Conflicting Advice From Market Winners: Susan Antilla
Bloomberg News
January 8, 1999, 9:25 a.m. PT
New York, Jan. 8 (Bloomberg) -- There's nothing like
sticking with the winners when you're looking for investment
advice.
The problem is, which winner?
If you're looking for advisers to follow from the latest
victors among investment newsletter writers, consider picking
names out of a hat first. Because their strategies, outlooks and
current advice have about as much in common as Moyers and Oprah.
Want backup for your theory that the big-shot stock market
averages like the Dow Jones Industrial Average are looking iffy,
but smaller Nasdaq stocks will do well in 1997? Then listen to
Louis Navallier, whose MPT Review was up 36.04% in the year that
ended Nov. 30 while the Dow gained 29%.
Need some justification for your bias that there will be a
new year's rally in the major averages, with the big-stock
indices ending 1997 with a 5 percent to 10 percent gain? Then
follow the word of Al Frank, publisher of The Prudent Speculator,
first place newsletter for the past one and five years.
Al Toral, editor of the Pure Fundamentalist, says to stay
away from turnaround stocks. George Putnam, editor of the
Turnaround Letter, says...well, take a guess.
Mark Hulbert, who publishes the monthly Hulbert Financial
Digest, keeps tabs on the recommendations of 160 newsletter
writers, about 80% of whom curse the day in 1980 when his
tracking service was launched.
That's because, by Hulbert's account, only about 20% of the
letter writers he's observed over the years manage to beat the
stock market on a consistent basis. It's a record about as bad as
that of mutual fund managers, whose distinction from the talent
of letter writers is that fund managers do better public
relations.
Caveat
Bloomberg asked Hulbert to tell how the current crop of
newsletter advice-givers had done in the one year and five years
that ended Nov. 30, 1996. With the caveat that ''no one beats the
market year after year,'' Hulbert delivered the top five
publishers in each time category.
Frank, the winner in both time periods, is still favorably
disposed to owning stocks, though with less enthusiasm than he
had through most of 1996.
He says his recommended list includes only 15 stocks today,
down from 40 monthly recommendations for most of 1996. That list
once got as low as 10 stocks -- in 1987, during the months before
the stock market crash. When you specialize in finding
undervalued stocks, he explains, it's a challenge to drum up a
long list today.
Slim Pickings
Ditto from Jim Collins, editor of OTC Insight, who says ''we
are finding only two-to-three new ideas a week to give serious
analytical consideration to.''
Unlike Frank, though, Collins is looking for a big stock
rally at the end of the year, rather than in the beginning. (Just
to keep things interesting, George Putnam says it's useless to
attempt to time the stock market). Collins expects that investors
will get excited about big stocks as they consider the
implications of proposed changes in 1998 government calculations
of inflation, which could cut Uncle Sam's Social Security bill.
Dow rally or not, Collins is expecting that small and mid-
sized companies will show the best performance in 1997. When
picking smaller stocks, Collins offers this advice: shun stocks
that trade for less than $6 a share, where there's too much
volatility and too little hard data to study.
Navallier is waiting to pick up some ''dirt cheap''
technology stocks in 1997, but he isn't buying yet. He says he's
learned the hard way that it can be costly to jump in before Wall
Street's research community signs on to an idea, so he's actually
willing to wait for tech stocks to become more popular before he
starts buying. ''I don't want to swim upstream against the
analysts,'' he says.
Stock Picks
All the winners, of course, had ideas of specific stocks or
industry groups that offered the most promise. Collins likes
3Com, the computer network company. Navallier is eyeing oil
service stocks, particularly Global Marine Inc. of Houston. And
Putnam's favorite is Novell Inc., the network software provider
''that got distracted from its main business,'' making ill-fated
acquisitions that it has since discarded. He first recommended
Novell, which traded at 19 in late 1995, in December. It closed
the year at 9 15/32.
Getting investors into stocks is one thing, but telling them
when to bail out is quite another. Of all the winners on the
Hulbert lists, only one volunteered advice about how and when to
get rid of a stock.
''Eighty percent of the selling we do is because a stock has
begun to underperform the market,'' says Collins. If a stock has
trailed the overall averages for two-and-a-half months, ''chances
are it's in a trend that won't reverse,'' Collins says, ''so you
might as well get out and put the money somewhere else.''
And where, exactly, might that be? Ask 10 experts, get 10
answers. Nobody said this investing stuff would be easy.
Hulbert's Top 5 for 12 months ended Nov. 30 1996:
The Prudent Speculator 714 497 7657 68.12%
The Investment Reporter 416 869 1177 50.96
Vickers Weekly Insider 202 783 3400 44.51
MPT Review 800 454 1395 36.04
The Pure Fundamentalist 708 945 4700 34.28
Dow Jones Industrial Average: 29
Top 5 for 5 years ended Nov. 30 1996:
The Prudent Speculator 714 497 7657 508.7
The Turnaround Letter 617 573 9550 226.1
The Insiders 800 327 6720 206.7
New Issues 800 327 6720 203.4
OTC Insight 800 955 9566 173.9
Dow Jones Industrial Average: 97%
Source: Hulbert Financial Digest |
