Short Cramer?
August 25th, 2007 by Grant in: InvestingLately it’s become quite evident that Jim Cramer is a fan of the bull market. In fact, he’s willing to go so far as to melt down, live on national television in an effort to fend off the bears.
Cramerica has a modest population, and the man did have a remarkable career managing a hedge fund. However, while you could take Cramer’s advice and buy his recommendations, others are actually shorting his recommendations based on the Cramer effect.
Interestingly, I came across a Barron’s article that produces some revealing numbers on Mr. Cramer.
Here are some excerpts:
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%…
Our analysis of Cramer’s picks over the past two years, from YourMoneyWatch.com, showed that, on average, the stocks jumped 2% the day after he mentioned them. From there, they usually moved sideways or down for the following 30 trading days (see chart). This offered an opportunity to make money — 5% to 30% a year — by selling Cramer’s selections short. -Source
Back when I watched Cramer semi-religiously, I could actually watch the spike in the share price before the open the next day. Many times, I’d see the sell off the very same day.
In short, there are stocks out there with fundamentals strong enough to overcome the Cramer effect. In a volatile market like today’s, it would be wise to find stocks that not only stand up to our credit crunch, but Cramer too.
That said, do you have some “Cramer Proof” stocks?
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