<...Especially if he could keep it to say, 250 words or less...>
Sorry -- how about 683?
Prognosticators: A Market Unto Themselves
alternate titleLooking Backwards At the Forward Projections
There are nearly 150 shopping days until Christmas.
That leaves only 100 writing days left for the stock
gurus, notable and nameless alike, to spin the divining rods.
Many investors, sophisticated and otherwise, flock to the
news stands and mailboxes to retrieve their new portfolio.
Whilst other investors were using this July 4th to land the
first scorpion on the moon via Roman Candle, or sail the Mosel
via San Francisco Bay, I have spent this afternoon pondering
the effects of guru predictions upon the market, the individual,
and portfolio performance. Obviously, I have no life.
Because one afternoon allows only limited research, this
study is based upon a rather small statistical sample. It
should be viewed, then, as a basis for further investigation
and not a complete, airtight survey.
Choosing two prognosticators at random, Individual Investor
magazine and Michael Evans of GQ magazine, I find a rather
curious pattern between their picks, and the subsequent
performance of those picks. I pose this very serious question:
When judging the further performance of these securities,
what amount of credit is due based on their real merits
as a financial instrument, rather than their listing as a
hot itemby a known writer?
Attempting objectivity, I will present evidence which weakens
my case, as well as items which support it. Thus, the timeless
tradition of an Economist never reaching a conclusion will be
honoured. Readers should form their own opinions.
Individual Investor (II) chose QLGC, THRX, and WGTI among others.
Michael Evans' (MKE) choices include ALTR, ETEC, and CUBE. All
are tech stocks except THRX, a medical devices company. These
six issues were chosen as they represent the hi/med/lo relative
to today's return if one had purchased them. The return period
is based upon a 40 week chart which covers the probable times
of selection, publishing, and consumption by the public.
It is assumed that the items were selected by each author in
October. They were published in November (as 'the December
issue') thus read throughout late November and early January. The
market (SI COMP) shows the usual 'January Effect' bump of
approximately 7%. This link accompanies my survey.
techstocks.com
Taking the worst, first, WGTI has performed pitifully since then
(-58%), but notice the incredible 40% run-up from November to January.
The subsequent slide cannot soley attributed to our correction
in February/March. It had already lost 30% by then. CUBE, (-58%) is
less strong for my case, but there are still run-ups during
the time period in question.
The medium performers, ETEC and THRX, show 20% - 30% winter
gains. To date they have managed to only track the COMP (18%).
High flying QLGC and ALTR (80%, 98%) were making good returns
even before the anticipated readership period upon which my study
is based. QLGC, however, does have that nice bump from 40% to
90%, yet levels off to the current date.
Whilst I have used these 6 examples in writing this article, it
should be noted that I took the other picks from the authors
into consideration, and many had very similar tales to tell.
CSCO merely tracked the market at this time, now 7%
URMD did nothing but go down, down, down, now -71%
PERI and NTAP add to my verisimilitude, now 8% and 25%.
ADPT and MYLX, are milder examples, but still show that
I'm not completely in left field. They are presently at
28% and -56%.
II's readership base is around 70,000. I admit ignorancy with
regard to GQs, but given its predominance in every grocery
checkout aisle, and every book store/newstand I frequent, I
might guess in the 200,000 range. Is it not reasonable to think
that a percentage of this readership can affect the apparent
performance of the stock? That is, the stock simply goes up
on the rabid purchasing by these readers. Its longer term strength
must rely on actual financial merits, but in the short-term, how
many investors could say in January, "Gee, this is great stuff!"
-MrB |
