Barron’s: Cramer’s Picks Aren’t All Reliable

CNBC’s Jim Cramer has had a renowned career as a hedge-fund manager, and he’s long been held by CNBC as "the guy who can help viewers make big money,” said Barron’s in a recent article. But a comprehensive review of his stock picks by Barron’s found that Cramer’s picks haven’t beaten the market.

According to Barron’s, over the past two years viewers of Mad Money, Cramer’s show on CNBC, would be up 12 percent, while the Dow rose 22 percent and the S&P 500 was up 16 percent, according to a record of 1,300 of Cramer’s Buy recommendations.

Barron’s also looked at a database of Cramer’s Mad Money picks maintained by his Web site, TheStreet.com. Although it only covers the past six months, it includes 3,458 stocks — mostly Buys punctuated by come Sells.

According to Barron’s, these picks were flat to down relative to the market.

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"Count commissions and you would have been much better off in an index fund that simply tracks the market,” the news source opined.

What’s more, stated Barron’s, CNBC officials told viewers they should buy Cramer’s picks a week after they’re aired and that viewers should focus only on the "tiny universe” of stock selections that Cramer researches the most.

After analyzing the stocks, continued Barron’s, CNBC said that if held for one month, they beat the S&P by 0.8 percent, or 1.7 percent after two months. They offered no results for the year-to-date.

"It turns out that CNBC did its analysis incorrectly,” concluded Barron’s after analyzing Cramer’s stocks themselves, and that the stocks beat the S&P by 0.4 percent in one month and 1.2 percent over two months.

What’s more, stated Barron’s, CNBC measured the stocks’ performance against the average performance of the S&P year-to-date, instead of against the performance of the S&P from the date of each stock pick. Also, it included more than 100 recently recommended stocks that weren’t held for the full one- or-two-month holding period that CNBC claimed.

More important, stated Barron’s is the stocks fell short of the S&P by a statistically significant 2.2 percent through last week.

How are viewers supposed to know that they should pay attention only to this subset of stock picks each week and ignore the thousands of others that Cramer makes on his show, asks Barron’s.

"There’s no doubt that Cramer is trying diligently to make you money. His advice is generally smart, his knowledge of individual stocks amazingly detailed. But the credible evidence suggests that the telestockmeister’s picks aren’t beating the market. Did you really expect more from a call-in host who make 7,000 stock picks a year?” asks Barron’s.

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