Maybe you’ve seen that crazy investing guru on CNBC. You know, the guy who doesn’t have a chair in the studio and is always pacing around yelling at the camera? Yeah, that’s the show Mad Money with Jim Cramer. As unorthodox as the show is, it is possible that this guy knows what he’s talking about. So I’ve decided to do a scientific investigation of how good his stock picks are.
My methodology is simple. I’ll be “buying” (using a virtual portfolio) $100,000 worth of every stock that he personally recommends in his two main segments at the start of the show. The Lightning Round segment in the middle of the show consists of people calling in and asking stock advice, and since Jim isn’t coming up with these himself, but rather, merely evaluating them, I’m going to be “buying” $50,000 each of every stock that he evaluates positively during the Lightning Round.
Then, I’m going to hold these stocks until he suggests that they should be sold (which could take awhile). At some point, I’ll just sit down and see what percentage growth Jim’s picks resulted in, and whether they beat the market. I’m not going to be playing games with trying to sell short stocks that he doesn’t like, as all of his recommendations are generally made against other stocks in the same sector, and I’ve never actually heard him recommending that anything be sold short.
Mad Money Recap is going to be very useful in this endeavor. It’s a fan site that faithfully transcribes each show and lists all of his stock picks. The basic plan is to buy the stocks after the close of market on the day that the transcript is published. For instance, I started by buying all of Jim’s recommendations from Tuesday last night.