Why don't geeks read Mark Hulbert? Every time I see people discussing investing, it's usually about index funds. Stock picking is supposedly fool's gold, so you should buy the whole market, or so goes common wisdom.
But the market can be brutal. It can have decades-long stretches of terrible returns. If you had all your money in index funds, and retired in 1929, you would have made no money for 25 years. If you retired in 1967, 15 years. If 2000, 10 years. Do you have 10 years of living expenses saved up?
There are good stock pickers out there, people who focus on fundamentals. And you don't have to take their word for it. Mark Hulbert has been subscribing to many stock pickers' newsletters, trying out their picks, and reporting objectively on the results since 1980. Some libraries subscribe to his monthly report, but since investing is a very long-term process, the same handful of newsletters keep showing up in the report: you only need to look at a few recent Hulbert reports to find good stock pickers.
I somewhat agree, but I wonder if times are changing.
Some background, I bought Hilbert's newsletter in 2003, and then bought and followed The Prudent Spectular, based off of its recommendation. I did so religiously, and even though I'm glad for it's advice which helped me ride through the collapse of 2008 without selling, the returns haven't been spectacular.
I wonder now, though, if the game has changed. Has there been so much ongoing disruption due to the advancement of tech, that what worked before won't work anymore.
Which is to say, the problem with stock pickers is that it takes a long time to measure their performance, and what worked in the last 20 years may not work in the next.
Btw, I don't know why you are getting downvoted. What you say is interesting and certainly has merit.
I don't know if you'll read this, but here is some info for you. I subscribed to Hulbert until mid 2014, and had a look at the yearly tables where he summarizes the performance of all the newsletters he tracks, with 1, 5, 10, and 15 year averages. With a bit of algebra, you can use those yearly 1, 5, 10, and 15 year averages to estimate the performance of the Prudent Speculator for single years, going back to 1992. Here's the numbers I got (percent/year):
2013 5.3
2012 17.8
2011 -2.3
2010 21.8
2009 38.4
2008 -43.0
2007 1.0
2006 14.6
2005 16.0
2004 27.1
2003 102.6
2002 -35.0
2001 11.2
2000 2.2
1999 19.1
1998 -0.1
1997 -15.5
1996 44.8
1995 56.4
1994 77.9
1993 -13.7
1992 35.6
You started in 2003, and dropped it sometime after 2008. The average for 2010 through 2013 is 10.6% per year, which is OK, but I think is in line with the broad market index.
One of the recent Hulberts has a recent semilog plot of the newsletter's returns, and by I eyeballing it can see that, while it outpaced the market from 2000 to 2007, it has pretty much tracked the market since 2008. So it hasn't beaten the index lately.
Hulbert also reports that the newsletter's author prior to 2002 (when he died) used margin to augment the returns. Since 2002 another person is picking the stocks, and they're not using margin, so that might account for the recent pedestrian returns. 10% is nice, but I agree it's not spectacular.
Looking at recent behavior dissuaded me from following it. I wanted a bit more money from my investments. But I can see how, in 2003, the previous decade made the plan look really good to you. I would have done the same thing as you.
Actually I never dropped it. I'm still thinking of jumping but not sure what to jump to. Part of me is hoping value oriented investing (which is The Prudent Speculators' main principle of investing) will make a comeback, but I'm not sure how likely that is.
They say that value oriented investing wins out over growth at the end, but here is a graph comparing the two that tells a different story over the last 10 years, IWO is a growth fund and IWN is a value fund (unrelated to The Prudent Speculator, but same strategy):
I was thinking of Louis Navellier, he seems to pay a little closer attention to the winds of the market, where as The Prudent Speculator just ignores them for the most part, and follows their basic strategy, but his newsletter is kind of pricey.
I don't want to invest in mutual funds, because I have the USA Citizenship curse that means I am taxed on profits. So, I try to shuffle around my losers every year and keep my winners alone. This way, I save money on taxes (aka Tax harvesting)
If you don't mind sharing, did you decide to follow a newsletter based on Hulbert's? If so, what is it?
Well, I would rather not say, but a couple of plans stand out, which I might look into:
The Forbes Special Situation Survey. They're value oriented, and have been around for a long time. They hold about a dozen stocks at a time.
Investment Quality Trends. These guys have been around since the 60s. They pick high-dividend stocks. Their notion of 'high-dividend' uses some chart tea-leaf reading: they assume that a stock's dividend yield will tend to range between a historical min and max, and they recommend a stock if it has a high dividend, relative to its own historical range. Lots of boring stocks like KO and IBM, but the newsletter does pretty well historically, and has low volatility.
Another method I've thought about about is the 'Permanent Portfolio'. It's not a newsletter. Simply put 25% each in an index fund ETF, stock ETF, gold ETF, and cash. Rebalance once per year. It's popular with end-of-the-world preppers, and underperforms the market, but it has VERY low volatility. Good for sleeping at night.
But the market can be brutal. It can have decades-long stretches of terrible returns. If you had all your money in index funds, and retired in 1929, you would have made no money for 25 years. If you retired in 1967, 15 years. If 2000, 10 years. Do you have 10 years of living expenses saved up?
There are good stock pickers out there, people who focus on fundamentals. And you don't have to take their word for it. Mark Hulbert has been subscribing to many stock pickers' newsletters, trying out their picks, and reporting objectively on the results since 1980. Some libraries subscribe to his monthly report, but since investing is a very long-term process, the same handful of newsletters keep showing up in the report: you only need to look at a few recent Hulbert reports to find good stock pickers.