Cramer’s Stock Pick Recommendations Analyzed (Part II)

October 18, 2010
By

(This article was first published on R-Chart, and kindly contributed to R-bloggers)


     This is the second post (previous one here) that provides an analysis of Cramer's stock recommendations based upon the Mad Money Stock Screener as of 10/15/2010.

Recommendations by Segment
As mentioned in the previous post, recommendations are referenced either by a number below or by name.
#   Description
5   Buy
4   Positive
3   Hold
2   Negative
1   Sell



Referencing calls by number is used to provide average scores and to plot results.  Also as noted previously, not all segments of the show are available through the Stock Screener.

Calls made during the Lightning Round and Mail Bag have an average of less than 4 (positive).  Calls driven by questions by the audience have a lower average, while those in interviews are higher.


Segment         Average Call
Discussed       4.387156
Featured        4.351351
Interview       4.895954
Lighting Round  3.764465
Mail Bag        3.605691




Calls Trail the Market

This is a bit more speculative a representation.  The S & P and Down Jones Industrial Average are used in this comparison.  The call (on a scale of 1 to 5) is multiplied by a factor so that a smoothed condition mean line is generated on the chart.  The factor is arbitrary, it just makes the line fit on the chart in a reasonable location, so the directionality of the call line is relevant - not the degree.

The S & P appears as the red line and the average of the calls for each day (times a factor of 3000) appears in blue.


The DJI is multiplied by a factor of 3000 in the chart below.

Although it is not completely clear, it appears that stock picks tend to trail the market movement.  For this reason they generally sound plausible.  Calls tend to be more pessimistic at the time the market has been moving down.

5 of Cramer's Favorites
A few of the stocks that Cramer has recommended in the last year qualify in a special way as "favorites."  They are the stocks that appear the most times in the data with only a buy recommendation.




Wynn Resorts (WYNN) had a range of $27.00 between the lowest and highest 19 buy recommendations.

           

Weatherford Int'l (WFT) 

had a range of 

$6.18 between its 16 buy recommendations.



NVIDIA (NVDA)  had range of 9.05 between its 15 buy recommendations



Cypress Semiconductor (CY) had a range of 4.58 between its 13 buy recommendations.


Teva Pharmaceutical (TEVA) had a 17.03range in its 12 buy recommendations.


Conclusion
We are bombarded with predictions and promises regularly in the news and media. Over time, I have grown more and more suspicious of the ability of individuals to consistently predict stock prices by simply having a superficial knowledge of current market motions and a general awareness of current financial news.  

 I often think about verifying the claims, but often don't have the time... figured I would at least take a cursory look.  I hope this sort of thing becomes more common to keep the media honest.  
At least Jim Cramer's show is cast somewhat in the realm of entertainment.  Again, I'll refer you to Bill Alpert of Barrons who has done more extensive analysis and reporting on Cramer's recommendations.  

To leave a comment for the author, please follow the link and comment on his blog: R-Chart.

R-bloggers.com offers daily e-mail updates about R news and tutorials on topics such as: visualization (ggplot2, Boxplots, maps, animation), programming (RStudio, Sweave, LaTeX, SQL, Eclipse, git, hadoop, Web Scraping) statistics (regression, PCA, time series, trading) and more...



If you got this far, why not subscribe for updates from the site? Choose your flavor: e-mail, twitter, RSS, or facebook...

Comments are closed.