Individual Gurus

A reader requested a review of the equity options trading advisory service offered as the “Options Hotline” via Agora Financial LLC. The “Options Hotline,” edited by Steve Sarnoff, presents to visitors a list of short-term “trades” with triple-digit gains and tells them: “If you are looking to make double- and triple-digit gains in a matter of months, weeks or even just days, you’ve come to the right place. Options are the best-kept secret on Wall Street, and mastering them can reap fantastic gains. Options Hotline can help you… Each week, editor Steve Sarnoff, painstakingly analyzes the markets to uncover the very best options with high gain potential.” Does this representation convey a realistic expectation? Does the “Options Hotline” offer value to subscribers? Using the self-reported recommended buys from the “Options Hotline” for 2005-2006 and for 2007-2008 and daily price data from Yahoo!Finance for the underlying securities from the day after recommendation dates through specified option expiration dates, we conclude that: Keep Reading

A reader inquired about the stock market forecasting performance of Joseph Battipaglia, senior member of Washington Crossing Advisors. Near the end of each of years 2004-2008, these investment advisors issued a forecast for the level of the S&P 500 index one year ahead. How well do they do? Comparing their year-end S&P 500 index forecasts for 2004, 2005, 2006, 2007 and 2008 to actual S&P 500 index performance, we find that: Keep Reading

Several readers have suggested a review of the advice of Martin Weiss, chairman of The Weiss Group, Inc., which operates Weiss Research, Inc. and Money and Markets. Dr. Weiss previously published a “12-Month Trading History of Premium Services” for “various premium services delivered mostly via email, providing investors with research and recommendations for trading stocks, mutual funds and options.” As of 1/9/09, there were 20 such services. This trading history is no longer available. The trades listed for these services are based on “copies of the broker confirmation statements of some subscribers.” Using data for the 530 trades listed across these 20 services as of 1/9/09, we conclude that: Keep Reading

As suggested by a reader, we evaluate here the market-related forecasts of Richard Band since late May 2002. Most of his predictions/recommendations come indirectly via MarketWatch columns, augmented by a few direct commentaries from The Money Show Digest. Mr. Band is editor of the Profitable Investing newsletter and author of the book Contrary Investing: The Insider’s Guide to Buying Low and Selling High. He is a self-proclaimed “New Hampshire skinflint,” presenting himself as “the newsletter world’s #1 authority on investing for low-risk growth.” The table below quotes forecast highlights from the cited source and shows the performance of the S&P 500 Index over various numbers of trading days after the publication date for each item. Grading takes into account more detailed market behavior when appropriate. Red plus (minus) signs to the right of specific forecasts indicate those graded right (wrong) based on subsequent market behavior, while red zeros denote any complex forecasts graded both right and wrong. We conclude that: Keep Reading

A reader wondered: “Is astrology more or less accurate than Jim Cramer?” She suggested that we check by reviewing the monthly stock market predictions of SootheSayer Linda Schurman, available back to August 2004. As an astrologer, Linda Schurman states that her “profession is all about cycles…” The table below quotes forecast highlights from the cited source and shows the performance of the S&P 500 Index over various numbers of trading days after the publication date for each item. Grading takes into account more detailed market behavior when appropriate. Red plus (minus) signs to the right of specific forecasts indicate those graded right (wrong) based on subsequent market behavior, while red zeros denote any complex forecasts graded both right and wrong. We conclude that: Keep Reading

Which stock market experts intrigue investors and traders the most? For insight, we examine CXOadvisory.com log files for visits derived from web search engines based on search phrases associated with specific experts. We consider the top 50 search phrases for each of the last three years and consolidate similar searches (e.g., “jim jubak” and “jubak” or “ken fisher” and “fisher investments”). We also normalize results for each year by expressing relative interest in experts by dividing the number of searches for each by the total number of searches for all experts. Using the top 50 search phases arriving at CXOadvisory.com for each of 2007, 2008 and 2009 (to date), we find that: Keep Reading

A reader observed and suggested:

“When I first started paying attention to markets in the 1980s and 1990s, one frequently cited argument against market efficiency was the Value Line anomaly – the fact that stocks with their best timeliness ranking had extraordinary returns over a long period. You can still find charts showing how well Group 1 has done versus Group 5 over a multi-decade period, but it seems that there has not been much cumulative performance separation among groups in recent years. Some raw data on their site shows that the predictive power of the ranking system seems to be missing from about 2000 onward. It might be interesting to look at what was once a widely discussed method of potential market outperformance.”

The Value Line Timeliness Ranking System sorts stocks into five groups, with Group 1 (5) expected to exhibit the strongest (weakest) future performance. Value Line summarizes annual performance data for Groups 1 through 5 based on assumptions of both weekly and annual group re-sorting. Because the trading frictions of weekly re-sorting are likely high and difficult to estimate, we focus on performance by group for annual re-sorting. Specifically, we measure the Group 1 annual returns minus the Group 5 annual returns and the Group 2 annual returns minus the Group 4 annual returns. If the ranking system is persistently reliable, both sets of differences should be persistently positive, with the differences for the first set generally larger than those for the second set. Using annual return data stated by Value Line for 1965 (partial year) through 2008 (nearly 44 years), we find that: Keep Reading

Tim Wood, who maintains the “Cycles News & Views” web site, requested that we remove the review of his public stock market forecasts. His rationale is as follows: Keep Reading

A reader suggested that we evaluate the forecasting prowess of Bill Gross, manager for PIMCO of the world’s largest bond fund. PIMCO describes itself as “one of the largest specialty fixed income managers in the world…” The predictions/recommendations evaluated here extend as far back as February 2000 and come from columns in MarketWatch, CNN/Money and TheStreet.com. The table below presents highlights from his commentary and shows the change in the 10-year Treasury note (T-note) yield (as a proxy for bond/interest rate behavior) over the 21, 63, 126 and 254 trading days after the publication date for each item. Note that a decline in T-note yield means a gain in T-note price. Red plus (minus) signs to the right of specific items indicate those that the market has subsequently proven right (wrong). We conclude that: Keep Reading

Do the stock recommendations of guru Jim Cramer on CNBC’s Mad Money move the market? Do they beat the market? In their May 2009 paper entitled “Investing in Mad Money: Price and Style Effects”, Paul Bolster and Emery Trahan examine the market impacts and performances of buy and sell recommendations made by Jim Cramer on Mad Money. Using daily closing prices for a sample of 1,387 clear buy recommendations and 534 clear sell recommendations from YourMoneyWatch.com [no longer active] spanning July 28, 2005 through December 31, 2007, they conclude that: Keep Reading