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Study: Jim Cramer's Stock Picks Aren't Beating Broader Market

Study: Jim Cramer's Stock Picks Aren't Beating Broader Market
Jim Cramer (Photo: CNBC)

By    |   Monday, 16 May 2016 01:14 PM

Jim Cramer, the former hedge-fund manager who hosts a market commentary show on CNBC, isn’t beating the market with his stock picks, according to a study.

Cramer’s Action Alerts Plus portfolio has underperformed the S&P 500 index by more than 0.79%  in terms of total cumulative returns since its 2001 inception, according to a working paper by Jonathan Hartley and Matthew Olson, researchers from the Wharton School at the University of Pennsylvania.

“While the fund outperformed the 500-member index in the years leading up to the 2008 financial crisis,” MarketWatch reports, “things have gotten worse since 2011, with Action Alerts Plus falling 9.5 percent in that year, when the S&P 500 was unmoved. It rose just 1.3 percent in 2014, versus an 11.4 percent increase for the S&P.”

Action Alerts Plus, a newsletter published by TheStreet.com that charges a $15-a-month subscription fee for information about stock trades, returned 64.5 percent cumulatively in the past 15 years, compared with 70 percent for the S&P 500 when adjusted for the reinvestment of dividends, according to the Wharton study.

Cramer said he “never promised outperformance” and that the subscription service is a “largely educational product.”

Part of the reason that Action Alerts Plus under-performs the market is that the fund keeps a large cash position so that it can donate money to charity, according to the Wharton report and TheStreet.com.

Ratings for Cramer’s “Mad Money” show on CNBC and subscriptions for Action Alerts Plus are falling, MarketWatch reports. TheStreet’s business-to-consumer subscription sales fell 14 percent in its most recent quarter to $6.3 million, according to the company’s most recent earnings report.

Cramer last month recommended buying stock in Expedia, the online travel-booking company spun off from Microsoft.

"Based on the fundamentals, this stock is absolutely worth buying hand over fist," the "Mad Money" host said.

Expedia late last year agreed to buy HomeAway for $3.9 billion in cash and stock. Cramer “considered the deal transformative and believed it could propel the stock” higher, CNBC reported.

“HomeAway is the world's leading vacation rental platform, with approximately $15 billion in bookings last year. Expedia's main goal with the deal was to access the $100 billion vacation rental industry and the sharing economy,” CNBC explained.

"I suggest buying the stock before the rest of the market realizes just how positive and powerful this story could be."

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Jim Cramer, the former hedge-fund manager who hosts a market commentary show on CNBC, isn't beating the market with his stock picks, according to a study.
Jim Cramer, stocks, market, CNBC
392
2016-14-16
Monday, 16 May 2016 01:14 PM
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