The business of stock prognostication is a tough one: a lot of uncertainty abounds, markets swing through surprisingly long bouts of herd-following and counter-trend sentiments, bots and market makers can rampage through the best technical setups, and companies sometimes only disclose the minimally required information. I dare to prognosticate only with risk management as a key partner. So I hold a lot of sympathy for those who also dare to prognosticate on stocks. CNBC’s Jim Cramer is one of those prognosticators I respect. So I was taken aback to discover his apparent inconsistency on his call on Nvidia Corporation (NVDA), a stock closely followed by a LOT of fans and detractors. For example, 117,000 accounts watch NVDA on StockTwits; 266,000 follow Apple (AAPL).
After Nvidia Corporation blew up to the tune of an 18.8% post-earnings loss, I eagerly listened to the Mad Money podcast Friday night to hear what Cramer had to say about the company’s earnings and stock. Cramer is/was a big fan of the stock. I was quite surprised to hear him do a victory lap in the wake of this disaster. NVDA’s blow-up validated a prescient warning he issued last month: he predicted that NVDA would miss on its next earnings report. His Trust even dumped its entire NVDA position.
I could not remember this warning on Cramer’s Mad Money show, so I did a search. The results appeared right at the top of the list because Thestreet.com made sure to reference Cramer’s October warning. He made this bearish call at an “Investment Bootcamp.” Cramer and his partner Jeff Marks were quite explicit: they sold NVDA ahead of an expected earnings miss but planned to add it right back into the portfolio after a big drop because of all the bullish secular trends surrounding NVDA. Cramer concluded the included video clip by saying: “I am not going to get “Facebooked” with this Nvidia…But we have to take action when we can, not when we have to.” This segment was a display of smart risk management and timely profit-taking. After all, Cramer was up $100 in the stock. Brilliant.
