And a big "Boo-Yah" to you, too
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Based on this incomplete list, Cramer’s picks have gained 16.2%, on average,
from the show’s launch March 14, 2005, through March 27, 2006. That
makes the Standard & Poor’s 500 gain of 7.3% look pretty sad. Cramer says
he’s made his viewers lots of money. “I’m very proud of my record,” he says.
[quote=skeedaddy]Based on this incomplete list, Cramer's picks have gained 16.2%, on average,
from the show's launch March 14, 2005, through March 27, 2006. That
makes the Standard & Poor's 500 gain of 7.3% look pretty sad. Cramer says
he's made his viewers lots of money. "I'm very proud of my record," he says.
That's not bad, but I've done better than that in a variable annuity.
And a big “Boo-Yah” to you, too
Monday April 3, 12:01 am ET
Q: I’m trying to follow Jim Cramer and Mad Money to make big money in
stocks. Will it work?
A: Fans of Jim Cramer and his Mad Money stock-picking television show on
CNBC call in excited about stocks, usually starting their questions with
Cramer’s signature “boo-yah!” yell.
For an hour, Cramer plays up his hyperactive personality, barking out
buy and sell recommendations on dozens of stocks. He is the evangelist
of stock pickers and market timers. Fans see him as a fountainhead of
information on gems other investors, traders, fund managers and analysts
have somehow overlooked.
Is Cramer really a stock-picking genius?
When I asked Cramer for his picks, CNBC, after considerable prodding,
provided a spreadsheet with Cramer’s picks from two of the five segments
of each show, excluding the lightning round, in which he answers
questions from viewers.
Based on this incomplete list, Cramer’s picks have gained 16.2%, on
average, from the show’s launch March 14, 2005, through March 27, 2006.
That makes the Standard & Poor’s 500 gain of 7.3% look pretty sad.
Cramer says he’s made his viewers lots of money. “I’m very proud of my
record,” he says.
I provided CNBC’s list to third-party research firm Investars.com, which
said, based on the incomplete list provided by CNBC, that the S&P 500
stocks picked by Cramer have performed much better than the S&P 500 at
large and his picks of stocks in the small-cap Russell 2000 index have
outperformed that index. Investars also found that small-cap stocks
recommended by Cramer soar after being mentioned on Mad Money.
But before you get “Boo-Yah” tattooed on your forearm, let’s take a
Tracking the right benchmark. The median market value of the 606 stocks
in the Cramer list was $6.8 billion, according to S&P’s Capital IQ.
Morningstar considers a portfolio with a median market value between
$1.6 billion and $9.3 billion to be midcap. So it doesn’t really make
sense to compare Cramer’s performance to the S&P 500, which is heavily
weighted toward large-cap stocks.
What if we compare Cramer’s results to a midcap index fund such as the
iShares S&P MidCap 400 index exchange-traded fund (AMEX: IJH
<http://finance.yahoo.com/q?s=ijh&d=t> - News
<http://finance.yahoo.com/q/h?s=ijh> )? Had you ignored Cramer and
simply bought IJH on March 14, 2005 and held it until March 27, 2006,
you would have been up 16.4%. That’s dead even with Cramer’s
But it’s not quite fair to compare Cramer to the IJH either. His picks
include large- cap stocks and some foreign plays. So I asked IFA.com to
calculate the return of the basket of index mutual funds it recommends
for risk-tolerant, results hungry “mad money” type investors. The return
of this portfolio, after fees, was 21.8%, trouncing Cramer’s return. You
can view the IFA portfolio here <http://www.ifa.com/portfolios/p100/> .
Cramer himself has described how hard it is to beat index funds. “After
a lifetime of picking stocks, I have to admit that (Vanguard Group
founder John) Bogle’s arguments in favor of the index fund have me
thinking of joining him rather than trying to beat him,” Cramer said on
the dust jacket of Common Sense on Mutual Funds, Bogle’s 1999 book.
Time. Don’t forget the cost of the time it take to follow Cramer.
IFA.com’s President Mark Hebner breaks it down this way: Imagine having
$100,000 to invest in a ten-stock portfolio of Cramer’s stock picks.
Cramer recommends spending at least an hour a week researching each
stock. That translates to more than 500 hours of homework a year. Even
if all that work pays off and you beat the market by two percentage
points, that’s a return of $2,000 or $4 an hour. “Was it really worth
it?” Hebner asks.
Time also tends to be cruel to stock pickers. The chances of a money
manager outperforming the market in the long term, especially after fees
and other costs, is small, says Bogle, whose Vanguard Group popularized
index mutual funds and who is acquainted with Cramer. “I wish him well,
but I’m not investing with him,” Bogle says.
Fees. Had you followed Cramer’s advice, you would have had to buy more
than 606 stocks, according to the CNBC data. Even if you use an online
broker that charges just $5 a trade, you would have spent $3,030 in
In an e-mail, Cramer wrote: "Transaction costs are always a factor
whether they are done within a mutual fund, a hedge fund or by an
individual himself. I believe strongly that my figures clearly beat
almost every relevant benchmark by a mile and that even if you put in
transaction costs you would be well ahead of the game."
To be fair to Cramer, one year of performance is not adequate to judge a
stock picker. And CNBC spokesman Kevin Goldman wrote in an e-mail to USA
TODAY: "It is overly simplistic to measure year-to-year comparisons.
Cramer can change his mind on a stock depending on a number of factors.
He says each investor should do his or her own homework about a stock."
What’s the lesson here? Be skeptical anytime someone claims to have the
ability to predict short-term movements in stocks or the stock market
and make them prove their returns to you. Almost always, the best thing
to do is plug your ears and run away, fast.
Matt Krantz is a financial markets reporter at USA TODAY. He answers a
different reader question every weekday in his Ask Matt column at
. To submit a question, e-mail Matt at [email protected]
Great post.. The basic theories he states are good for the every day JOE and Mary.. I question the hype.. It does smell like 2000..