Cramer vs. Cramer: Intuitive Surgical

He's at it again.

Jim Cramer, the colorful artisan of financial theater, is flip-flopping on Intuitive Surgical (Nasdaq: ISRG  ) to the detriment of those paying attention.

Before digging into his latest flip -- tactfully executed earlier this week on the eve of National Pancake Day -- let's see how Cramer's inconsistent calls on the fast-growing surgical-robotics specialist have burned his boo-yah minions.

The zigzag circus
I'm grateful for Cramer, and not just because he's providing me with column fodder today. Whenever an investor attains rock-star status -- and it's safe to say that Cramer is a celebrity, given his multiple appearances on The Colbert Report -- it's hard to complain. Anyone who can break out of the CNBC programming block and send a pro-investing message to mainstream America gets high marks in my book.

But I'm less enthusiastic when that message gets disoriented by a dizzy whirl of roundabout market calls -- which often happens on Cramer's Mad Money nightly show. In boiling down equity analysis to little more than a sound bite, a stock he likes today may get animatedly panned tomorrow.

I first chronicled Cramer's zigzagging ways on Intuitive Surgical two years ago.

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

The total gains seem respectable at first glance. Following Cramer's advice would have netted an investor an awesome 59% increase. Unfortunately, that's before you account for brokerage commissions, bid-ask spreads, and short-term capital gains taxes along the way.

Instead of taking three round trips and drawing out your Schedule D tax form, wouldn't it just have been easier to buy and hold after the first bullish call? That way, investors would have earned a clean paper profit of 106%.

Cramer's clearly brilliant. He wouldn't have ascended to the ranks of hotshot investors, and successfully launched TheStreet.com (Nasdaq: TSCM  ) , if he weren't. He just finds himself doing some not-so-brilliant things when the cameras are rolling.

Bringing out the spatula again
To his credit, Cramer has gotten more consistent on his show. When he likes a stock -- like Intuitive Surgical or Google (Nasdaq: GOOG  ) -- he'll stick to it.

You can't hide from your own record in this Web-savvy age, where folks are tracking the ins and outs of every Wall Street rock star. Checking Cramer's calls on Intuitive Surgical isn't as laborious as it used to be, now that sites like CramerProject.com do exactly that.

Cramer had been pretty steady until recently. He was bearish on Intuitive Surgical through most of 2006, and bullish through most of 2007. Even as the stock peaked two months ago -- a few ticks shy of $360 -- he remained bullish.

I'll let TheRubba -- a fellow subscriber of the Fool's Rule Breakers newsletter service, which has steadily recommended the stock since 2005 -- explain what happened next:

Within a few weeks after that show, he comes on the air and says a "very good" analyst from Wachovia downgraded the stock and convinced him. He also said and I quote "A top may finally be here for ISRG". The stock was at 260. I archived this show on my DVR with the purpose of a celebration after their earnings.

Cramer turned bearish on the stock on his Jan. 9, 2008, show. It's actually a relief when Cramer goes negative on Intuitive Surgical, because his patterns show that he'll return to the side of the bulls weeks later, when the price is higher. What really gets me about last month's call is that Cramer sided with the bears just weeks before the company's quarterly earnings report.

You just don't do that with Intuitive Surgical. The company has topped analyst expectations for 21 consecutive quarters, and it hasn't just been squeaking by in doing so. The revolutionary operating-room assistant is obliterating profit targets by double-digit percentage margins.

Wall Street Est.

Actual

Q1 2007

$0.53

$0.62

Q2 2007

$0.66

$0.79

Q3 2007

$0.80

$1.04

Q4 2007

$1.04

$1.24

Source: Thomson.

So no one should be surprised that Intuitive Surgical trounced expectations yet again. The stock took off, leaving Cramer-watchers to kick themselves for surrendering their shares in the $260s a handful of trading days earlier.

In typical fashion, Cramer hopped back on the stock this week, at levels far higher than his most recent bearish turn.

"Cramer said Intuitive Surgical beat its numbers fair and square, and when a company beats every metric Wall Street is looking for, that's a company he wants to invest in," his own company notes in recapping Monday night's show.    

Really? Isn't that what Intuitive Surgical has done in every single quarter dating back to the final period of 2002? Why bet against that trend?

Cramer should be more Intuitive
Intuitive Surgical isn't Cramer's only Achilles heel. Last year, I called him out for his polarizing turns on The Knot (Nasdaq: KNOT  ) , back when he suggested that Yahoo! (Nasdaq: YHOO  ) would acquire companies like the wedding-resource specialist and banking-industry lead-generator Bankrate (Nasdaq: RATE  ) .

It rarely makes sense to trade in and out of stocks that you like. You're not supposed to marry your investments, but it's just not healthy for them to fall in and out of your favor.

Rule Breakers subscribers were tipped off on Intuitive Surgical way back in our March 2005 issue. The stock was trading at $44.17 at the time, and it's stuck around the scorecard ever since, for total gains around 570% to date. David Gardner hasn't gotten the itchy trigger finger before earnings. He didn't throw in the towel whenever the shares corrected, and he hasn't cashed out because the gains are huge.

When you find a quality investment, patience pays.

So welcome back to Intuitive Surgical, Cramer. I have no idea how long this phase will last. But let's hope that history repeats itself, should you ever decide to turn bearish again.


Read/Post Comments (0) | Recommend This Article (35)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 573810, ~/Articles/ArticleHandler.aspx, 7/22/2014 5:25:45 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement