Brad, your points are very well taken, and are appreciated by VL. As I recall, VL has a policy against its analysts taking a position in the stocks they cover. Second, when VL records its success with its rating system it waits a full week before "buying" the security.
In looking at VL's success, it doesn't seem to cause an immediate price movement in the stocks it picks. In fact, it is my impression that there is as frequently as not a slight downward movement on stock price. Your point about self-fulfilling prophecy is one that I've given a great deal of thought to, and frankly have no idea. In any case, if it works does it really matter that much? Here is one example of an old VL pick that I've stayed with over 11 years: TYC. I don't have the numbers in front of me, but as I recall, I got into the stock at about $8 in 1986. Its now trading at about $81. Not including dividends, this stock has yielded an annual rate of return of about 26% per annum! I've never felt I had a reson to trade it.
If you're interested, VL is available in most libraries, and they have a statement of policy that explicitly answers your questions. They also publish the results of their picks, and reference the academic studies I alluded to. I suggest you check it out.
I would have to disagree with your assessment of the meaning of rapid translation of inside information on stocks. If anything, this is a prime example of the efficient marketplace!
Regards,
Paul |
