Sunday, January 29, 2006

Cramer, Again

So far in 2006, Jim Cramer's "managed account," which he sells access to for $399 a year in his Action Alerts Plus service, is up 3.14%, compared to 2.34% for the S&P 500. For all of 2005, he also beat the S&P 500, and again by a few percentage points. Not a fair criticism, because he claims to be so risk averse? Check out this analysis of where Cramer is going recently:

The Cramer Files

Yes, that's yours truly in comment #2. (And Ilene had complained about Cramer's NKTR sell alert, so I emailed the link to her too.)


It is frustrating to watch Cramer move smaller cap, less liquid stocks 25% after hours, while knowing in his managed accounts he is buying large cap stocks that do very little and his track record for his own real money buys is unimpressive. But the TV viewers pile in, driving the prices up, while the only sure winners are those already in the stock. It leads me to believe that Cramer doesn't need, or have, any real talent in selecting stocks, he has a following of people who drive the stock up, and then he can take credit for finding great stocks.

When I was a practicing attorney in Atlanta, I took on some client accounts as a money manager, incidental to my law practice, essentially managing client stock portfolios because for me investing was a passion, for them a headache. In my transition to a full time stock trader, I left most of those clients to their own devices, but kept some under management, mostly becasue they insisted. This weekend I sent out the following semi-annual report to one of my clients:


Dear [name omitted],

In the past six months your account has risen....54%.

As I have been e-mailing you on occasion, the largest winning position percentage-wise has been Nanoviricides, up an incredible 1,385% since purchase. Other notable winners have been AVI Biopharma, up 211%, Glamis Gold, up 258%, Novavax, up 164% and Amlylin Pharmaceuticals, up 169%. In fact, of the 22 stocks current being held in the portfolio, 18 are winners and only 4 are below our original cost basis.

As we go into 2006, Biotechnology, Precious Metals and Technology sectors appear poised for significant upward gains in the months ahead and accordingly, that is where I am focusing the account. As the returns above indicate, we are on a run here and whatever it is that is working is what we should be doing in the account.

Best personal regards,

Allan


This return for my client took a lot of work and continual research. I can't call out a stock name on TV and get an automatic 25% gain. This Blog has been mostly about trading and acheiving triple digit returns to make the time, effort and risk worthwhile. But I know that most of you either Buy-and-Hold or Position Trade when it comes to stocks. Some simple strategies will help you to improve your returns, but following Cramer is not on that list.

1. Following the Insiders. Look at Insiderbuying.com for what is possible. Check out the track record, all they are doing is buying stocks with significant insider buying. You learned the importance of that here.

2. Take a shot once in awhile on an NNVC, or XDSL, WAVR or SMTR. If three lose 50% and one gains 1000%, well, you do the math. And keep in mind that just because a friend of yours suggests that the pink sheet biotech stock is junk, that doesn't mean you should sell it, nope, let it keep going up because that is matters here.

3. Some of the best money made the past 50 years has been in precious metal stocks. They seem to run in cycles, cycles that last years and decades. A good precious metals newsletter, like The Dines Letter, will keep you on the right side of those cycles along with providing some highly leveraged ways to play the moves.

Nothing is new in today's blog, you've heard it all before. But there's something about Cramer that brings this out in me.

A

4 comments:

Jonathan said...

As college student and finance type I enjoy watching Cramer for the entertainment value, you are right about him driving certain stocks up under the right circumstances (artificially I'd say). But as far as investing solenly in his suggestiongs the two minute safe harbor at the begining of the show does it for me. Besides, from the time the stock has been identified, researched upon, the show has been taped, and aired, most of the money that could be made has already been made by someone else (or is in the process of). I'd rather follow the basics...doing my homework, diversifying [there I'm biased with LatAm stocks] and keeping my percentages between cyclical and growth, etc.

In any case I think Cramer's show is a lawsuit waiting to happen.

Greg Reiman said...

Hi Allan:

I fear our new Fed Chairman "Helicopter Ben Bernanke" is going to run up money supply and let inflation fly. As a result I am looking at commodity based stocks, oil, metals, timber, cement etc. One of those I am researching is CCJ which is a play on uranium. The question in my mind, has this stock already had it's run up, or is there more to come? It is not cheap by any means. But will inflation fuel this stock and other commodity type stocks to even prices that make todays prices look cheap?

Any thoughts Allan?

Greg Reiman

Greg Reiman said...

HI A:

I mentioned CCJ earlier this week. This morning is took a huge dive, about 7%. This looks to me like an overreaction. It started rapidly spiking back up at 11:43 am. Since I had gone to 95% cash late last week, I had plenty of dry powder ready so I jumped in with both feet, and if I had been quicker on the trigger I could have almost caught the bottom, but I was screwing around trying to enter a fancy bracketed buy order, It ended up costing me an extra 75+ cents a share by the time I gave up and placed a market order.

Greg

Allan said...

Greg,

That's an issue my trading partners and i face all time, in fact daily. My solution has been to go in with a market order for a core position and then use limits on subsequent orders. But in a fast moving situation like we had today with CCJ (Yes, I played it too), it's best to just go in with a market order for all you want and not be too cute. It was a good idea, we knew it and once i saw CCJ bottom and turn, I wanted in immediately, no questions asked.

A