Inversing Jim Cramer Isn’t a Good Strategy. Here’s Why
Love him or loathe him, there's no denying that Jim Cramer, the charismatic host of CNBC's "Mad Money," knows how to grab attention. With his larger-than-life personality and boisterous antics, Cramer has become a lightning rod for controversy in the finance world. Critics often claim that Cramer's advice is best ignored, with some even advocating for an "inverse" strategy of doing the exact opposite of his recommendations. That led to the creation of SJIM (an inverse Cramer ETF) and LJIM (a long Jim Cramer ETF). However, the LJIM ETF is actually set to stop trading on September 11, 2023, due to a lack of interest.
However, is Jim Cramer truly the financial pied piper he's made out to be, or is there more to this TV personality than meets the eye? Let's dive in and find out.
The Entertainer with a Heart of Gold (and Stocks)
It's no secret that Jim Cramer knows how to entertain. His animated approach to discussing the stock market can be both captivating and overwhelming. However, it's important to understand that Cramer's goal is to make the stock market more approachable and less intimidating to everyday people.
Don't be too quick to write off Cramer's insights just because he wears his heart on his sleeve (and occasionally tosses a chair or two). He puts in the work, interviewing CEOs, researching companies, and analyzing market trends. So, before you dismiss his recommendations outright, remember that there's substance behind the showmanship.
A Man of Many Picks
Detractors often scrutinize Cramer's track record, asserting that his stock picks frequently underperform the market. Yes, not every recommendation Cramer makes turns to gold, but consider the sheer number of stocks he discusses on his show. With so many calls, he’s bound to get some wrong.
What's more, Cramer has always promoted a long-term investment approach, urging viewers to do their own research and make well-informed decisions. In essence, his recommendations serve as a springboard for further investigation, not a direct order to buy or sell.
Does Betting Against Cramer Really Work?
The "anti-Cramer" strategy suggests that investors can outperform the market by doing the opposite of what Cramer advises. But is it really that simple? The introduction of two exchange-traded funds (ETFs) - one betting on Cramer's picks (ticker: LJIM) and another betting against them (ticker: SJIM) - adds a fascinating twist to this debate.
These ETFs enable investors to put their money where their opinions are, offering a chance to profit from or against Cramer's recommendations. Although these ETFs are relatively new, they can show you if the anti-cramer strategy works.
But does it work? Here is the performance of SJIM (the inverse Cramer ETF) since its inception in early March. It’s down 3.3%. Nice.
Besides, a lot of the stocks in the LONG Jim Cramer ETF are blue-chip stocks, such as Walmart (WMT), Oracle (ORCL), Nvidia (NVDA), Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL), and more. So, think again. If Cramer likes these stocks, then are these really the companies you think you should be betting against? Profitable blue chips?
Interestingly, the LJIM ETF has actually gained 2.2% since its inception, believe it or not.
Conclusion — Stop Blaming Others For Your Losses
Jim Cramer may be a polarizing figure, but it's important to give his advice the fair and balanced assessment it deserves. In other words, don’t blame him for your losses and use him as a scapegoat just because it makes you feel better. Instead of dismissing his recommendations due to his wild personality or adopting an "anti-Cramer" strategy, consider using Cramer's insights as a piece of the larger investment puzzle. After all, when it comes to investing, there's no such thing as a one-size-fits-all approach.
