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How About James Stack?

| Last Updated: February 16, 2010 | Posted in: Individual Gurus

A reader suggested: “You should consider an evaluation of James Stack’s ‘Investech’ newsletter in your Guru Grades evaluation. As far as I’m concerned, he’s been extremely accurate in his predictions.”

James Stack, president of InvesTech Research and Stack Financial Management, seeks to “maximize risk-adjusted-return”. There is little information on the InvesTech web site regarding investment performance, and newsletter archives are not publicly available (except for a few hand-picked issues).

A search of MarketWatch.com for “James Stack” produces a few forecasts for the overall U.S. stock market, as follows:

S&P 500 Index
Date Comments from:  James Stack via MarketWatch.com 21-Day Return 63-Day Return 126-Day Return 254-Day Return
4/28/09 “…our confidence in this market is growing — albeit slowly, but still growing… The fundamental blocks are already in place for a market bottom, and the technical blocks seem to be following.” He…has been quietly whittling down his ample cash position and making selective recommendations of stocks and mutual funds. 6.0% 14.9% 26.2% +
10/1/08 “the gloomy psychology … that we are seeing today would rival even the deepest market bottoms of the last 30 or 40 years. From an investor’s standpoint, that should actually be encouraging,” …noting that scary headlines are most common at market bottoms. -17.8% -23.3% -30.1% -10.4%
6/30/06 This, coupled with the balance of the other indicators that Stack looks at, convinces him that “we have seen the market highs for the time being.” 0.1% 5.4% 12.2% 20.5%
2/21/06 …Stack’s primary advice to clients these days is “Don’t buy any stocks that you wouldn’t want to own in a recession.” 1.7% -1.2% 1.5% 13.0%

This sample is far too small for a Guru Grades-type review.

MarketWatch.com also cites James Stack several times for his (somewhat early) 2005 prediction that the U.S. housing market would collapse and need a bail-out. Guru Grades focuses on forecasts of U.S. stock market behavior both to keep the review process manageable and to keep the playing field level among forecasters.

However, Mark Hulbert reiterates three times in mid-2006:

From 8/22/06: “Stack’s advice, had it been provided in one continuous newsletter over the past two decades, would rank him near the top for risk-adjusted performance among newsletters over the past 20 years. (Stack in fact has had several newsletters, however, which we don’t string together…)”

From 8/8/06: “Stack has one of the better risk-adjusted performances of any newsletter editor I have tracked over the past 20 years.”

From 6/30/06: “When ranked according to risk-adjusted performance, Stack’s advice is in fourth place over the last 20 years, according to the Hulbert Financial Digest.”

In other words, as of mid-2006, long-run tracking of James Stack’s newsletters by Hulbert Financial Digest indicated a relatively high Sharpe Ratio (per his goal), but not necessarily high raw returns.

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