Tesla’s stock sank over $15 on Thursday following its earnings report. Jim Cramer, who is known for being bombastic and borderline ridiculous, dropped another bomb when he said that you have to be on drugs to understand Tesla and its high-flown forecasts.
“If you’re an analyst, I think the only way to handle an Elon Musk conference call is to take some mind altering drugs so you can really tune in and turn on the whole psychedelic story,” the “Mad Money” host said of Tesla’s CEO.
But perhaps the reverse is true: Perhaps you must be on mind altering drugs to listen to Jim Cramer.
Should you listen to Jim Cramer?
According to an article on MarketWatch, “Jim Cramer has built a lucrative career as a stock picker, but a new analysis of his charitable fund—a personal stock portfolio he co-manages that the financial website he founded has built a subscription service upon—shows he doesn’t beat the market.”
The article continued: “Cramer’s Action Alerts Plus portfolio has under-performed the S&P 500 index in terms of total cumulative returns since its 2001 inception, according to a working paper released Friday by Jonathan Hartley and Matthew Olson, researchers from the Wharton School at the University of Pennsylvania.”
Another article in MarketWatch reviewed the article: “Jim Cramer’s Picks — Here are 49 Stocks to Buy Right Now,” published on TheStreet.com.
Cramer made a strong case for the 49 stocks.
“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 wrote. Even if there was a correction or downturn, Cramer wrote that these stocks would do well.
David O. England, a retired finance professor from Carbondale, Ill., decided to test Cramer’s stock buy list. On April 6, England bought $1,000 of each security on Cramer’s list in a paper-trade account (not including commissions) at the close of the following day.
The final result? Even after the most recent 1,000-point Dow Jones Industrial Average DJIA, +0.09% rally, Cramer got a failing grade. Although Cramer promised his picks could survive any downturn, these stocks didn’t survive during the market’s brutal third quarter. Only 14 of Cramer’s 49 stock picks closed higher after six months than their April trading price, a paltry 28% success rate.
So if Cramer thinks you must “take some mind altering drugs” to understand Tesla, perhaps it is more accurate to attribute that state of mind to people who listen to Cramer’s advice.