Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:
Shorting Cramer by Bill Alpert
Summary: After analyzing infamous TV stock-picker Jim Cramer's picks using all available means, Barron's says the only way to make more money off his picks than buying a simple index fund or ETF is to short a stock's 'pop' the day after a Cramer mention. Based on YourMoneyWatch.com, a website run by a retired stock analyst and Cramer fan, Cramer's picks consistently underperformed the market, making 12% over the past two years (before commissions) -- vs. 22% for the Dow and 16% for the S&P 500. A database of Cramer's Mad Money picks maintained by his website (http://MadMoney.TheStreet.com) which covers picks over the last six months were flat to down compared to the broad market. It also showed no performance difference between Cramer's Lightening Round picks (in which he judges stocks mentioned by callers with no advanced notice) and his pre-prepared Mad Money picks, despite his insistence to the contrary.
CNBC, which airs Mad Money, told Barron's it was looking at the data incorrectly -- and that viewers should buy only the show's picks a week later. In an erroneous analysis, they say that Cramer's 'most-researched' stocks (about 12 a week) would have beaten the S&P by 0.8% over one month and 1.7% over two. The truth: They beat by 0.4% and 1.2% respectively, and fall short by 2.2% YTD. Barron's also questions how viewers are to know exactly which picks they should trade. His show's popularity, though, have been kind to Cramer's website, TheStreet.com: traffic, ad sales and shares have risen since Mad Money's 2005 launch, even as Cramer has sold off $4.6 million of his stake. When contacted by Barron's editor Bill Alpert, Cramer was belligerent. "I can show exact data, which says my picks are much better than the S&P," he insisted. Alpert spent weeks pursuing the not-forthcoming data.
Related Links: Boo-yah! Barron's Shorts Cramer • Jim Cramer: Sometimes I Hate Myself • TheStreet.com Jumps On More Cramer Commitment • Cramer Podcaster: Jim's Picks Underperform • Can You Make Money From Jim Cramer's Picks? • Will New Coin-Flip Cramer Study Threaten TheStreet.com? • Jim Cramer the Coin-Flipper?