What's the best strategy of investing with Jim Cramer's stock picks?

Question

This question is for people that have experience and follow Jim Cramer's Mad Money show on CNBC. We know we can make money already with the help of the show, but what is your best investment strategy and why?

Answer 1

Even Cramer, himself, does not advocate rushing in the minute he recommens a stock. There is usually a big jump in the price in the after-market after his recommendation. The best thing is to wait until the next day and until the market has been open for a couple of hours. But the main force driving any investmet is the over-all trend of the market. Anything you buy in a bull market will tend to go up, but, in a bear market, even the best stocks go down with a few exceptions. The present bull market has been going on a long time, so I'm holding until the major indexes dip below their 30 day extended moving average.

Answer 2

While there are as many people praising Cramer as their are vilifying him, on the whole what he is doing is good for the average investor. He is teaching them, at a basic level, some of the more important rules and theories behind investing. One can only hope that this will at least light the fire beneath the people watching the show to take a more active position in their investing.

However, the real problem comes about through the actions of the people listening to Cramer not as much what Cramer is doing himself. Too often, people are just looking for a quick money making idea that will make them instant profits. This thinking, which many fall under, is not realistic and is fueled by greed and misunderstanding of the financial markets.

As to your question about what is the best strategy to follow when following Cramer. If you are trading - only buy if you can get in before the initial run up or short sell after the run up. If you are investing - do some research before you buy.

Here is an interesting article on the Cramer Effect:
http://www.investopedia.com/articles/06/madmoney.asp

Answer 3

Cramer is not an investor, his is a trader. If he was into real estate he would be flipping.

Here is what people have come up with that have tracked Cramer's picks. He has not beat the S&P 500 this year. I think the artical was written in September and if you had followed Cramer to the T, you would be up 7% while the SP 500 was up 12% (when the artical was written). Also his average effect is 12 days. So if he said buy, the stock would go up 12 days and begin to fall back where it was. If you were a couple of days late to the party, my advice is to look at the support to see if shorting the stock is the way to go (because on the average that would be the way to go).

Answer 4

I work in the investing business, managing a small brokerage firm, and I often wonder why folks would listen to Cramer at all. But having said that, Cramer has a huge following and his remarks can move stock prices.

My suggestion would be to research his picks carefully and then wait to buy once the prices falls back....if the fundamentals hold up.

If your objective is to make quick profits and forget the long term hold, then I'll attempt to short his picks the day he makes them, but study the charts of his past picks and try to determine the patterns.

Happy investing!

Answer 5

I have my serious doubts as to Cramer having any value at all. Unless some independent third party decides to do some kind of unbiased test of his stock plays, I won't put much value into them.

The reason is that I was following the street.com when it first came out during the internet/nasdaq market craze in 2000 or so.
Cramer put out a lenghty one page news article during that time talking about how there is a "new economy" paradigm where previous methods of stock valuation such as P/E ratios are no longer relevant. He then provided 10 "new economy" stocks which were going to be important stocks for the years to come. I don't remember all the names but over half dont exist any more.
Furthermore, his article was encouraging full investment in "new Economy" internet stocks, and came out within 1-2 months of the *absolute* record all time top of the Nasdaq. I mean it was uncanny how close the date of the article was to the absolute WORST possible time ever in recorded history to be a buyer of the nasdaq.

Then I hear him on CNBC talking about how he didn't follow the herd in the dot.com crash and somehow "knew" using his keen hedge fund instincts that it was time to get out of the internet stocks ahead of time. Chances are that article is gone, as it would not be an asset to his television and authoring careers.

Actually I found a link to it, enjoy:
http://www.thestreet.com/funds/smarter/891820.html

Answer 6

each and every expert has reliable and vulnerable factors. Brinker is sweet at standard industry timing, no longer so good at finding out on individual investments (distinctly in this style of industry). Cramer is sweet on concept, short on prepare. you need to confirm each and each ones good and undesirable factors, and then comprise it into what works for you.

Answer 7

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