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On July 9th, 2012, in honor of Major League Baseball's Home Run Derby, Jim Cramer held an All Star Stock Derby on his CNBC show Mad Money. He selected five stocks based on their performance through the first six months of 2012:

  1. Arena Pharmaceuticals (ARNA)

  2. Onyx Pharmaceuticals (ONXX)

  3. US Airways Group (LCC)

  4. Mellanox Technologies (MLNX)

  5. Pharmacyclics (PCYC)

His viewers then had 24 hours to vote for the All-Star stock. The criterion was simply to select which company would end the second half of 2012 with the biggest share price increase.

For perspective, a quick review of where the stocks stood on December 30th, 2011 and July 9th when the contest took place is in order.

Dec 30th

July 9th

Percentage
Increase

Arena Pharma

$1.87

$11.46

512.83%

Onyx Pharma

$43.95

$67.24

52.99%

US Airways

$5.07

$13.49

166.07%

Mellanox Tech

$32.49

$73.40

125.92%

Pharmacyclics

$14.82

$58.67

295.88%

On July 10th, Cramer announced his viewers had overwhelmingly selected Arena; overwhelmingly at 67%. He went on to explain Arena was not his selection. He believed the risk/reward was too great and that the stock could not live up to the hype for another six months. He recommended one of two options for investors: 1) sell half and let the rest ride or 2) recoup the initial investment and play with "house money".

Arena's stock had closed at $11.81 on July 10th. On July 11th, the share price opened at $11.22 and closed at $11.13 - a 5.76% decrease. After the market closed on July 11th, Cramer again defended his skepticism as his controversial comments were blamed for the loss. Cramer did not deny his comments were the catalyst citing the backlash on his Twitter account. He stressed that investors really should consider taking profit. On July 12th, the stock opened at $10.90 and closed at $10.61 - another 4.67% decrease for a two day decrease of 10.16%. A week after the contest on the 16th, Cramer shared concerns about the cult following of Arena. When Vivus's (VVUS) weight-loss drug Qsymia was approved on July 17th, Arena's share price fell below $10 on the 18th. The share price tried to shake off the two events through the 24th of July. But, after the 24th, Arena only saw the $10 mark once through year-end. Some retail investors either followed Cramer's advice and/or were shaken out of the stock. Institutional ownership increased from 25% mid-year to 32% at year-end.

On the other hand, Cramer confessed, in the July 10th show, that Onyx Pharmaceuticals would have been his choice. FDA approval of their blood cancer drug was still on the horizon. In fact, on July 20th, Onyx received accelerated approval for Kyprolis. The stock price jumped 11.66%.

By December 31st, 2012, the true results of the stock derby were finally evident. And, as it turned out, Cramer was indeed correct - Onyx Pharmaceuticals had the best performance through the remainder of the year:

July 9th

Dec 31st

Percentage Increase

Arena Pharma

$11.46

$9.02

-21.29%

Onyx Pharma

$67.24

$75.53

12.33%

US Airways

$13.49

$13.50

0.07%

Mellanox Tech

$73.40

$59.38

-19.10%

Pharmacyclics

$58.67

$57.78

-1.52%

Mellanox Technologies ran to $120.05 on September 6th, 2012. On October 17th, 2012, during their third quarter earnings release, even though it had blown away third quarter expectations, Mellanox issued fourth quarter guidance that disappointed investors. Wall Street was expecting results in line with third quarter results. Mellanox guided expectations down 5-8% but still over 100% greater than the previous year's fourth quarter. The stock price fell 20.5% in one day and tumbled another 23.9% to year-end. Had Mellanox not stumbled, it just might have finished the year as the derby winner. As this article is being written, a strange turn of events unfolded. After market close on January 2nd, 2013, Mellanox guided fourth quarter revenue down again another 18-20%. Cramer touted his obsession with Mellanox through August. When Mellanox announced the CFO's retirement in September, Cramer recommended it was time to sell or stay away.

It might be a reasonable argument that the Mad Money viewers in July did not fully understand the contest was meant to project which stock would perform in the last half of the year as it had in the first half. Had the contest been to project which stock's performance would be the best by year-end, the viewer's choice, Arena, would have won despite having the worst performance of the second half of the year.

Dec 30th

Dec 31st

Percentage
Increase

Arena Pharma

$1.87

$9.02

382.35%

Onyx Pharma

$43.95

$75.53

71.85%

US Airways

$5.07

$13.50

166.27%

Mellanox Tech

$32.49

$59.38

82.76%

Pharmacyclics

$14.82

$57.78

289.88%

By the way, just as Onyx Pharmaceuticals entered the Mad Money Stock Derby as the least of the best, Prince Fielder entered the MLB 2012 Home Run Derby looking like the "odd man out". He had the least number of home runs in the first part of the MLB season of any of the contestants and the highest number of at bats per home run. But Fielder took the MLB Home Run Derby hitting as many home runs in its final round as he hit in the first half of the season. Maybe Mad Money viewers should have voted based on Fielder's performance. Maybe next year.

Source: 2012 All-Star Stock Derby: Who Really Won?