Tracking Cramer’s ‘Data Center Doomsday’ Call
January 4th, 2010 By: Rich Miller
Last Oct. 22 stock pundit Jim Cramer warned his legions of CNBC viewers that the data center industry was ripe for a major fall. “Get out of the data center stocks,” Cramer told viewers. “I think the data center industry is in decline. I see an industry that’s about to be brought low by new technology, so I think you should sell, sell, sell.”
Our response at the time: “When it comes to data centers, Jim Cramer is dumber than a bag of hammers.” (See There’s a Village Somewhere Missing an Idiot for the full story).
So how did Cramer’s prediction turn out? If you sold all your data center stocks, you’re probably regretting it. Nine of the 13 publicly-held companies we track in our Data Center Investor chart have gained in value since Cramer’s Oct. 22 call, including five stocks with double-digit improvements in that short time. Those include Equinix (EQIX) and Switch and Data (SDXC), whose merger announcement prompted Cramer’s prediction of Data Center Doom.
The data center hasn’t yet been brought low by Nehalem processor technology, which Cramer warned would “make the data center model obsolete.” Cramer completely ignored the data center sector as shares of these companies surged in value for most of 2009, discovering DuPont Fabros (DFT) in late September, long after its shares surged from $2 to $13.
To be sure, data center stocks won’t go higher forever, particularly after the stellar runup for the sector during 2009. But if you’re interested in understanding the industry and its future, take the time to understand the factors that are driving the demand for data center space, and how technology is impacting these facilities and their design. As we noted in our October post, Nehalem processors will allow companies to do more with less, but they’re not going to empty out all the data centers.
Michael CampbellPosted January 4th, 2010
While this particular rant of his is about your specific industry, his predictions in general are around 48% good. (That % came from a study someone did over the past 3-5 years, if memory serves.)
Point being, don’t get all bent out of shape about it.
NickPosted January 4th, 2010
48% good? That means it was also 52% bad. That’s not really helping his credibility.
[...] } First up is reading about Jim Cramer’s face plant in predicting Intel’s Nehalem CPU was going to drive all the dat…. I in turn predicted Cramer didn’t have a clue what he was talking about. The results are in, [...]
Craig PiercyPosted January 6th, 2010
Don’t casinos need only slightly over 50% good to take all your money. If those stats are true, then continuing the Cramer plan would eventually break someone.
I’m still trying to understand why the adoption of any particular processor not matter how powerful would negate the need to house a company’s IT infrastructure. Processors are getting more powerful all the time and our accumulation of data keeps increasing. Businesses will always need colocation, data center outsourcing, and managed services,especially when IT is not their core competency. Along with credit default swaps, Cramer is one of the main reasons why so many people have lost value in thier stock portfolios. His advice is useless.
MarkPosted January 20th, 2010
@Nick and Craig in the stock market world batting .200 is considered good. Why? that means for every 4 losses you have one winner and that winner was good to double your money place on the winner once maybe twice. In the stock market no one holds onto the stock until it looses all its value (unlike gambing where you play until your bust). If you lived dangerously in the stock world you would still sell at when the stock when got to a 20% loss. That’s called a stop loss, so if the stock was a dollar you sell at 80 cents. So at a .200 batting average on 5 stocks of $1000 each you make $200 net gain with a 20% stop loss. With Crammer that’s two wins out of five cause we’ll give the market the house advantage. Net Gain $1400 ((2 x $1k) – (3 x $200)), or a 28% return on investment, which is rock start status in the stock market world.
While I think Jim is a nut case, he’s very public with where he invests in money unlike alot of the experts out there.
[...] a commencement of 2010 Data Center Knowledge had an engaging article tracking his prophecy in a brief term: So how did Cramer’s prophecy spin out? If we sole all [...]