I subscribed to The Street.com after years of seeing Jim Cramer on TV and on ads all over the internet, with the hope of gaining a deeper understanding of the fundamental analysis behind picking stocks. Admittedly, it was a different approach than most other services I have subscribed to, which focused primarily on the technical aspects of picking stocks. However, I thought it could be useful to incorporate some of the more fundamental aspects into my analysis, possibly even using this service and another more technical-focused service side by side later down the road.
Jim Cramer is known for his career as a manager of the hedge fund he founded: Cramer Berkowitz. The website claims that from 1988-2000 Cramer earned “a compounded 24% after all fees.” I am sure that I don’t need to go in any further detail about Jim Cramer, as he is a pretty well-known figure. Other than Cramer there are other contributors, including Jack Mohr and a general “research team” which is “made up of some of the most talented and acclaimed financial professionals on Wall Street today.” Who makes up the research team exactly? I have no idea.
Right off the bat after signing up for the Action Alerts Plus subscription, you receive multiple offers to upgrade to other services, and pay more money for “upgraded” services like “Real Money Pro” (which costs more than $800 per year) or add additional features such as the “The Street Quant Ratings” (for an additional $50+ per year). I may be alone in feeling this way, but it really rubs me the wrong way when a company takes this approach. But then again, I can’t imagine very many people enjoy being bombarded with additional offers immediately after signing up for a service. As if the service I just signed up for was not good enough, and I needed to upgrade or add additional features to make it worth my while. The price of the Action Alerts Plus subscription I chose was over $350 per year, because I chose to subscribe on a yearly basis. Had I chose the monthly option, it would have been about double. However, you are able to get a pro-rated refund at any point throughout your subscription, so the yearly option was definitely the better choice as I had the option to cancel anytime and pay about half of the normal monthly cost.
As far as the actual recommendations, when the market is not doing so well you can probably expect about one “alert” (or stock recommendation/ update) per day at most, and some days there might not even be an alert at all. On the other hand, when the market is doing really well you could see upwards of 2-3 alerts per day. I was fine with the frequency of the recommendations because on average there was usually at least one per day. There are additional newsletters like “The Daily Booyah” and others that you can opt to have sent to you as well that are included with your subscription, but I personally did not find these very valuable as they seemed to be an unnecessary “information overload.” The site is not very difficult to understand, as the alerts are broken down into three categories/ratings: 1- which are stocks they would “buy right now”, 2- which are stocks they would “buy on a pullback”, and 3- which was stocks they would “sell on strength.” On average there seemed to be about 30 stocks in the portfolio at any given time (give or take), all with different categories/ratings.
Each alert is provided similar to an article format, with a formal title and some text. There are times when an alert will introduce a new stock and will cover the fundamental aspects of the stock, and why they might be favorable in the near-term/ long-term, encouraging you to buy the stock. There are also times when an alert will be sent to you, notifying you that they are adding to their existing position, along with the exact amount of shares bought, at what price, etc. The majority of the recommended trades are small and seemed to be bought in roughly 100-share blocks for the most part. This was interesting for me, as I was able to follow every time they recommended a new stock, recommended to add to a current position, just how many shares they bought, etc. I took the time to analyze the portfolio a little deeper and was able to sort of “paper trade” by just following the site for a little while, before acting on any investments myself. I did think that this feature was great as well, as it really made you feel like they were being transparent with you regarding their trades. I also enjoyed receiving the alerts, as they did provide some condensed information about the company and covered some of its near-term and/or long-term prospects.
While I did enjoy the thought, I felt as though the majority of the information they provided was nothing spectacular. It often seemed to be the same information you can find online for free from sites like seekingalpha.com or even through your brokerage. I guess the value lies in the fact that the recommendation is coming from Jim Cramer. Additionally, the major problem I had with the service overall, was the results. By their own record, the S&P 500 has beaten their results in 9 of the last 16 years. The S&P has beaten Action Alerts Plus’s results every year since 2013. 2014 was abysmal for them, as the S&P returned roughly 13.5%, while Action Alerts Plus returned just 1.3%! These facts were very discouraging right from the start, but nonetheless, I continued with the subscription with an open (but cautious) mind. The S&P ended up topping their results during the time I was a subscriber as well, so I guess I would have been better off just finding an index fund rather than following their recommendations.
While there were somethings that were appealing about Action Alerts Plus’s offering, there were just far too many negatives for me to consider continuing with the subscription. To start, it seemed to me as though the vast majority of the stocks that were recommended by the company were companies you already know about, and possibly already own positions in. It seemed like they mostly stuck to “household names” when it came to choosing stocks, and very rarely did I see a stock recommended that I had never heard of. Next, they do tell you where to buy the stock, but they have virtually no “sell” rules, whatsoever! For example, with Investor’s Business Daily, they follow a 7%-8% sell rule. This way the losses are 7%-8% for the most part (other than the rare ones that gap down in early-market/ after-hours trading). This was another major concern for me. For example, during my time as a subscriber, Cramer had three open positions in Twitter; two hundred shares from 2014 and an additional five hundred from 2015. All three positions were closed in August of 2016 for anywhere from 46%-60% LOSSES. I cannot imagine losing 60% on a single trade! At some point there needs to be a cut off, in order to limit your losses. I was hoping that the service I paid for would have included that, but it did not, and this was a major issue for me, as I had to find and set my own exact exit points based on my own parameters. One of the other major concerns was that there was little to no reference of any technical analysis at all. I was looking for a service that focused on fundamentals, however, I did expect there to be some degree of technical analysis incorporated into the service. This again, was a major downfall.
So all in all, there is evidence of Jim Cramer’s past success running a hedge fund and of his overall past success in the market, but plain and simple; this success does not carry over into the actual website. The site wasn’t very complex, as I was able to pick it up fairly quickly. They were also pretty transparent with their trades and results (even though that made the service seem less-than credible). But the negatives of the subscription far outweighed the positives. I felt like I never really gained anything from the money I paid for the subscription, even after diligently following their recommendations. Most of the information that was presented seemed to be the same information that was making the rounds on television or the web for free. While Jim Cramer is quite the master showman (and salesman), the service very simply falls short. I would have been very disappointed if I would have upgraded to any of the other services when I first signed up! Nonetheless, I just took the lost money spent on this subscription as yet another learning lesson. I was hoping for more, especially with his TV persona, and perceived success in the market; and I did not feel as though I got nearly the value I was expecting based on what I paid. Not only that, but the results were very poor. You can sign up for a free trial to their site and view the results for yourself. It seems as though Action Alerts Plus’s main customer base is likely someone who is new to investing (even though the site does not do a very good job of educating their subscribers). However, even if this is the case and you are new to investing and just trying to find a good resource to get started, please look elsewhere.