The Buckingham Report

With CNBC television now airing his show three times a night, Jim Cramer’s Mad Money has certainly found a following since its debut four months ago. This despite the fact that online encyclopedia Wikipedia (http://en.wikipedia.org/wiki/Mad_Money) says: “The majority of the hour consists of Cramer shouting, leaping, and gesticulating around the set and at the camera. This format makes the show lean towards entertainment rather than being a useful source of financial information.”

Certainly, long-term investors should care little about what Cramer has to say, just as day traders should have little interest in what I have to say. We cater to two completely different audiences, but I can say that many of our subscribers watch Mad Money for more than just its entertainment value, judging by the spate of e-mails we receive asking us about Cramer's take on some of our recommendations.

I have no animosity toward Cramer and I actually find his show interesting, though I have only seen the program a half dozen times. However, I was convinced that his advice was not for me after seeing an interview he conducted on April 21st with Donald Tomnitz, CEO of one of our favorite stocks, homebuilder D.R. Horton.

After listening to Tomnitz discuss positives for his company and the housing sector such as favorable demographic trends, a shortage of desirable land, large builders taking market share, a low interest rate environment, geographic diversification and 27 years of increasing earnings, Cramer praised D.R. Horton as a great company trading for a very inexpensive P/E ratio, but he then pulled out a fax he had received from a short-seller that suggested the stock was soon due for a 25% decline.

Despite offering no justification for his stance, Cramer’s conclusion was that Tomnitz’s 10-minute rational explanation of the fundamentals of his business was all well and good, but he was betting that the short-seller had it right. At the time, D.R. Horton was $29. Three months later, the stock stands at $41.

Obviously, no one can get them right all the time and I readily concede that we are wrong on 30% of our selections, but what bothers me about Cramer’s advice is that he is now pounding the table on homebuilders, screaming that it is the time to buy the sector. Selling D.R. Horton at $29 and buying at $41 just doesn't seem like prudent speculation, even as I do share his current opinion that the homebuilders are buys today.

While I am told that Cramer’s record as a hedge-fund manager was exceptional and one has to be impressed with his knowledge and stamina during his Lightning Round viewer call-in segment, we’ll let short-term oriented folks follow his advice. After all, we know that the slow and steady tortoise wins the race, even if the hare seems to be having more fun along the way. Of course, making 20%+ per annum on our recommended stocks and in Al Frank’s TPS Portfolio over the past 28 years isn't exactly boring!

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Past performance is no guarantee of future results. Therefore, you should not assume that the future performance of any specific investment or investment strategy will be profitable or equal to corresponding past performance levels.

About Al Frank Asset Management
Al Frank Asset Management, Inc. (AFAMI) is an Investment Adviser, registered with the Securities & Exchange Commission and notice filed with the State of California; is editor of The Prudent Speculator (TPS) newsletter, editor and publisher of The Prudent Speculator TechValue Report (TVR) newsletter, and is the Investment Adviser to two value oriented no-load mutual funds.

Al Frank Asset Management, Inc. is committed to assisting our customers build wealth. We are a leading resource for value-based investor information in the financial community, where we combine our simple, proven philosophy of buying under valued securities for their long-term appreciation with our experience, hard work, and intensive research to give you actionable investment information that can be used on a daily basis.

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