Surprise: The Inverse Cramer ETF (SJIM) Is Currently a Poor Bet Now That Flipping Jim Cramer’s Recommendations Has Stopped Working

The proverbial manna from the financial gods, where investors only had to flip Jim Cramer’s recommendations to generate outsized alpha, has ceased to exist. Interestingly, this tectonic shift has coincided with the launch of a dedicated Inverse Cramer ETF from Tuttle Capital Management.

Back in October 2022, Tuttle Capital Management had applied to the SEC for the approval of two new ETFs: Inverse Cramer ETF (SJIM) and Long Cramer ETF (LJIM). Well, these two ETFs launched last week to much fanfare. Alas, the Inverse Cramer ETF’s underlying investment thesis, for the time being at least, has evaporated into thin air. Let’s delve deeper.

Back in 2022, flipping Jim Cramer’s recommendations was one of the easiest ways of generating outsized alpha (excess returns). After all, as we’ve noted repeatedly, the CNBC host had a knack for representing the consensus view of the market, and consensus rarely allows for stellar returns. In fact, IndexOne’s i1 Inverse Cramer Index was up over 30 percent in 2022.

However, with the imminent launch of a dedicated Inverse Cramer ETF, we had postulated in late 2022 that the strategy of flipping the CNBC host’s recommendations might soon stop working:

“Now that Wall Street is about to start capturing the alpha from reversing Cramer’s recommendations, as is now being done via the Inverse Cramer ETF (SJIM) offered by Tuttle Capital Management, the gravy train might well be about to end.”

Our fear was that the ETF would add a strict level of accountability for Jim Cramer, forcing the famous host to become more circumspect in his stock calls. And this is exactly what seems to have happened lately.

Consider the fact that IndexOne’s i1 Inverse Cramer Index (shown above) is down over 5 percent so far in 2023. For reference, the S&P 500 index is up 5.86 percent in the same timeframe.

Unsurprisingly, Tuttle Capital Management’s Inverse Cramer ETF (SJIM) is down around 1 percent since its launch on the 03^rd of March 2023, while the Long Cramer Tracker ETF (LJIM) remains in positive territory since its inception. Of course, a few weeks do not constitute a solid basis for identifying a definitive trend. However, should Jim Cramer maintain circumspection vis-à-vis his stock picks, flipping his recommendations would only entail diminishing returns going forward.

Another important point that investors should consider involves the somewhat idiosyncratic nature of centering an ETF on Jim Cramer, who sometimes reverses his investment thesis within a few hours or days. For instance, as illustrated in the tweet above, Jim Cramer recently turned bullish on Tesla – which is the right call, in our opinion. However, the SJIM ETF still maintained a short position on Tesla as of the 03^rd of March. These discrepancies are likely to adversely affect the ETF’s returns.

Do you think Jim Cramer is finally about to become a reliable financial guru? Let us know your thoughts in the comments section below.

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