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I always hear and read how Jim Cramer does not know what he is talking about, that he's a fool and just about entertainment and that is it. I used to watch him a lot over a year ago, not to buy stocks he recommended, but to listen to his ideas on different sectors, the overall market, and how he does not have an issue going after poor management. A lot can be blocked out, and there is some that is not useful, but for the most part I believe Cramer does a good job. 2010 actually ended up being a good year overall for the markets, with a good amount of volatility.
In actuality, an individual can use Cramer as a strategy and have a chance to beat the market. Now, if one was to just take all of his recommendations blindly, that may not be the best idea. What an individual can do is take the stocks he goes about in-depth and add extra research. What I did to show the results of this "Cramer strategy" is to list 50 of his recommendations from January 5-February 8, 2010. Here is how I chose the stocks:
  1. No "lightning round" buy or sells – there's not enough info for someone to form an opinion.
  2. No segments of talking to company management – that leads to a Cramer bias after having them on.
  3. If there was a large group of 10 or more, I didn’t put any unless one or a few were mentioned as favorites.
  4. I used the segments that went into full details about the sectors and/or particular stocks, but again, if one was favored over the others, I ignored the rest.
  5. I did not duplicate a recommendation, as many were recommended several times throughout the month.
  6. If there was not a strong buy signal such as “I think they may do well” or lack of confidence, I did not list.
  7. Overall, I mainly used the stocks that were represented in the longer length segments.
  8. I did not use anything from the mailbag questions.
  9. If Cramer mainly talked about a subject or sector, I did not use the stocks mentioned unless it was stated as "must own" or it was otherwise shown that he was really bullish on the stock.
Stock
Buy Date
Buy Price
1/20/2011
Ford (NYSE:F)
1/6/2010
$11.37
$17.78
56.37%
Boeing (NYSE:BA)
1/6/2010
$59.78
$71.12
18.97%
American Science & Engineering (NASDAQ:ASEI)
1/6/2010
$81.81
$84.27
3.00%
OSI Systems (NASDAQ:OSIS)
1/6/2010
$28.45
$33.78
18.73%
FLIR Systems (NASDAQ:FLIR)
1/6/2010
$32.80
$29.27
-10.76%
L-1 Identity Solutions (NYSE:ID)
1/6/2010
$7.35
$7.31
-0.05%
NICE-Systems (NASDAQ:NICE)
1/6/2010
$33.01
$34.60
4.80%
Statoil ASA (NYSE:STO)
1/7/2010
$25.98
$23.82
-8.31%
BHP Billiton (NYSE:BHP)
1/7/2010
$80.18
$88.08
9.85%
Bank of Nova Scotia (NYSE:BNS)
1/7/2010
$45.37
$56.24
23.96%
Companhia Vale (NYSE:VALE)
1/7/2010
$31.15
$35.67
14.51%
Banco Bradesco (NYSE:BBD)
1/7/2010
$21.53
$19.41
-9.85%
Banco Santander Central Hispano (STD)
1/7/2010
$17.19
$11.86
-31.00%
China Unicom (NYSE:CHU)
1/7/2010
$13.33
$15.39
15.45%
Allon Therapeutics (OTC:NPCUF)
1/7/2010
$24.68
$33.90
37.36%
Apple (NASDAQ:AAPL)
1/8/2010
$211.98
$332.68
56.94%
Google (NASDAQ:GOOG)
1/8/2010
$602.02
$626.77
4.11%
Polyone (NYSE:POL)
1/11/2010
$8.50
$13.14
66.35%
SPDR Gold Trust ETF (NYSEARCA:GLD)
1/11/2010
$112.85
$131.20
16.26%
Bank of America (NYSE:BAC)
1/11/2010
$16.93
$14.54
-14.12%
Wells Fargo (NYSE:WFC)
1/11/2010
$28.80
$31.89
10.73%
Intel (NASDAQ:INTC)
1/11/2010
$20.95
$20.95
0%
Caterpillar (NYSE:CAT)
1/12/2010
$62.24
$93.61
50.08%
Johnson Controls (NYSE:JCI)
1/12/2010
$29.97
$38.80
29.46%
Alcoa (NYSE:AA)
1/13/2010
$15.98
$15.98
0%
Kimberly-Clark (NYSE:KMB)
1/13/2010
$63.62
$64.54
1.45%
Hewlett-Packard (NYSE:HPQ)
1/13/2010
$52.22
$46.78
-10.42%
1/13/2010
$130.23
$155.80
15.80%
1/13/2010
$17.60
$23.84
35.45%
Magna International (NYSE:MGA)
1/13/2010
$28.93
$57.80
99.80%
EnCana (NYSE:ECA)
1/13/2010
$35.19
$31.98
-9.12%
Dominos Pizza (NYSE:DPZ)
1/14/2010
$11.31
$16.64
47.13%
Chemical & Mining Co. of Chile (NYSE:SQM)
1/14/2010
$42.80
$53.26
24.44%
Altisource Portfolio Solutions (NASDAQ:ASPS)
1/19/2010
$22.85
$28.78
25.95%
Advanced Micro Devices (NYSE:AMD)
1/20/2010
$8.87
$8.02
-9.58%
Cooper Industries (CBE)
1/20/2010
$43.70
$59.20
35.47%
Telvent Git (NASDAQ:TLVT)
1/20/2010
$39.89
$28.30
-29%
Panera Bread (NASDAQ:PNRA)
1/22/2010
$72.81
$100.15
37.55%
Cogent Communications (NASDAQ:CCOI)
1/25/2010
$11.50
$14.51
26.17%
Schlumberger (NYSE:SLB)
1/26/2010
$65.75
$85.28
29.70%
Starbucks (NASDAQ:SBUX)
1/27/2010
$22.41
$33.18
48%
McDonald's (NYSE:MCD)
1/28/2010
$62.83
$75.16
19.62%
International Paper (NYSE:IP)
2/4/2010
$22.15
$27.45
23.93%
Gannett (GCI)
2/4/2010
$13.66
$14.55
6.50%
McClatchy (NYSE:MNI)
2/4/2010
$5.02
$5.18
3.19%
Cisco (NASDAQ:CSCO)
2/5/2010
$23.70
$20.77
-12.30%
Altria Group (NYSE:MO)
2/5/2010
$19.38
$24.04
29.20%
Visa (NYSE:V)
2/5/2010
$82.56
$70.69
-14.38%
Cinemark (NYSE:CNK)
2/8/2010
$14.82
$17.66
19.16%
Hasbro (NASDAQ:HAS)
2/9/2010
$35.06
$44.66
33.01%

c
16.79%
With those 50 stocks, making the buy date one day after the recommendation and the sell date up to today, the return was 16.79%. While many investors can beat that mark, that is huge diversification that beat the overall market during that timeframe as well.
Just using a strategy to invest $1,000 on each of those, totaling $50,000, the end result would be a value of $58,395. Not so bad given that each holding is only 2% of the overall portfolio. The S&P 500, if an investor were to invest the same $50,000 evenly on January 5, 2010, January 20, 2010, and February 9, 2010, they would have seen a 12.89% return versus Cramer’s 16.79%. That is a difference of 3.9% or $1,950 using the example of $50,000.
Of those stocks listed, he was right the large majority of the time, as 38 out of 50 were either even or positive, which makes 76%. While there would be some flaws in just following this idea, because it only shows a small time frame and does not emphasize research, it is another tool and idea that is at the very least interesting. If an individual were to follow this, but do additional research on top of it and add a larger position to the “better stocks,” there is a possibility for an even higher gain.
This is not something I would utilize myself, but I thought that it was a valuable portfolio idea and something to think about.
I also think Cramer deserves a little more respect for the knowledge that he does hold and share. I was always curious about his actual results on the stocks he went in-depth about; based on that data that I gathered, his results are pretty good. It would be interesting to go a little further and see his results throughout a longer timeframe using the same approach.
Disclosure: I am long AAPL.
Source: Jim Cramer Is Better Than You Think