CNBC’s Jim Cramer on Tuesday reminded investors to pay close attention to analyst call volume.
“In the crazy world of Wall Street, it’s not enough to think about a company, a sector, an asset class or macroeconomic indicators, including [Federal Reserve] “You also need to consider the reaction and even the reactors themselves,” he said.
He used recent calls from analysts on Advanced microdevices to illustrate his point:
On Monday, Barclays upgraded the semiconductor maker to overweight from equal weight, sending its stock up 10%. A day later, Bernstein downgraded the company’s stock to market-best from best, citing concerns about a deteriorating PC market. AMD shares fell 2.39%.
Cramer said that neither analyst is necessarily wrong in this case because their arguments are based on different time frames.
“Bearish Analyst” [is] like rain because AMD’s business is terrible right now and showing no signs of improvement, but in the long run an optimistic analyst will be right because eventually the downturn in semiconductor manufacturing will end,” he said.
Cramer added that while these trading periods can be confusing, they can also be beneficial for investors if they don’t act recklessly.
“As we get closer to the heart of the reporting season, I need you to understand that the reaction is often the right one, depending on your time frame. However, it can also be wrong,” he said, adding: “In any case, if you have conviction, the reaction can often be a great opportunity to buy, buy, buy or sell.”
Denial of responsibility; Cramer’s Charitable Trust holds shares in AMD.