per show on Mad Money, but Barron's reports that Cramer's picks overall do not beat the S&P 500.From Barron's August 20th edition:
"Over the past two years, viewers holding Cramer's stocks would be up 12% while the Dow rose 22% and the S&P 500 16%, according to a record of 1,300 of the CNBC star's Buy recommendations compiled by YourMoneyWatch.com, a Website run by a retired stock analyst and loyal Cramer-watcher."
"We also looked at a database of Cramer's Mad Money picks maintained by his Website, TheStreet.com. It covers only the past six months, but includes an astounding 3,458 stocks - Buys mainly, punctuated by some Sells. These picks were flat to down in relation to the market. Count commissions and you would have been much better off in an index fund that simply tracks the market."
After an initial day-after 2% pop for Cramer's picks, the stocks "usually moved sideways or down for the following 30 trading days. This offered an opportunity to make money - 5% to 30% a year - by selling Cramer's selections short." Short selling is betting that a stock price will drop and profiting from that drop.
3 comments:
As with any stock recommendation
you must do your homework.
Even the experts get them wrong at times,including Barrons. 12% is not a bad return. However,if you have the money to trade 3,458 stocks your doing quite well.
I've seen his show before.. It's not really that good. I know my father watches it, and I've asked him why because he tells me all the time that this guy is "bad advice" And he always replies with. " He may be wrong, but it's fun to watch!
Now I don't know much about the stock market. I've always been interested in it. But never gone the step forward to find out much.
Thomas, you make a good point about everyone gets picks wrong at times, but for a self-professed financial genius like Cramer to fail to beat the S&P 500 return of 16% over two years is pretty sad. Even a bozo like me has done much better. 12% per year is great, but 12% over two years is mediocre at best. Also, good point about 3,458 trades. With that many trades, you are merely paying for your broker's BMW, not accumulating wealth.
Scatman, your father is right about Cramer being fun to watch, but I can only take him in VERY small doses.
My biggest concern with Cramer is his past, and quite likely current, ethical lapses. He admitted that he manipulated stock prices by giving idiot reporters info they would write about that would impact the price of the stocks he held. Then, he backtracked and said that he was only saying that it was possible to do that, but he didn't mean he had done it. Sure. Right. In addition, Barron's highlights many stocks that popped during the day before he made his recommendation on TV. Some of that was likely due to news, but others were obscure companies without any big news, so it certainly appears that Cramer is tipping someone to this picks before he makes them. Maybe not, but appearances do matter to most.
Anyone who really wants to learn about the stock market should watch Bloomberg. CNBC is alright, but for the most part, it has a bunch of pretty talking heads jabbering on about the hot topic of the day. Little beef, mostly filler.
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