Cramer’s Best Buy Earnings Recommendation Gets Crushed

By Damien Hoffman

December 15 2009 Email

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Jim Cramer Hat On last week’s Mad Money, game show host Jim Cramer told his acolytes “to pick up [Best Buy] BBY before Tuesday morning’s announcement.” First, trading stocks ahead of earnings is the riskiest aspect of trading. Most professional traders close their positions ahead of earnings and decide what to do after the announcement. The reason for this risk management strategy: guessing earnings is a complete gamble.

Enter our circus show friend Jim Cramer. While Jim is busy telling people he’s trying to make them better investors, here he is (again) giving investment advice to use the riskiest tactic in trading. Well, I am sad to say Jim’s ESP was dim, and those who started buying BBY into earnings are now getting slammed. The company missed expectations for margins, and the stock is trading down almost 7% as I write.

As Jim says in his Stock-Picking Rules to Live By, “Just because someone says it on TV doesn’t make it so.”

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Cabdriver

With respect, I disagree. Now I'm really new to this "game", but over the 4 years I've been "studying" [what can I say, I'm retired & don't have a life anymore] this new hobby, I find him correct or early more often than I find him down-right wrong [I gave up on the Fox Noise folk after 6+ months of plum bad calls, they've got one guy over there that really knows his stuff, & he used to be on Fast Money!] Not many have the guts to swing at the pitches night after night, let alone be correct more often than wrong! & is it me, or does he seem to be doing the mea culpa thing more than once a year [he just did one tonight in fact, how many of the other talkin' heads ever admit/own their "bad calls"?] In the end, in this game you've got to be willing to "own" where YOU place your bets. I wish we had more people willing to teach like Cramer, maybe 1 in each public school system....
Damien Hoffman

Cabdriver, thanks for your thoughts. I am very happy Cramer has helped you. However, his long term record can't beat an index:

http://online.barrons.com/article/SB11868126575...

I sincerely wish you the best with that. But I think there are much better teachers and resources available. They simply get less TV time.
Mark

Question: Do you write an article every time Mr. Cramer is right?

Or is this simple anecdotal evidence that Mr. Cramer is just plain wrong (again and again and again). This is how it reads to me. Am I missing something?

I've watched his show a few times and find him entertaining with some knowledge tossed in for good measure.
Damien Hoffman

I just point out when he is wrong as a balance to him telling you when he is correct. If you are looking for his overall record, please read this:

http://online.barrons.com/article/SB12339710739...