Anti-Cramer ETF Not Necessarily a Home Run

October 18, 2022

Tuttle Capital Management filed a prospectus to launch a new exchange-traded fund that would do the opposite of what Mad Money’s Jim Cramer suggests, whether it’s buying or selling a stock.  

The firm filed for two ETFs, the SJIM (Inverse Cramer ETF) and the LJIM (Long Cramer ETF). There has been much research showing Cramer’s picks have underperformed the market, so could an inverse Jim Cramer ETF be the next star? 

As a little background, Tuttle Capital Management launched the AXS Short Innovation Daily ETF (SARK). By shorting the holdings of the former market star ARK Innovation ETF (ARKK), SARK gained 57.9% year to date through Oct. 5, 2022, while ARKK lost 57.4% (both numbers include the impact of dividends).  

Is this Inverse Cramer ETF worth a look? Sure. Is it the answer? I think not. I’ve written about a statistical look at Cramer’s performance and how Cramer made me 22% in 22 days when I bought the two stocks he said to sell-sell-sell immediately. I even suggested an inverse ETF in my Roth Family of (Imaginary) ETFs, where my flagship fund was the Neutral Opposite Mad Money ETF (NMAD).  

The proposed Inverse Cramer ETF has a stated objective of engaging in transactions designed to perform the opposite of the return of the investments recommended by television personality Jim Cramer. That means it is either shorting or using derivatives transactions such as futures, options or swaps that produce a negative correlation to the TV personality’s buy recommendations and buying long positions in his sell recommendations. 

That strategy is similar to my proposed ETF: 

 

Neutral Opposite Mad Money ETF (NMAD) – This is a market-neutral fund and the flagship of the Roth family of ETFs. It’s going to be a hit. The goal here is to be market neutral while using the picks from Jim Cramer’s Mad Money show. NMAD (think “no mad”) will go long on stocks Jim Cramer recommends selling and short those he says to buy. The logic of why this will work is compelling.  

 

I asked Matthew Tuttle, CEO of Tuttle Capital Management, whether or not his inverse Cramer ETF would be market neutral, and he replied that he was in the quiet period after the filing but would be happy to talk in great depth once the ETF was launched.  

My view is that the inverse Cramer ETF will provide a service to investors to be able to track the long-run performance of Cramer’s picks. It’s easy to track Cathie Wood’s stock picks with ARKK, but no security tracks Cramer’s picks.  

Will I be rooting for the short or the long Cramer ETF to outperform? I have mixed feelings. On one hand, I think following Cramer’s advice is foolish. On the other hand, I’d like to see the long Cramer ETF do better because we need active investors to keep markets efficient. Cramer plays a big part in perpetuating the folly that keeps markets working.  

 

Allan Roth is the founder of Wealth Logic LLC, an hourly based financial planning firm. He is required by law to note that his columns are not meant as specific investment advice. Roth also writes for Barrons, AARP, Advisor Perspectives and Financial Planning magazine. You can reach him at [email protected], or follow him on Twitter at Allan Roth (@Dull_Investing) · Twitter. 

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