Saturday, August 1, 2009

The Jim Cramer curse - SYNA gets smacked!

I'm not a fan of CNBC's Mad Money program. This is because Jim Cramer is consistently wrong about his stock picks. He is correct on fundamentals, the reason why an investor should buy a stock, but is almost always wrong on the technicals which tell investors when they should buy a stock and he almost never tell investors when they should sell a stock. The problem with most investors is that they stay in a stock to long never knowing when to get out.

This brings up Synaptics (ticker: SYNA). Up until a few weeks ago SYNA was acting well. It was a leading stock with good fundamentals and a great growth rate. I turn on CNBC and there he is ... Jim Cramer telling all of his listeners they should go out and purchase the stock. At that point, I thought, this isn't good. For those of you who follow my twitter posts, I mentioned it the next next day. I got a response back from a user stating that he didn't understand why one would sell SYNA. Jim Cramer had the CEO on his show telling us how rosy things were.

I don't know the reason why, but I know the pattern. Anytime Jim Cramer pushes a stock or has the CEO of the company on his show, the company's share price almost always goes down. It doesn't matter how well the company may seem to be doing. It's almost like a curse OR maybe these CEOs get on his show to tout their company so they can sell their shares and get out while telling investors how great things are going. I don't know.

SYNA was no exception. Within a week, notable weakness in SYNA started to show up. A clear sell signal for those following technical analysis. The stock was acting very weak. While the market was rallying hard, SYNA was barely moving. Those holding on and waiting for the earnings report were rewarded with a 30% whack on the opening the next morning along with the following news:
  • SYNA missed their earnings numbers
  • SYNA is guiding lower
  • SYNA CEO is retiring
I would not be surpised to see some shareholder lawsuits over this. At the time the CEO was on Mad Money, he should have known they would be having trouble meeting thier own expectations they feed to the analyst. He also knew he would be leaving. Both of these put pressure on shares prices.

I choose not to listen to Cramer because he makes sense and he starts to take 'parking space in my brian' and investors start making bad decisions because what he says makes sense. A friend of mine came up with a great suggestion. There should be a mutual fund that short sells all of Jim Cramer's recommendations. It would do well.

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