Most likely to succeed?
By Peter Brimelow, CBS.MarketWatch.com
Last Update: 12:01 AM ET March 3, 2003
NEW YORK (CBS.MW) -- Safety in numbers? While the market staggers, what about the stocks most favored by investment letters?
Over the years, Mark Hulbert and I have experimented with various ways of looking at the stocks voted Most Likely To Succeed by the 100-plus investment letters that are tracked by the Hulbert Financial Digest.
It seems reasonable that it must mean something when the same stock is recommended by several advisors. Particularly because they often have quite different techniques.
But at one point we thought popularity could go too far -- that stocks recommended by a very large number of advisors seemed to get into contrary opinion territory, and underperform.
What you wanted, it appeared, was stocks that were popular, but not too popular.
However, over 20 years, that effect seems to have gone away. Mark Hulbert's current conclusion: most-favored stocks do tend to outperform the market.
The effect is weak -- it could well be eaten away by commissions. But it does mean that the stocks with significant letter support are worth further study.
At the end of this column, I list the stocks rated as buys by 9 or more letters.
Top of the investment letter hit parade right now: Newmont Mining Corporation. That might be a vote of support for gold -- except that no other gold mine appears on the list.
Alternative explanation: Newmont is apparently backing off forward hedging, the mushrooming practice which hard-core gold bug services like Le Metropole Café blame for distorting the gold price and depressing the shares of gold mining companies.
It also seems reasonable that stocks recommended by several of the letters that have done best, according to data from the Hulbert Financial Digest, should do even better than stocks recommended by just any old letter.
We haven't back-tested this. But at the end of this column I also list the stocks currently most favored by investment letters that have outperformed the market over the past 10 years.
Interestingly, none of them appear among the stocks most favored by investment letters overall.
The third column indicates the number of newsletters currently recommending that particular stock.
Stocks rated as buys by nine or more newsletters:
Newmont Mining (NEM: news, chart, profile) 14
Pfizer (PFE: news, chart, profile) 14
Microsoft (MSFT: news, chart, profile) 13
Qualcomm (QCOM: news, chart, profile) 13
Intel Corp. (INTC: news, chart, profile) 11
EBay (EBAY: news, chart, profile) 10
Boston Scientific (BSX: news, chart, profile) 10
Johnson & Johnson (JNJ: news, chart, profile) 10
Amgen (AMGN: news, chart, profile) 9
AOL Time Warner (AOL: news, chart, profile) 9
Bank of America (BAC: news, chart, profile) 9
Cisco Systems (CSCO: news, chart, profile) 9
Dell Computer (DELL: news, chart, profile) 9
McDonald's (MCD: news, chart, profile) 9
Stocks currently most favored by investment letters that have outperformed the market over the past 10 years.
Hewlett-Packard (HPQ: news, chart, profile)
JP Morgan Chase (JPM: news, chart, profile)
MBNA Corp. (KRB: news, chart, profile) |
