On April 6, 2015 just as the market was topping out, Jim Cramer wrote a column laying out what he called were “49 Stocks to Buy Right Now” which he qualified as “stocks that are clearly marked as winners no matter what, because they are domestic and because they do well precisely in this kind of environment.”
He further rammed his picks down the throats of anyone gullible enough to actually listen to Cramer by saying that “every single one of these companies reported excellent last quarters, and with no exceptions their charts are pretty much perfectly made for this downturn…. You would not be able to get into these stocks without this selloff, and all of these companies are simply not going to skip a beat because of what came out on Friday.”
One person decided to test just how “made perfectly for this downturn” Cramer’s stock choices really were.
And so, on April 6, a retired Professor of Finance in Southern Illinois, David England, unveiled the “Cramer Challenge” when he bought $1,000 of each security on Cramer’s list (in a paper-trade account of course – because in this day and age, everyone “trades” virtually, plus who would actually risk real money listening to Cramer) at the close of the following day.
England further put his own money on the table with his Gentleman’s Challenge. His offer was that after six months (October 7, 2015), if more of Cramer’s stock picks were up than down, England would pay for Cramer to fly from New York to Marion IL, put him up in a local Holiday Inn, and treat him to dinner. Cramer was to return the favor in New York, if more than half of his picks were down.
Cramer never responded to the wager offer.
England proceeded to track the portfolio’s performance and kept a weekly record of the results for which he also audited by an independent third party.
Six months later, on October 7, England unveiled the results (which we reported at the time), and the performance of Cramer’s “Buy Right Now” stocks that were “marked as winners no matter what.”
His findings: only 14 of Cramer’s 49 stocks closed higher than their April trading price, 28% success rate. It also means that 35, or 72% of the total, closed lower than the day Cramer recommended said portfolio of stocks.
What was the total portfolio return? A 7.09% loss in just 6 months.
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Ok fine, it was only 6 months: perhaps more time was needed for the investment thesis to fully materialize. So to set the record straight, moments ago England did the honorable thing and laid out the full 1 year return (as of April 8, 2016) of the Cramer “basket.”
But before we reveal the results, this is what England said:
“I risked my reputation and personal money on my challenge to Mr. Cramer because no one stands up for the investor on your average Main Street. Ask yourself, when was the last time you saw the media audit any so-called ‘Market Guru’s Buy List?’ I wanted to put many principles for investing to the ultimate test,” England said. “I wanted to go up against one of the best in the business, and I wanted to prove the dangers of mindlessly buying from these kinds of lists.”
Did he say “one of the best in the business“? Anyway, here are the results:
At the one-year mark, Cramer was up on only 16 of his 49 picks, “a miserable 33 percent success rate,” England pointed out.
Some of the other results:
- More than half (25 of 49) of his recommended securities are down double-digits.
- Overall performance of 49 recommended securities since April 7, 2015: -9.18%
- S&P Index performance over the same period: -1.38%
- Jim Cramer picks vs. S&P over this period: -7.8%
As England concludes, “a year ago, when the picks were made, Cramer said with extreme confidence: ‘Every single one of these companies reported excellent last quarters, and with no exceptions their charts are pretty much perfectly made for this downturn,’ Cramer said. Even if there is a correction or pullback, Cramer said his picks would do well. Cramer wrote, in fact, ‘This is THE list. Go forth and conquer.'” England points out, correctly, the only thing to “conquer” here is the danger of mindless-buying from perceived giants in the investment arena.
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Of course, none of this should be news to anyone, and we are confused why England wasted his time with this particular exercise when he could have simply done the opposite of what Gartman recommended for the past 6 (or 12, or however many) months (with the benefit that it changes every single day) and be the owner of several Greek islands by now.
For those curious, here is Cramer’s “Buy Right Now” portfolio as announced on April 6, 2015 and how it traded through April 8, 2016.
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