As the Cramer Turns

Earlier this month, I took Jim Cramer to task for his Mad Money pontifications -- specifically, advising his callers to weave in and out of Intuitive Surgical (Nasdaq: ISRG  ) over the past six months. Cramer's three round-trip trades would have been profitable in total. But they sorely underperformed against the less stressful choice of buying -- and holding -- shares in the promising and insanely profitable operating-room robotics specialist.

Jim was a good sport about the piece -- he took the time to write me back a few times after he read it. He wasn't the only one with an opinion. Some emails defended Cramer, particularly his calls on Google (Nasdaq: GOOG  ) . I'm pretty sure that Jim would be the first to claim that he can do his own defending, but the emails were spot-on. Even though I dug into the show's archives to find instances where Jim had issued Google price targets of $350, $400, and $446, he ultimately maintained his optimism as the stock barreled through those marks. Well done, Jim.

I also received some emails pointing out how Cramer's one-liner lightning-round zingers often proved to be way off the mark on stocks like Conexant Systems (Nasdaq: CNXT  ) and SanDisk (Nasdaq: SNDK  ) .

However, my point was not that Cramer was mortal. Lord knows that if I'm ever taken to task for the times that I've been wrong (after scribing nearly 4,000 articles for Fool.com), I'd be bruised for weeks. Cramer's got every right to miss from time to time and still be considered one of Wall Street's great investing minds. My beef was with the dangers of trading on the whipsawing whims of a mercurial market maven.

The fourth time's the charm?
This all brings me back to Intuitive Surgical. When we last left that saga, Cramer wanted viewers to "ring the register" and cash out of the stock on his Jan. 5 show. The stock opened the next day at $117.73, making it the seventh change-of-heart since the summer.

Well, the maven's mood swings continue. Mike from California, the Rule Breakers subscriber who first alerted me to Jim going Sybil on Intuitive Surgical, pointed out how he's at it again. On Tuesday night's show, Cramer regained his bullish tone on Intuitive Surgical. "I like the stock," he said. The shares went on to open at $129.84 Wednesday morning.

It's the second time in a little more than two months that Cramer has advised trading out of the stock, only to regain his bullish bent a couple of weeks later -- thus missing out on double-digit gains.

Date Recommendation Opening Price
7-26-05 Buy $63.16
7-28-05 Sell $69.21
9-6-05 Buy $69.38
11-9-05 Sell $95.70
11-14-05 Buy $105.50
12-13-05 Hold $118.89
1-5-06 Sell $117.73
1-17-06 Buy $129.84


Add it all up, and the trades would result in a 59% overall gain. Not bad. Even if you account for short-term capital gains taxes (if traded in a taxable account) and the trading costs (like broker commissions and bid-ask spreads), you made out nicely.

Patience is a profitable virtue
However, as I pointed out in the original "Cramer vs. Cramer" article, it falls well short of the advice given to our Rule Breakers newsletter subscribers. In March of 2005, we recommended Intuitive Surgical at $44.17. David Gardner issued a re-recommendation six months later, with the stock at $69.68. So what would you rather have -- the need to scrawl out your Schedule D on a double roll of toilet paper, or 191% gains over the past 10 months (or 85% over the past four months)?

I know my choice. Quality stocks from quality companies were made to be held. Traders will disagree vehemently, but keep in mind that the reason Cramer is donning a Google halo thus far is that he advised investors to hold onto the stock despite the lofty gains along the way.

Whether it's a shooting star like Intuitive Surgical (one of three newsletter picks from 2005 that have more than doubled) or even the two freshest Rule Breakers recommendations singled out last month, it pays to be patient when you have a winner in your portfolio. If you want more proof, consider a 30-day trial subscription to Motley Fool Rule Breakers to see how the average thoroughly researched stock pick has more than tripled the S&P 500's return.

Cramer? You're on notice. Mike from California isn't the only one watching. Put that great mind and colorful personality to good use by making us all better investors -- not unfortunate speculators.

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. The Fool has a disclosure policy. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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