Cramer Stocks To Buy
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Take the final day of January, in which stocks surged on data showing the employment cost index decelerated to a 1% quarterly rate, which was below expectations and importantly below the 1.2% of the third quarter. At the same time, though, the index is running 5.1% year-over-year.
Specifically, on Nov. 20, 2012, Jim Cramer's urgent message was to exit two stocks immediately -- Hewlett Packard (HPQ) and Best Buy (BBY). Fast forward six months and three days through May 23, 2013, and how did these two stocks do Well, considering Hewlett Packard was up 115.62 percent, while Best Buy gained 124.64 percent in total return, you be the judge.
I asked the folks at S&P Dow Jones Indices where the performance of HP and Best Buy ranked in the S&P 500. Though they responded that they didn't have the data readily available, the folks at Wilshire Associates did on their large cap index. Of the 749 stocks in the Wilshire U.S. Large-Cap Index, since Cramer's urgent sell message, Best Buy ranked the 3rd best performer while Hewlett Packard came in 4th. I ran some numbers and the probability of being wrong enough to get two of the four best performers was 1 in 35,062.
As a side note, in Cramer's book \"Getting Back to Even,\" Hewlett Packard was one of 12 stocks highlighted in his chapter on how to invest for the recovery. Between the Oct. 13, 2009, publish date of his book recommending Hewlett Packard, and his Nov. 20, 2012, sell immediately recommendation, Hewlett Packard's total return was a loss of 73.83 percent. In other words, investors who listened to Cramer, and acted upon his advice, would have first lost nearly three quarters of their investment and then missed out on more than doubling it.
Being a numbers guy, I couldn't resist calculating the odds of making four sell recommendations on what ends up being the four best performers out of 749 different stocks. Can we have a drum roll The odds are 1 in 13.1 billion. By comparison, the odds of winning the Powerball jackpot are much better at 1 in 175 million, or 75 times more likely to happen than picking four stocks that poorly. Thus, picking the four best performers as stocks to sell is the next closest thing to being statistically impossible.
Admittedly, Cramer came up with other sell recommendations and I didn't do a thorough search to see what those stocks were and how they performed. Which is to say I'm not painting all of his advice with the brush of statistical impossibility. With these stocks, however, his recommendations to buy after they surged and sell after they plummeted, appear to be driven by nothing more than recent performance.
By any measure of statistics I can think of, these four awful stock calls are telling of Cramer's incredibly poor ability to call stock sells. It not only surpassed my wildest imagination of just how bad anyone could be, it gave me an idea. I'm going to launch a new long-short hedge fund called Remarc (REMC). It's the reverse spelling of Cramer's name and the reverse of his advice as well, buying long positions in stocks Cramer says to sell and shorting any stocks Cramer calls a buy. If the odds also reverse, this fund will make the Powerball jackpot look like spare change I found between my couch cushions. So forget about \"Mad Money\" and jump on Remarc, it would be mad to miss out on this action.
Whether Cramer's viewers understood that the host and former hedge fund manager was not talking about Bear Stearns' stocks is unclear. Meanwhile CNBC's defense of Cramer has not insulated its heavily promoted star.
\\\"He kind of puts himself forward as the champion of retail investors, but had they listened to him on the [Bear Stearns] call, they would have lost a lot of money,\\\" said Roger Ehrenberg, the managing partner of IA Capital Partners in New York. \\\"He empowers people to feel confident about buying and selling individual stocks, when in fact most people are ill-qualified to invest in that manner.\\\"
\\\"On 'Mad Money,' Cramer promotes a mindless short-term approach to markets by encouraging frenetic trading of individual stocks,\\\" David F. Swensen, who supervises the $20 billion endowment of Yale University, said in an e-mail to ABC News. \\\"Such a high-cost, tax-inefficient strategy almost guarantees failure.\\\"
Cramer, on the other hand, loves to tweet about stocks, regardless of how the investing community reacts to his takes. Yesterday, he criticized popular meme stock Bed Bath & Beyond (NASDAQ:BBBY) over Twitter. But Cramer has made it clear that he believes investors should be buying on the dip right now. As he recently stated:
For the past few months, there has been a steady drumbeat of bad news about Bitcoin (BTC 3.39%) mining stocks. With the price of Bitcoin no longer on the march upward, Bitcoin mining companies are struggling to turn a profit. So it's perhaps no surprise that during the Lightning Round of the Oct. 31 Mad Money show, CNBC host Jim Cramer was unequivocal in his decision not to recommend Riot Blockchain (RIOT 13.81%)
It will likely be much the same story when Riot Blockchain reports earnings later this month. We're already starting to see a preview of what to expect with Bitcoin mining stocks across the board, and it's not pretty. These companies are so highly leveraged to the price of Bitcoin that everything they do loses value when Bitcoin falls.
For example, in Q2 2022, Riot Blockchain reported a huge $100 million impairment charge for the value of Bitcoin it holds on its balance sheet. It also reported a huge $349 million non-cash write-down in value of two Bitcoin mining company acquisitions. In this regard, Cramer is absolutely correct: You don't buy Bitcoin mining stocks in the middle of a bear market.
For now, I'm with Cramer. You simply don't buy Bitcoin mining stocks when the price of Bitcoin is falling. So let Riot Blockchain report earnings this month, turn in some disappointing numbers, and watch the price of Riot Blockchain fall even further as investors give up on Bitcoin mining stocks entirely. That's when you might be able to scoop up Riot Blockchain on the cheap. If you believe that Bitcoin is going stratospheric next year, you'd be able to buy up a super-cheap Bitcoin mining stock at exactly the right time to profit from a Bitcoin bounce in 2023.
Cramer was also an \"editor at large\" for SmartMoney magazine. He was accused by some of an unethical practice when he made a $2 million personal gain after buying stocks before his recommendation article was published, though he was candid in the article that he had purchased the stock; however, according to Ira Lee Sorkin, former head of the New York office of the S.E.C., inasmuch as Cramer was a writer for a general-interest publication, an argument can be made that Cramer did not breach any obligations.[26]
Though hardly anybody is going to confuse Cramer with investing icons like Warren Buffett or Jack Bogle, does that mean you should put any significant money toward the Inverse Cramer ETF Probably not. The White Coat Investor has always recommended investing in low-cost index funds and shying away from individual stocks. As Dr. Jim Dahle philosophizes, good investing is boring investing.
I don't think the market is so dangerous. In 1990 we had a full-scalebear market in the financial stocks. You had Citicorp, Chase, Chemical Banklosing 70-80 percent of their value. Okay. That was a sector that wasdecimated. In 1994 you had foreign country funds decimated, okay. In eachcase there were speculators betting that Chase had the stock going down, didn'trealize the dimension of real estate problems. There were speculators sayingthat the foreign stocks had the stock going down. They were all wrong. Thoseclasses of assets were dangerous at the time and they became great bargains.What I'm saying is that there are bargains right now, there are stocks rightnow that if you're shrewd enough, you will be able to buy them at the openingtoday and I you'll make money in a year from now.
I think that let's take the case of Phillip Morris. Let's usePhillip Morris because it's big and controversial. It's got a lot of problemsfrom cigarette litigation. I own Phillip Morris. I'm not as big in it now asI was before, because it happened to visit the 80s, it's now at a hundred. Itwas down 15-20 points and I bought a lot of it. But Phillip Morris is thehighest yielding stock in the Dow Jones. Its yield is safe. The dividend issafe. Its earnings are growing terrifically and it's going to get pulled downwith the rest of the market in the same way that in 1990, Merck andBristol-Myers initially got pulled down with the rest of the market when Iraqinvaded Kuwait. Six months later Merck, Pfizer, Bristol-Myers were updramatically. A lot of other things kept going down. Six months from now Ibelieve that the same tiering will occur. They will be very solid financialstocks, like a Phillip Morris, that could be much higher. But those stockshave not caught the fancy of the speculative public. The speculative publicis indulged in stocks that I have no confidence in. There's a stock that I amsure of right now, Iomega, that is the third-tier player in a very cyclicalmarket, storage for personal computers. My first-tier players, Sea Gate andQuantum, go down every single day and they're doing fine. The second-tierplayers are teetering on bankruptcy. Amax Corp., bought by the Koreans lastyear, this time Connor Peripherals had to be bought by Sea Gate because itwas doing so badly. The third-tier players, Iomega, IMP, historically inthis era when PC sales are threatened if there's a lot of competition instorage, the third-tier players usually cease to exist in six to eight months.Now the idea that Iomega could be wiped out never entered in the minds of anyof the people who are involved in Iomega. Iomega became this year'sBristol-Myers. The problem was that Bristol-Myers was an unbelievablywell-managed company with huge earnings, huge assets, great balance sheet,great dividend, and Iomega is a company that just got in the businessbasically. The balance sheet is fine. The management's never been tested.Alan Shubart, who runs Sea Gate and anybody would tell you he's the beststorage manager in the industry, is saying we're in horrendous times. He'sseen every up and down. The people who run Iomega haven't seen anything.Hewlett-Packard, which is the foremost computer manufacturing company in thebusiness is getting out of the storage business. They find it to be toocompetitive. How can Iomega make it Now I'm picky on Iomega in partbecause Iomega became an entity that people viewed as a savings bond with anearnings kicker. And it turned out to be no more than just a piece of paperthat is split many times. I think that that's indicative of where we'regoing. 59ce067264