Barron's cover story on Jim Cramer this week is a perfect August cover: beach reading about whether Cramer is a good stock picker.
Cramer and I went to college together and I was a board member at TheStreet.com (NASDAQ: TSCM), so I am not unfamiliar with Jim's career.
The Barron's piece starts out by saying the viewer of Cramer's show Mad Money would only have made 12% on Cramer's picks over the last two years. The magazine uses a firm called YourMoneyWatch to determine that. It tracks Cramer's stocks from when he tells viewers to buy them up until he says that they are "sells." In a chart, Barron's shows Cramer's performance against the two year advances of the Dow at 22% and the S&P at 16%.
Cramer has a wide following. His Mad Money show has 138,000 viewing homes according to Nielsen. Several hundred thousand more people read him through products at TheStreet. He is written about in the press several times a month, so Cramer is almost certainly the most widely followed stock guru in the country.
I don't know if the Cramer stock picks make money or not. He offers thousands of them when all of his columns, comments and TV recommendations are combined. Tracking services may not be perfect when they decide what a Cramer "buy" is. Barron's factors in commissions. But, commissions are part of any transaction, not just ones that come from listening to Mad Money.
The idea of ranking Cramer largely misses his importance as a media and Wall Street figure. Cramer is about research. He is about individual investors learning the things that institutions know, and about thinking like a professional investor. What Cramer brings to investing is that people with small portfolios can reason their way around the stock market and do well. But, they have to look hard at the companies, their managements, the global economy, the Fed, and all of the other forces that make a market.
I rarely watch Mad Money; t makes my hair hurt. But, from what I have seen from the show, it is as much about the way winning investors think as it is about stock picks. And, good advice about how to think is hard to come by.
Douglas A. McIntyre is a partner at 24/7 Wall St.
See also:
Zac Bissonnette: Jim Cramer: Too much Lightning Round, not enough sound advice
Peter Cohan: Fed Chair Cramer's stock pix lag the market
Advanced Micro Devices rallies after settling Intel tiff
United Technologies fires up a deal with GE
Cramer on BloggingStocks: Not much time left for downside 
Reader Comments (Page 1 of 1)
8-19-2007 @ 11:00PM
telliertome said...
Cramer is a tool that investor's/active traders should use with care. Measuring aggregate performance is a fool's game because of the enormous amount of picks Cramer is making on the show. Cramer needs some defending on some of his better picks. For example, despite being reviled for pushing Jones Soda stock from 10 to 30 back to 10, his record could have made you 90%. See the performance here - http://www.stocktagger.com/2007/08/defending-jim-cramer-jones-soda-jsda.html
8-22-2007 @ 2:57PM
mgrund said...
Look is there any tool that should not be used with care.
I just lost an entire positon to bancrupcy buy reliing on and S&P rating. Hey what a minute why doesn't someone apply the Cramer standard to bond ratings, or equity research. You stuff you pay for,and is supposed be the best on the street.
Oh well thats not going to happen. May the Feds can regulate ratings agencies, since the press will not hold them to account, But at lest we will be safe from cramer ( This called Satire. I mention this becuse Cramer also uses Satire,and from the way the press covers the man I am guessing that they are unfamilar with the concept -wheresas this is sarcasim. It is a relative of Satire.