CNBC’s Jim Cramer reminded investors on Tuesday to pay close attention to the scope of analyst calls.
“In the crazy world of Wall Street, it’s not enough to think about the company or the industry or the asset class or the macro, including the [Federal Reserve] – you also have to consider the reaction and even the reactors themselves,” he said.
He took advantage of recent analyst calls Advanced micro devices to illustrate his point:
Barclays upgraded the semiconductor maker to an equal-weight overweight on Monday, sending the stock up 10%. A day later, Bernstein downgraded the company’s stock to market performance from outperforming, citing concerns about a deteriorating PC market. Shares of AMD fell 2.39%.
Cramer said that neither analyst is necessarily wrong in this case because their arguments rest on different time frames.
“The bearish analyst [is] like rain because AMD’s business is terrible right now and showing no signs of improvement, but in the long run the optimistic analyst will be right because eventually the semiconductor downturn will come to an end,” he said.
Cramer added that while these trading periods can be confusing, they can also be beneficial to investors as long as they don’t act hastily.
“As we approach the heart of earnings season, I want you to understand that the reaction is often right depending on your time frame. However, it can also be wrong,” he said, adding: “However, if your belief, the response can often be a great opportunity to buy, buy, buy or sell.”
indemnification; Cramer’s Charitable Trust owns stock in AMD.