It’s been close to two years now since I started writing about the teasers that investment newsletter publishers send out to entice us to subscribe, and the results aren’t so pretty.
I track the picks that I sniff out, and make those tracking spreadsheets publicly available so that everyone can draw their own conclusions — but as you can imagine, the last six months have turned even the best-sounding stock ideas into ashes.
Those of you who’ve been around these parts for a while also know that I can be a bit pokey with the updating — but as we wind down the year, I wanted to let you know that I just recently added all the November and December picks, so the spreadsheet for this year is complete (unless I happen to come across something that calls out for a writeup between now and New Year’s Day). The tracking data is now easily available from any page on the site, using the “tracking” link at the top (near the search box).
Any surprises? Well, the average pick this year is down about 40%. The average pick from 2007 is down 56%. (Neither number is particularly scientific — it includes every pick made all year, and is not annualized.)
These kinds of markets bring lots of shocking numbers, especially when you’re dealing with “story stocks” and investments that are often highly speculative — the outliers are always what I find most interesting, and of the 400 or so stocks I’ve looked at and written about there are 35 or 40 that are down by at least 90% (and four or five that are down by 99% — none have completely disappeared from the markets yet, I don’t think). On the other end, only about 10% of the picks are up at all, the vast majority would have given you negative returns.
These spreadsheets have always shown a lopsided market, with a handful of great performers and a few handfuls of abysmal ones, but it used to be that the great ones were up by 400% — now the “great” ones are just up, period.
On the positive side, some of the best picks this year were made in the last couple months, as folks started to do some bottom picking during these awful markets and enjoyed the recent rally from the lows. Two of the best picks from the year were made just this month, Silver Standard (highly leveraged to silver, this one moved dramatically when silver shot up) and Nanosphere (a heavily teased nanotech company). They could still fall back quickly, of course, but it’s nice to see a little green on the spreadsheets.
And the best decision of all during the past two years?
Selling out and going to cash, as aQuantive did when they were bought out by Microsoft well over a year ago … that buyout, at a high premium, means that aQuantive is now by far the best performer in Gumshoeland and the only one that has a return of over 100% (can you guess how many of those teaser ads “promised” returns of at least 100%? Yep, pretty much all of them). That pick was made back in April of 2007, so it seems a bit sad that the teasers peaked so early.
And of course, the usual disclaimers: The tracking that I do is of a fictional “impulse investor” who sees the ads that the newsletters send out, gets hot under the collar and buys the stock immediately, and holds on forever. Clearly many newsletters would have performed better than these singled-out teaser picks, and some would have had you sell stocks that were falling. In the history of tracking these picks there have been many, many outstanding performers in the short term — some were up 300-400% for quite a while, so you could certainly have done better than this if you had magically determined the perfect sell point. Of course, you could have often done better by buying an index fund, too.
I hope you’ve all had some sunshine in what turned out to be a dismal economic year, and I hope you’re having a wonderful end-of-year celebration, whether it’s Christmas or Hanukkah or the Solstice or Kwanzaa, or just some time off work and the celebration of family, friends or whatever blessings you may enjoy.
Unless inspiration strikes viciously from the email box, I won’t be writing you again until next year, so let’s all raise a glass to a brighter and more hopeful 2009. Thanks for reading!
Personal Capital is an advertiser with Stock Gumshoe, but Travis also uses it every day for his personal accounts and finds it invaluable. Here's what he said: "They offer a great (and genuinely FREE) 'second opinion' for your financial plan, but what I love most is their automated financial dashboard -- it will look at all your assets and debts, tally up your asset allocation, project where you'll be at retirement, and suggest ways to manage risk or improve returns. It's free, I think their free tools are great, and I think it's worth checking out -- you can do so here.