Kerry, Well, I guess my initial ruse wasn't too subtle.
I also use Value Line for several reasons. First, they are the only source for long term stats and prices on thousands of companies in one place. Everyone today seems to think that if a stock upticked yesterday, that is a long term trend. <G> Second, I also love to go after the 4s and 5s I may have missed on my own. If Value Line hates them and they have a real business, a contrarian has to love them.
Here is the problem I have with their performance numbers. First of all, they are pure and simply momentum geeks. That is what The Value Line is. True, it is more related to earnings momentum than price momentum, but a rose by any other name is still covered with manure.
But lots of folks are momentum geeks, including some I consider friends in the money management world. In money management, you buy momentum, so you are always buying at the top. In the newsletter world, you buy momentum, but since you use "recent price," instead of real market prices, guess what happens? You end up buying at the lows right before the stock starts its move. And this kind of padding of performance, over many years and thousands of stocks, really makes a difference in reported long term numbers. By the same token, if you can get out before a major down move, by using a "recent price" instead of a real price, it helps trememdously.
The big advantage VL has over the S&P is more than all accounted for by these tricks. Yes, it fools golly gee investors, but it is statistically a scam, IMHO.
One way to know I am right is to compare VL's newsletter performance to VL's mutual fund performance. For the 10 years ending March 31, Value Line's newsletter has kicked the butt of the S&P 500, which was up by 18.28%. The Value Line Fund, their Special Situation Fund and The Leveraged Growth Fund (borrowing money to cream the market during a huge bull market <G>), were up nowhere near that amount. That, IMHO, shows the real value of the Unvaluable Line rankings under genuine market environments.
I don't like to harp on VL all the time. Nearly all newsletters do the same sort of thing. But VL looks more respectable than those that The Cabbage Letter and some of the others, so it is more likely to fool honest people. As I've said, I use the service, but the rankings and performance numbers make me laugh when I don't feel sad for new investors who believe them.
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