Will New Coin-Flip Cramer Study Threaten TheStreet.com? (TSCM)

Almost 9 months have passed since CXO Advisory published results of a study that showed that Jim Cramer's stock picks were no more successful than flipping a coin.

That study is now out of date, since Mr Cramer (pictured right, courtesy of Dvorak.org) has picked hundreds of stocks since then. So Mark Mahorney of Bloggin Wall Street has performed a new study of Mr Cramer's stock picks over the last three months. He writes:

TheStreet.com has put up a screener tool to screen against Cramer's Mad Money stock picks. There's a rolling 3-month database containing all of his calls... Surprisingly, if you give the screener no specific criteria you can get a list back of all 1885 calls in a table that will dump right into a spreadsheet perfectly...

There are 1077 buy calls and 477 sell calls for a total of 1554 buy or sell calls... The 1077 buy calls are up an average of 2.88%... The 477 sell calls are up an average of 3.52%! They're not only down, but they're up by more than the buy calls. Averaging the 1077 gains of 2.88% with 477 losses of 3.52% we get a whopping total gain of 0.5%.

The problems with following Cramer's 1885 calls on 876 unique stocks giving an average return of basically zero, you'd do just as good throwing darts at the newspaper stock listings and then flipping a coin to see if you wanted to go long or short. If you do buy or sell a stock, there's no clear indication on what to do with it later. And there's no calculation of return from a buy point to a sell point or from a sell short point to a buy point for the relatively few calls that have changed direction.

Meanwhile, TheStreet.com Inc. (TSCM) is benefitting enormously from the popularity of Mad Money, despite the fact that TheStreet.com has no contractual rights to the Mad Money TV show. (See TSCM General Counsel's admission that TheStreet.com has no contractual rights to Mad Money TV and his clarification that TSCM does have contractual rights to some of Mr Cramer's other performances and a contract with Mr Cramer himself for TheStreet.com.)

If word gets out that Mr Cramer's stock picks are no better than coin-flipping, will that negatively impact TSCM?

Full disclosure: short TSCM at time of writing.

Related:

• Cramer's latest stock picks, including: Mad Money, Lightening Round, Stop Trading and his Radio Show.

Comments

[Dion Almaer:]

The problem is that Jim Cramer is in the entertainment business (in his show). This means that he is not likely to talk about what actually is sound financial advice for the people who watch his show, no?

2006 Mar 22 04:03 PM