase the quality of your life.

[The Wizard]

I watched his show once, only once and only briefly because all the shouting, jumping up and down, and frenetic activity practically demanded that one turn off the TV immediately before the pandemonium spread. In that brief span he mentioned three times that he lived down the street from the CEOs of two companies whose stock he was recommending and that's how he knew their stock was going to do well. Uh-huh.

Bring back Louis Rukeyser (sp?) I say.

There was definitely a Wall Street Week effect back in the day, yes.
I forget the details of just how that effect worked...

[tadamsmar]

This is interesting:

http://online.barrons.com/article/SB123 ... rticle%3D1

The article indicates that speculators may be shorting Cramer's picks. Also, he is either recommending momentum plays or his pre-show research is allowing insiders to front-run his recommendations.

[larryswedroe]

Yes there are at least two academic papers on the subject
I've written about them including in Wise Investing Made Simple and
http://www.cbsnews.com/8301-505123_162-37840731/remember-jim-cramer-also-picked-lenny-dykstra/

and also wrote another piece on him citing a Boglehead story

http://www.cbsnews.com/8301-505123_162-37840723/why-you-shouldnt-listen-to-jim-cramer/?tag=mwuser

and here are citations


Joseph Engelberg, Caroline Sasseville, and Jared Williams, “Is the Market Mad? Evidence from Mad Money,” March 2005.
Barron’s, “Shorting Cramer,” August 20, 2007.
Paul Bolster, Emery Trahan, and Anand Venkateswaran, “How Mad is Mad Money”, Journal of Investing, Summer 2012.


Hope that helps
Larry

[Cherokee8215]

He's much more of an entertainer than a serious stock picker. Due to the the fact that he has to do a show every business day, he can't just say "Sorry folks, I don't see any attractive opportunities today, I'm gonna cut the show 20 minutes short today." With the required volume of ideas he has to pitch or pan every day, I'm thinking he doesn't personally believe in many of them.

[HomerJ]

You have got to reckon, had he talent, that he'd be running some hedge fund somewhere, or advising people who run hedge funs, for very big bucks.

Apparently he did, and retired in the early 2000's 100M richer. He's either lucky or good. I'm sticking with my boring index funds.

He was lucky... Read his book "Confessions of a Street Addict". I have some respect for him for admitting he was lucky. He was overleveraged a couple of times on some bad bets, and came within inches of losing it all.

[JW Nearly Retired]

He was lucky... Read his book "Confessions of a Street Addict". I have some respect for him for admitting he was lucky. He was overleveraged a couple of times on some bad bets, and came within inches of losing it all.

I second this. He was really lucky and then even luckier to decide to quit when he was ahead. Reading this first entertaining JC book ought to convince investors they have no chance doing well at stock picking. It convinced me, long before Bogleheads.
JW

[InvestorNewb]

To give you a hint of the answer: A stock picker (active manager) will likely not outperform the S&P500. Yet, it is easy to construct a portfolio that will outperform the S&P500.

What portfolio do you suggest for this? Has it consistently beat the S&P500?

[umfundi]

To give you a hint of the answer: A stock picker (active manager) will likely not outperform the S&P500. Yet, it is easy to construct a portfolio that will outperform the S&P500.

What portfolio do you suggest for this? Has it consistently beat the S&P500?

I was thinking of Rick Ferri's story of the adviser who trumpeted that he outperformed the S&P500, except that his portfolio was very different than the large companies that comprise the index. By increasing risk I believe one can outperform the S&P500 over time.

The other thing I believe is that the performance of the S&P500 is driven, over shorter periods, by a relatively small number of outstanding performers. The median performance is lower than the average. Thus, any particular stock is likely to under-perform the index.

Keith

[jwblue]

I find it comical that fund managers profit after the public buys the stock and drives up the price.

Even if his picks are profitable, at what price does the public buy at? Due to the public buying, the price
must rise quickly.


The comment about Bear Stearns in this thread says a lot.

I read that he takes a high amount of risk and the returns he has gotten do not equate to the risk he takes.

JC even admitted he was lucky.

[nedsaid]

I respect Jim Cramer for what he accomplished running a hedge fund. Some consider him to be a very good financial journalist. But I would not try to implement his investing advice. Bit too crazy for me.

He seems like a contrary indicator. It seemed whenever he was very bullish on the stock market there would be a big drop. Whenever he got excessively bearish, the market would rally.

I remember that he admitted once to spreading rumors about a company while his hedge fund was shorting the stock. You might find the clip on You Tube. It was a pretty damning admission and you wonder about the ethics of those in the hedge fund industry. I bet he won't say that again, it could have got him in trouble with the regulators.