When to take profits off the table

If a stock is up 500% in a straight line, that's a clue.

By Jim Cramer Jul 11, 2012 10:15AM

I stumbled onto a cult of true believers these last few days, not unlike the cult behind Dendreon (DNDN), the last hornet's nest I tried to navigate, and I think the consequences will be similar for both the hornets and me.

 

I'm talking about Arena Pharmaceuticals (ARNA), the company that has the first new diet pill approval in more than a decade.

 

Arena was the best-performing stock in the first half of the year, and I had posed the question to viewers of Mad Money whether it could continue such prowess or whether other strong stocks from the first half, including Onyx Pharma (ONXX), US Air (LCC), Mellanox Technologies (MLNX) and Pharmacyclics (PCYC) were going to do better.

 

Viewers voted overwhelmingly for Arena, clearly believing that we are in the early innings of the story even as it is up more than 500% for the year.

 

Put aside the fact that the anti-obesity drug may not cause you to lose more than 5% of your weight, or that it may not be paid for by insurance, or that you can take it for only a certain period rather than for a lifetime like, say, Lipitor, and you have to admit that a 500% gain is worth preserving. Layer on that a rival drug, arguably as good as if not better, from the now well-capitalized Vivus (VVUS) might be approved as soon as next week, and you might have an even better reason to be worried about losing that gain.

 

But when I stated these risks and suggested that you sell half or take out your invested capital and play with the house's money, Twitter @JimCramer lit up instantly. I got the usual charges against me, that I am a tool for so-and-so or that I was secretly short.

 

I can handle that. It's been said before. Pack of lies, of course.

 

But what bothered me was that -- as when I suggested a few years back that Dendreon might not live up to the hype with Provenge -- the true believers blew their stacks.

 

Look, it is great that Arena got as far as it did. I hope it goes further. But I don't care if it has a cure for the common cold. If a stock is up 500% in a straight line, you take something off the table. There is nothing sinister about that. It is called common sense.

 

When I started this site, I very quickly realized that you have to have a thick skin when you are attacked. I used to do a lot more provoking 16 years ago than I do now. Call it callow youth.

 

But when I am criticized for being critical of a stock that has rallied huge, I am not going to praise and hype it simply because the viewers have spoken.

 

Here's something the viewers and readers should listen to, and it's one of the first rules I ever learned in this business: Nobody ever got hurt taking a profit.

 

If you can't handle that wisdom, if you think that's an attack, if you think that view is motivated by short sellers, then you don't belong in the game and you certainly shouldn't be wasting your time reading or watching me.

 

P.S. As I was writing this column, BofA/Merrill downgraded Dendreon to "underperform" from "neutral."

 

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust.

 

 

 

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20Comments
Jul 11, 2012 11:56AM
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My problem with you Jim is that one day you tout ARNA and the very next day you say very negative things about the stock. People do not believe anything that you say now because you are not consistant....thus the belief that you are just trying to manipulate the stock downward while pumping up VVUS. A double minded man is unstable in all of his ways.....to quote a well  known source...the bible.
Jul 11, 2012 11:21AM
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My biggest complaint, Jim, is that while watching your segment I heard you talk about a 200 lb person only losing 10-15 lbs.  You were coming down hard on the efficacy.  Fist of all, that's a substantial amount of weight for someone to lose and keep off.  The implications that weight loss has on type 2 diabetes is huge!  That shouldn't be overlooked, it should be celebrated!  The other thing you didn't mention was that was the non-compliant subject.  Those who complied lost and average of 16% of their baseline weight over the year.  That's about 35 lbs.  

You mentioned an insurance company not covering Belviq.  What insurance company was that?  When reporting it's important to state facts otherwise it can be interpreted as manipulation.

My only other complaint was that Qnexa was dragged into the conversation and was, in my opinion, pumped as the choice over Belviq.  If that's the case then why not have VVUS as one of the contenders?  Just seemed a bit odd to me.  

That's fine that you feel the viewers got it wrong.  That's fine if you feel some should take some profits.  I hold ARNA and I have the freedom to buy VVUS but I won't.  I feel ARNA is the safest drug and when they reach the European & Asian marketplace they will reap all of those rewards.  I will not be buying VVUS because I feel they will be restricted by the FDA.


Jul 11, 2012 11:48AM
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Jim,

I have been a viewer of yours for a long time. I am very disappointed in your recent antics which resembles a dog and pony show. I have been long on ARNA for two years and I have watched manipulation take place on this stock. Last night your comments were questionable at best. ON air you have pumped ARNA when it was at a higher price and before it had FDA approval. If there had been other news or if you did not do that lame contest, I would agree that it is your opinion. BUT when you get people to vote and you do not like the vote you bash the stock because it has a hugh "cult" following. What do you think of Apple shareholders? Just TWO DAYS count them TWO DAYS AGO you were all over the tv singing ARNA's praise. What happened over night? I think that question needs an answer. Why the contest?

Also, In your response you stated that Belvig can not be taken for a long time. You are WRONG. It is the only drug that can be taken for a long time unlike phentermine which is a key ingredient in VVUS. Also, when you state that VVUS may be better, I want to know for whom? Not the women of child bearing years because they will not be able to take this due to sever BIRTH DEFECTS. Name one person who would want to take a drug that is part of a drug taken off the market due to heart issues(phentermine) and an anti-seizure medicine because that is what you have in the VVUS diet pill.

In closing, you are welcome to your review but what everyone on YAHOO message board is so angry at is that you BLAB incorrect facts about ARNA, you change your opinions more than a politician and they feel the only reason that you do this is for financial gain.
Jul 11, 2012 12:01PM
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Jim Cramer and Adam Feuerstein were both bashing ARNA into the ground below $2 in 2011 promising no FDA approval, and now ARNA above $11 they are suddenly desperate to remove retail who won big in the face of mighty hedge funds all who bet wrong and lost.

 

Btw we're the same group that ran DNDN $4 to $54 2009/10, reloaded DNDN at $26 on CMS review, then sold out $38 to $43 in 2011 to load ARNA heavily under $1.30. We told everyone who would listen in 2011 to cover ARNA at $1.28 (Cover $1.28 or $1.29) the post exists in real time at ARNA YMB,  and yes we stole valuable shares away from hedge funds that were earmarked for their covering.

 

We also called DNDN"s August 2011 bear raid 5 weeks early late June 2011 and that post exists (Dendreon Bear Raid Game) in real time as well at DNDN YMB. 

 

Now is NOT the time to sell with big news coming before month's end- Qnexa PDUFA and EMA updates. We are selling zero shares in 2012 with EMA approval and either Europe partnership or full buyout coming. If anything accumulate the dips as Wall Street is very trapped short ARNA, and there is a huge scrum for shares going on right now.

 

Keep up the great work JC as your hedge fund bashing game film for many years has been thoroughly studied, exposed and defended well by smarter longs. We stopped listening to your show years ago and our portfolio has skyrocketed as a result. Maybe CNBC will finally concede they're in on your scam and terminate your contract in effort to disassociate their show from obvious hedge fund manipulation. Telling complete liesto your viewers just to keep from losing and for Wall Street to make a buck no longer sits well with retail investors on Main Street who bailed out Wall Street Fall 2008 because they lost big time then as well placing wrong bets on America.

 

Btw who is Corey- the guy who keeps calling in about ARNA every few weeks. Is he a Street employee?

Jul 11, 2012 11:38AM
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6) Cramer misrepresented BELVIQ’s earnings potential because of “limited numbers of Easai drug reps in America”. How hard would it be to train any drug rep about a medication that will change America’s heath?

7) Cramer misrepresented BELVIQ ‘s earnings potential because of its marketing company taking about 40% of its revenues in the United States. He neglected to mention that outside the U.S (Europe, Latin America, and Asia), ARNA will get significantly more, if not all, of the earnings.

8) Cramer said QNEXA will not need to be a scheduled prescription, and BELVIQ will. He got this just backwards as well . It is highly likely QNEXA will be scheduled. BELVIQ has yet to be determined, but far less likely as highly classified as QNEXA, meaning more restrictions on it. QNEXA will have to be mail ordered, whereas most all pharmacies will actually stock BELVIQ.

9) Finally, the ultimate blunder is that Cramer blatantly said that NO INSURANCE COMPANY WILL EVER COVER AND ANTI-OBESITY MED? Why? Because he had asked one! This is preposterous, because as we all know, covered formulary changes take time. When insurance companies can actually SAVE $, by eliminating other costly meds by addressing the root health problem (obesity), instead of its sequellae, we will have stumbled on a major solution to the cost of healthcare in America!
Jul 11, 2012 11:37AM
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Post I found on Yahoo Message board.

The media (and Jim Cramer) have it all wrong as far as Belviq efficacy in weight loss and he misrepresented Belviq last night.

*****The AVERAGE WEIGHT LOSS WITH BELVIQ IS 8% OF BODY WEIGHT AMONG RESPONDERS. About 50% of patients will lose MORE than 5% of BW in 12 weeks. If not, they need to stop it. Among those that do reach this threshold, 35% lost > 10% of BW, and the top 25% of responders lost > 16.7% of BW!

3) Cramer is mistaken regarding his interpretation of FDA data. Regarding weight loss efficacy, he related BELVIQ was not placebo-controlled, and QNEXA’s data was. Wrong! He has it just backwards. BELVIQ’s data was placebo-controlled, and QNEXA was not. This makes a huge difference in accuracy of drug efficacy.
Jul 11, 2012 11:37AM
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4) Cramer stated that around 60-70% of patients will not respond to BLEVIQ. Wrong again. The real answer is 47.5% will not lose more than 5%, which makes them classified as non-responders. Nevertheless, do not ever underestimate the power of 5%-8% of weight loss. It can have dramatic effects on overall health, with significant reductions in incidence of Type II diabetes mellitus, coronary vascular disease, hyperlipidemias, sleep apnea, stroke , and even malignancy reduction. Our patients will feel much better about their overall health, and can use the psychological improvement to exercise more, with reduction in pain from osteoarthritis in weight bearing joints.

5) Cramer made another blunder in attempting to use scare tactics about “hallucinations” with BELVIQ. The incidence of hallucinations is ridiculously miniscule as to the absurd. We will not go into the significantly elevated risk of cleft lip incidence in babies born of QNEXA mothers, and the mind-numbing “dopey” side effect of topiramate (called “DOPAMAX”). Who needs that? None of this was discussed by Cramer.
Jul 11, 2012 12:04PM
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I hope the SEC look into these frauds and manipulation going on with ARNA.  

Jul 11, 2012 11:30AM
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Jim, how can you say QNEXA is better? even if it's approved.. QNEXA will have heavy restrictions.. and could not be prescribed to woman at child bearing risks (more than half of potential obestity population!!!!!!!!!)

I can understand your recommendation...  for people who got at high prices after you pumping.. but at least have a fair judgment... Belviq is the just start... you will know after tomorrow Conference.

Good luck!
Jul 11, 2012 11:29AM
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i agree watching you is a waste

alcoa as the BEST stock of the dow 30 for 2011 at 18 now forever at 8 is

clearly evidence that you are a fraud..............that's why YOU are out of the game and selling advice

.................because you are a hack

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jul 11, 2012 11:58AM
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This lowlife KNOWS there is a huge manipulation happening to ARNA and he IS a part of it. Listening to thi goon is like listening to a pimp promising you a way out with a happy ending.

Jul 11, 2012 12:11PM
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Looks like the attempt to pump up VVUS is not working!!!!!
Jul 11, 2012 12:33PM
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IF YOU SPEND MORE THAN YOU MAKE YOU GO BROKE

 

IF YOU EAT MORE THAN YOU BURN YOU GET FAT

 

IF YOU FOLLOW LINK AND CRAMER YOU ARE BROKE

Jul 11, 2012 12:08PM
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the scam man is always upping his scam.............now occasionally he apologizes for

his gap down picks.....this is an attempt to appear honest................he now trots out

his partner S. LINK in an attempt show that another "expert "  also recommends his pump

 

DON'T FALL FOR THIS CRIMINAL'S SCAM

Jul 11, 2012 1:25PM
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Its my belief that vivus will not be approved, and Cramer is more than just a little off on Arna.  Look at the incline of vivus just on speculation alone its not approved for a good reason. the FDA is not satisfied today and  it is unlikely to pass. We just watched this happen with OREX. I personally  would not bet on a hope and a prayer as he is asking you to do with VVUS its just gambling. If you do not sell such a stock a head of the market you will lose big. On the other hand ARNA's weight loss drug is a safe, regulated and approved by the FDA a sure bet for a increase in revenue or even a buy out or collaboration with a well positioned drug maker with tons of cash. With that said  if you are one of the few that made the 500% increase. Im sure you are smart enough to take your well earned profit .  After all the Street said in a past article that ARNA did not have a chance of being approved. Cramer was wrong then and Ill make a bet $ that I will make alot more on a sure thing then cramer will make hoping VVus will be approved. As for the few fans in Japan ARNA has already signed with a drug copany in Japan, I'm suprised Cramer do's not know this.   Best of the Market to all.   Wis Joe
Jul 11, 2012 1:22PM
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I suppose owning equities right now is a lot better than owning California munis.

 

People are going to get real familiar with not getting their principle back on maturing bonds.  Bonds from all different issuers.  Including the U.S.  Tell Grandma and Grandpa to cash in those Savings Bonds now while they can!

 

 

Jul 11, 2012 11:33AM
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When I'm up 30% from my buy-in at a dice table, I cash out and go outside for a smoke.

 

 

Jul 11, 2012 11:11AM
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