Tracking Jim Cramer's Performance: January 2007 Stock Picks 28 comments
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From Jim Cramer:
What I'm saying is that there are bargains right now, there are stocks right now that if you're shrewd enough, you will be able to buy them at the opening today and I you'll make money in a year from now.
It has been a year since Jim Cramer made his many picks in Mad Money Lighting Round. Undoubtedly, many people followed his advice buying his stock picks. To get an idea of how much money they made, I decided to do a little research.
The research is straightforward enough. I looked up the recap of Mad Money Lighting Round at Seeking Alpha and tabulated Jim Cramer’s bullish and bearish calls. I then calculated one-year returns from the second (market) day he made the calls.
Bullish: If a bullish call has a one year return higher than that of the S&P 500, it is a right call. If not, it’s a wrong call.
Bearish: If a bearish call has a one year return lower than the S&P 500, it is a right call. Otherwise it’s a wrong call.
I calculated the accuracy of his calls by this formula: Accuracy = right call/all calls. I also determined what return a loyal Cramer follower would have made if he/she had bought all of his bullish calls and sold all of his bearish calls.
In January of 2007, Jim Cramer made a total of 194 bullish calls and 123 bearish calls. Out of the 194 bullish calls, 60 are right calls. Out of the 123 bearish calls, 53 are right calls. The accuracy of Jim Cramer’s bullish calls is 30.93% and that of his bearish calls is 43.1%. The combined accuracy is 35.6%.
During the one-year period after Jim Cramer made his calls, the S&P 500 fell an average of 3.72%, his bullish calls on average fell by 3.33% but his bearish calls actually increased by 3.11%.
The table below shows Jim Cramer’s calls on 1/3/2007 and their subsequent one year returns. You may request a complete report of all of his January 2007 calls from MZ Capital.
Data source: Seeking Alpha
Research assistance: Ivy Cui
Disclosure: I own none of the above stocks
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This article has 28 comments:
NYX was around $100/share when he made his pick. It is now around $62/share.
You would think at least his "Stock of the Year" could be relied on as a carefully researched pick. Yeah, sure, it is up to individual investors to pick and choose, but the point of this whole discussion is that Cramer does no better than the average investor. In point of fact he did substantially worse than I did, on my own. And I am STRICTLY an amateur, not an analyst (pronounce that anal ist), or a broker (well named, the name says everything).
If I can do better than Cramer, what are people watching him for? I assume just for the entertainment, kind of like watching a clown show.
I'm so glad to see that someone finally took the time to put Cramer's recommendations to some analysis (anal lysis).
Could you please re-run your analysis using one week after his call for the entry position? it would be interesting to see how results compare. Thanks
Like the old saying goes "you don't get anything for nothing" or "there isn't any free lunch".
With that said, it almost seems that you should do the opposite of what Cramer suggests and then you would have had a net positive year.
He says sell, you buy.
He says buy, you sell.
Then you would be looking at about 65% above average on both sides of the market (up and down).
Wow, now that is saying something.
The sad thing is that with the numbers he turned in for the year, he is doing worse than the fifty-fifty chance that he has to get it right !!
Wow, that is crap !!
Hahaha.
Good luck to all, do your homework and if you don't know what to do, invest in things that you understand and know.
One should invest in the companies and believe in their ability to produce products/services with normal profits. Las Vegas is for gamblers and the stock market for owners of companies.
The author I found who helped me the most was Gene Walden and his book "The 100 Best Stocks to Own in America", currently not very updated, to the best of my knowledge. But, although the last edition I know of, the seventh, is from 2002, the 23-page introduction began my instruction in the principals of investing years ago. I've read a lot in my latest fifteen years of investing in the stock market. The hotshot (Cramer?) method has never given me an overall positive return. The simple methods of buying and holding good companies, selling when they don't meet my criteria, of course, has been the true blessing on my investment. At least for me, I need to forget the fast and furious trading, etc., because I will eventually make a wrong decision when too much money is in play.
If Walden's book isn't available in your library--and it is from Amazon--one could look for John Slatter's "The 100 Best Stocks You Can Buy:2008". Also for the armchair investor, he, too, has a great introduction (41 pages long), which will indicate when to buy and sell, etc.
A great book, in my opinion (remember, I'm obviously not one of those previously mentioned analysists or borkers--by the way, all of you, nice blog comments above!) is "The Single Best Investment: Creating Wealth with Dividend Growth" by Lowell Miller. Last edition I know of this is from 1999. (Disclaimer: none of the above authors will admit knowing me and so, no, I'm not anyone's nephew, nor do I have anything to gain from the sale of these books.)
I think that the Cramer method eventually will lead most stock purchasers to make generally poor decisions. I am happier being pokey and investing in good companies, as per Gene Walden's concepts. Can't suggest to the amateur investers too highly visiting your local bookstore and seeing what else is on the shelves besides Cramer's much tossed about titles.
As others have pointed out, it is folly to look back at his picks a year later. You need to do more homework on his calls than that.
Now Cramer himself seems to claim on the show that he told you when to sell, but the truth is, most of the time he doesn't or it is so fleetingly mentioned that you will miss it and hold on too long.
At the end of the day, though, the net effect of Cramer's picks is really very little different than a stock touter. He may blather on for 20 minutes with a pitch about the finer points of some company, but when all is said and done, the Cramer effect will kick up the stock (usually instantaneous as can be seen on the scrolling ticker on the screen during the show) and then the stock will die down - just like a penny stock. In fairness, though, when the DOW itself is doing a dead cat bump and looks like a penny stock, how can anyone counteract that?
Cramer is at his best when he speaks about the controlling factors at work in the market, what is going on, and what should be going on. "They know nothing" proved to be right. He embarrassed the Fed into action. Now let's see if he can embarrass the entire market back into a rising tide. It's a big job, but I personally don't see anyone else out there who even comes close to being capable of doing it. Let's hope Cramer can. None of you turkeys hanging around here could possibly do it, that's for sure. If you can, get to work!!
cramer nearly never says "buy this stock and wait 1 year"
he constantly reiterates that he doesnt believe in "buy and hold" he believes in "buy and homework"
his show gives his idea at that exact point in time
after that its up to the viewer to research and do their homework. it is after all THEIR money, and not his. he isn't invested in all those companies because he admits he doesnt know them intimately enough to put his money in them. he specifically notes when he owns a particular stock, because the law requires him to, and it is not very frequent.
also, in the past 5 months there has been a global credit crisis
so pointing to what he said in jan 2007 and ignoring everything that has happened world wide in the interim, is nonsense.
David Gorman
CashbackRealty.com
He is simply a bubble maker - CROX, LULU, UA,... - no sensible stock picker would be recommending these stocks at the levels he did. His strategy is buy high sell higher - that would never for any at-home investor. He talks up the stocks abusing his pulpit.
His picks may have worked in a bullish market but that is all over. The market going forward would be hard grind - not for the likes of Cramer.
Sell Cramer.
Cramer is a trend follower and that is it. When he is super bullish, get bearish and when he is super bearish, get bullish. The reason he probably did well as a hedge fund manager was he would swing from one to the other very quickly (once he'd actually figured out that he was on the wrong side which could take some time) and the ride the new trend. If that is the case, then even he could make money.
Therefore, unless you are trading the market like him then you should only use his advice as a market barometer and do the opposite. He is starting to get super bearish so I know that the bottom will be coming once he declares that we will never again have a hope of positive returns on the long side.
There is also a difference between his thoroughly researched picks and the top of the head answers of the Lightening Round. At least in his books he has pointed this out. Please do the research again fairly.
He entertains and educates me. He is highly intelligent and people see his antics as working with a half deck. He doesn’t have a need to impress people, just help. Some people take themselves too seriously. Are the haters here looking for a scapegoat? It's not like he is getting commission from your stock buys.
Someone mentioned earlier, "There is no such thing a free lunch." And those of you that watch him sporadically, don't do your homework, don't follow up on the website for videos of missed shows, and link to other sites like Seeking Alpha, THEN YOU ARE LOOKING FOR A FREE LUNCH. And those of you that have run the numbers since Jan 2007 and criticize his stock pics, are acting like a MONDAY MORNING QUARTER BACK. Hind sight is 20/20!!!
The way I see it is, Jim works hard to keep people in the game and that is good for the economy and the country. Jim is doing a good thing. I didn't understand "jack" until I started watching CNBC last fall. The way the market is, I want to sell everything and put my money in cash. Is that good for me, the economy or the country?
I have bought a few stocks from Cramer's, TMF's, Fast Money's and a few other's recommendations and my portfolio is better for it. On the other hand, some of the recommendations from any of the above would have made me a very broke and sad person.
Making money in the stock market is part skill, part luck, part timing etc. The experts I mentioned earlier are all reporting the best information they can at the very moment on that very day. It's up to us home gamers to do what is best for our particular situation.
As said before, we have to do our homework; we are in charge of our own happiness; accept responsibility for your life; and if you are pointing your finger at another, three fingers are pointing back at you.
Booyah! I'm sticking with Cramer!
Cramer constantly states on his show and in his books that his lightening round picks are not well-researched and are not necessarily his real selections. If your work shows that the lightening round calls performed well, Cramer will no doubt take even more credit than he deserves. The potential claim is, "If my off-the-top-of-my-head calls are that good, imagine how great I must be with some real analysis. Buy my action alerts plus." If his performance with his lightening round calls is poor, however, he will simply dismiss the results by saying, "I always tell you to be very careful with what I say based on 15-seconds of analysis in the Ligntening Round. In the latter statement he will be absolutely correct. What does his performance with a 15-second analysis mean?
To get true measure of Cramer's Mad Money performance you need to track the performance of his featured selections each day. That job, however, is a fool's mission. Cramer's greatest expertise lies in making it impossible to track him. He almost never makes a sell call on his show. He reiterates buys at varying prices. Do we track Cramer's results on Google from his call fot Google to go to $650 when it was at $550 and assume everyone sold at $650, or do we track his call from when he said with Google at $700 that it would go to $1000, or do we pretend there was a fictional one-year holding period and say he recommended it at $500 and it fell to $400?
If we create a fictional holding period of one year, do we measure his loss from the "buy" call at $500 or the "buy" call at $700, or both. Unlike responsible market gurus who make clear buy and sell calls, Cramer tells people to sell if the reason you bought the stock changes, but average down geometrically if the stock falls, and to "take some money off the table" at unspecified points as the stock rises.
Since he does not base sell signals on fundamentals, like the characters in the movie "Two For the Money," Cramer's has his earlier followers selling to those to whom he is now recommending a "buy." When you give out both sides of the game you are always winning for someone. Cramer has taken this old trick of the race and sports touts and perfected it for the world of the stock tout.
His Mad Money calls can never be tied down. If Google goes to to 1000 he will claim he recommended it at 500 and doubled everyone's money. If Google drops to 400 he will claim you should have taken your money off the table as Google rose to his initial target of 650. For those who bought when he recommended Google at $700 he will say they should have taken some off the table at $750 and that they should have "done their homework" and sold when the "reasons for buying changed." What were Cramer's reasons for recommending Google at $700? The only reason given by Cramer at that point was that the stock had momentum would go to 1000. That reason for buying could, after the fact, be said to have changed on the very first down tick, or even on the first low volume day with a gain.
If Google drops from $700 to $500 and rebounds, Cramer will cite the advice in his book and on his broadcasts that you buy on the way down in pyramid format.
So what are the results of his followers? When should buy on drops or sell on drops. Should they hold when Cramer re-recommends a buy, or should they sell on the way up no matter what he says. Who knows?
Every once in awhile Cramer will make the mistake of locking himself in. For example, Bear Stearns. He cannot claim that the reason for buying had changed because as late as three days before Bear's collapse he clearly stated, "Bear will be taken over." If his adherents were following his advice, they should have buying more and more Bear in pyramid fashion all the way down. There was no escape. Cramer's initial reaction was, incredibly, to misrepresent his recommendation with regard to Bear. Once again, shades of "Two for the Money."
In the case of NYX. however, Cramer was foolish enough to call it his "Stock of the Year." Yes, the analogy to sports touts continiues. Sports touts have a "Game of the Year" and Cramer has his "Stock of of the Year." He couldn't take that back or misrepresent it. NYX never had a sufficient upmove to claim you should have sold it. Cramer was finally forced in an unusual corner. He beat himself with a whip (literally), begged for forgiveness is Jim Baker fashion, and continues to use NYX as proof that he is honest and admits his mistakes.
You cannot validly track any stock selector to an arbitrary date. If you tracked Warren Buffets new buys for only one year he might or might not look any good, but your numbers could be validly criticized ojn the basis that Buffet holds most stocks for 5+ years. If you track him for 5 years and he sold one stock 3 years earlier your tracking could likewise be criticized as inaccurate.
The only way to legitimately and accurately track an investor's results is to track him from his actual purchase price to his actual sell price. The only way to do that with Cramer is to track his
purchases and sales in his Action Alerts Plus portfolio. Cramer keeps those results well hidden from the public eye. It may cost you a fee to get to the portfolio, but you would make that up in the saving of time required to track Cramer's daily Ligtening Round nonsense.
We can only surmise Cramer's Action Alert portfolio results from the fact that he never publicizes those results, and the suppostion that if they were good he would shouting the numbers from the rooftops. Shining the light of day on that portfolio would be a great service to the public.
You've reported this in a really cool manner, trying to be positive by only stating the % of right calls, not the % of wrong calls etc. You could have stated it more clearly and pulled of Jim's pants completely by simply stating that, even in these tough market circumstances, you could have made good money by doing exactly the opposite of what Jim is recommending... So keep tuned in to Jim Cramer. All Jim really needs is attention anyway.
On Mar 15 10:23 PM User 108799 wrote:
> Your analysis is flawed. Cramer constantly suggest not to buy his
> picks for at list 5 days after the price of the stock has settled.
>
> There is also a difference between his thoroughly researched picks
> and the top of the head answers of the Lightening Round. At least
> in his books he has pointed this out. Please do the research again
> fairly.
Andrew
IntelligentBuyer.com