Has anybody actually made money by listening to Jim Cramer?

Question

I have nothing against him, I just wanted to know.

Answer 1

Sure, for that style of investing. James Cramer is the first to tell a person that what he represents is for someone to think about what they are doing-to do their homework. He is the first one to say "never listen to tips." I totally agree. There is not one investment that I ever buy, or sell based on the recommendation of someone else. I don't care whether he likes KO or GS or LVLT. But when he says what metrics are the most important to traders regarding the retail industry during earnings season, why a stock that pulls up based on demand for an unreleased product may lose steam, or why its important to know that insiders did not sell into a buyback, well that is Wall Street knowledge that I listen to. I think too many people take James Cramer literally-he is a great entertainer, smart as anything, and has made returns over many years that are not matched by many. He is not going to be right on every call, nor is anyone else, but if you listen to the man's knowledge and apply it to your own personal situation, you can surely be a better investor. Good luck and have fun!

Answer 2

I don't think you should ever buy a stock solely on what someone else tells you, whether it's Jim Cramer or the guys on "Fast Money" or the TV repairman. (OK, I guess I'd make an exception if Warren Buffett walked up to me and told me to buy "XYZ", but that hasn't happened yet!)

What I DO recommend is that you use recommendations from Cramer and other people as ideas for doing further research. This is most helpful when he tells me about a stock or sector that I haven't been monitoring. After doing my research, I have bought several stocks that he's recommended... some have done well, some haven't. Some of the best performers I bought after hearing his recommendations have included BWLD, GS, AAPL, WHR, and COH. However, BEAS, HAL, and MPEL haven't worked out too well for me.

Another thing I recommend is to ALWAYS have an exit strategy in place when you buy a stock. My strategy is to sell any stock that loses 8%, and sell my winners after they drop either 10% from their highs or 25% of my gain, whichever is lower. Even if you have an even number of winners and losers, this kind of strategy will make you money over time because your winners will significantly outgain what your losers lose.

So... long story short... I have made pretty good money overall by selectively buying Cramer's recommendations, but only after I've done my homework and by making use of an exit strategy.

Answer 3

Any key investment news has already passed through the hands (or computers) of the big money managers and market analysts first. By the time the average investor even knows about a stock's big increase, it has already trended up. If you move on this information, chances are you will buy at the stock's peak price.

In fact, the early adopters are counting on naive investors to take these overpriced stocks off their hands. It is called the "greater fool" theory. One fool buys an investment not for its actual value, but because he feels the price will rise and can find some greater fool to sell it to. The greatest fool is the one left holding the bag at the end, paying too much for stock in a company that will not distribute respectable dividends.

Why do you think Jim Cramer gives nightly stock tips on his show, Mad Money? Because he is benevolent? Perhaps. Or, is it because he first buys certain stocks at low prices, peddles them on his show, watches as the sheep follow his orders and push the stocks' prices up, and then sells the shares for a capital gain? He then shows you the price increase a few weeks later, and says, "See, I told you so". It's a self-reinforced delusion hiding his true intentions. If he really wants to showcase his prowess, why does he not follow the price of his "picks" over several years? He cannot. Because this price increase is temporary and a result of his audience's actions, not because the stock's true value went up. Here is the greater fool theory played out on national television, right in front of our eyes. "Boo-yah" indeed! Boo-yah for Jim, and boo-hoo for his audience of greater fools. (Interestingly enough, you can purchase a Jim Cramer talking bobble-head doll from his website. The doll randomly says either "buy, buy, buy" or "sell, sell, sell". The true irony, that we will see in a later chapter, is that this random doll is about as accurate as the real Jim Cramer (or any pundit, for that matter) at predicting the future.)

Answer 4

I've made a lot of money from watching and learning from Cramer. (for example, 40% on Goldman Sachs over 6 months). Unlike many financial "gurus", he tells people not to blindly follow his lead. What I like is that he talks in a language a non MBA can understand. Using what I've learned, I've made more on my own than I have from Cramer's recommendations.

Answer 5

I haven't because I didn't do what he said. I recently checked the recommendations he made, and I read, 6 months ago, and all but one is up 15 percent or more. Of course, this is a pretty good market, so the trick would be to backtest his recommendations in bad years.

Answer 6

yes, the shareholders of the companies he touts. Enough people listen to him that they will buy or sell a share of something and hopefully all the people that buy it will be part of the upswing in the market. I basically think that he takes darts and throws that at his billboard of stocks and says, "ahhh.....landed on Best Buy....they must be turning quite a profit. Buy, buy Best Buy!"

Answer 7

Mad Money is hard to come by.

Answer 8

http://internet.seekingalpha.com/article/11461