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Jim Cramer's Smart Call

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Since he climbs out on a stock market limb several times a week, Wall Street rock star Jim Cramer has no shortage or winning and losing calls. However, the new three-year deal he inked this morning with (Nasdaq: TSCM  ) may go down as one of his best choices yet.

Come January, Cramer's new deal will find the fiery celebrity forgoing his salary and bonus. He'll still be getting restricted stock units that vest over the next three years, but his pay will largely be based on royalties stemming from his Action Alerts PLUS subscription service. That's a good move all around.

For starters, Cramer doesn't really need anymore. Sure, he may have founded the company nearly 15 years ago, but between his books and regular CNBC gig, it's not as if he needs to be managing a stock-picking service.

The breakout success of Mad Money on General Electric's (NYSE: GE  ) majority-owned CNBC has made him a regular on The Colbert Report, The Martha Stewart Show, and any national stage looking for a sharp-mouthed guest who can turn boring market coverage into dynamic television.

However, it also has to be embarrassing for Cramer to see that the company with which he's often associated has been waffling about in the single digits for nearly two years.

It certainly doesn't help that hasn't posted a quarterly profit in more than two years. Revenue did climb 8% in its latest quarter, so that's encouraging. There's also the $0.025-a-share quarterly dividend. It may not seem like much, but for patient investors, it translates into a respectable 3.7% yield.

Then again, it's not as if is an anomaly. Value Line (Nasdaq: VALU  ) is trading closer to its 52-week low than its 52-week high. Morningstar (Nasdaq: MORN  ) is holding up substantially better, though earnings did slip in its latest quarter.

Even in China, arming individual investors with equity know-how isn't a slam dunk. China Finance Online (Nasdaq: JRJC  ) posted a year-over-year decline in revenue during its latest quarter, despite a 29% surge in premium subscribers.

Forgoing his salary won't necessarily help Cramer turn into a profitable company. But basing his pay solely on the success of the subscription service he authors and the stock's direction over the next three years sounds like a better recipe for success than what's been cooking at the company over the past couple of years.

ChinaFinance Online is a Motley Fool Rule Breakers recommendation. Morningstar is a Motley Fool Stock Advisor selection. The Fool owns shares of Morningstar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz is a fan of Cramer and even read his autobiography a few years ago. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Read/Post Comments (5) | Recommend This Article (8)

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  • Report this Comment On December 13, 2010, at 1:45 PM, Zachbu wrote:

    You're giving Jim Cramer credit for "climbing out on a limb"? Please. Jim has been a disaster to He's wrong way more than he's right and always screams and yells to act like he knows more than he does. Beware of those with a gift of gab, I always say.

    And his Mad Money show on CNBC has performed dismally in the ratings. Look it up. Jim has the lowest rated show on the lowest rated Cable news network. How does Jim have any credibility after Jon Stewart completley downdressed him 1 plus year ago? Jim can talk a good game and has cost a lot more people money than he's made.

    But let's be honest. He's a fraud. In addition to Jon Stewart this was the same guy who touted Lenny Dykstra as "one of the great stock pickers." We saw how that turned out. Would any honest and smart person ever say that about Lenny Dykstra? I think not.

  • Report this Comment On December 14, 2010, at 8:43 AM, lctycoon wrote:

    I am convinced that an Inverse Jim Cramer ETF (that does the exact opposite of what he says) would be a better long term investment than Berkshire Hathaway.

  • Report this Comment On December 14, 2010, at 1:43 PM, majordm wrote:

    just keep tracking his picks in CAPS... Lenny Dykstra endorsement? SMH.

  • Report this Comment On December 14, 2010, at 1:58 PM, ROCKCHALKJ wrote:

    since its 'cool' to dislike jim cramer, you guys make it seem like he doesnt know what hes talking about at all.

    for example.. if you invested in his FADS CAN ( netflix, aaple, dupont, (forgot), chipotle, amazon, and FFIV you would be up significantly. hes no sensei or guru like some say he is.. but hes no idiot.

    i learned about lulu on his show, and i doubled my money on that one.

    disclamer.. i LOL'd hard @ictycoon.

  • Report this Comment On December 14, 2010, at 2:32 PM, J56D wrote:

    It certainly doesn't help that hasn't posted a quarterly profit in more than two years.

    Sirius has!!!

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