Individual Gurus

Eddie Kwong of TradingMarkets.com requested a review of Larry Connors’ Daily Battle Plan (Battle Plan). TradingMarkets.com presents the Battle Plan service as “a reliable guide for short term traders looking to take advantage of the surge in interest in exchange-traded funds (ETFs) with “a record of more than 80% correct trades. …Larry and his research team developed this evidence-based trading to counter the spotty performance and glaring conflicts of interest that exist on Wall Street.” To enable a review, TradingMarkets.com made public a listing of all Battle Plan trades since mid-October 2008, which uses ETF closing prices on trade recommendation dates to calculate gross returns and gross win rate [since removed from public view]. Using the data for the 165 positions listed as of 4/21/11 for the period 10/14/08 through 4/20/11, we find that: Keep Reading

We evaluate here the stock market commentary of the Cabot Market Letter, published by Cabot Heritage Corporation and currently edited by Michael Cintolo, via MarketWatch.com since late 2002. The available sample encompasses three editors. The Cabot Market Letter “provides expert market timing and a Model Portfolio for traditional growth investors. …Cabot Market Letter has been consistently recognized for outstanding performance by Hulbert Financial Digest and Timer Digest. It was named as one of the Top 10 Letters of 2010 by MarketWatch, one of only nine newsletters in Hulbert’s 2010 Honor Roll for performance in both up and down markets since 1998, and is currently ranked among the Top Ten Newsletters by Timer Digest for long-term performance.” 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 suggested that we review the stock market commentary of Abby Joseph Cohen, partner and chief U.S. investment strategist at Goldman Sachs. Her public record, available most robustly via MarketWatch and Bloomberg.com, focuses on her year-end forward forecasts for the levels of major stock market indexes, such as the S&P 500 Index. She seems to derive her forecasts principally from earnings forecasts. All citations found, concentrated in the period 1999-2002, are bullish. Given the quantitative nature of her forecasts, we focus on Abby Joseph Cohen’s annual S&P 500 Index forecasts made near the end of each prior year versus two benchmarks: (1) the expert averages from the annual Business Week stock market forecast surveys (discontinued in 2008); and, (2) simple mechanical extrapolations of the actual historical annual performance of the S&P 500 Index. Using data for 1999-2011 (13 years), we find that: Keep Reading

A reader asked: “Have you done an analysis of the Barron’s Daily Stock Alert service?” Barron’s recently described the performance of this service during November 2008 through October 2010:

“A sure way to beat the market is to pick the best stocks and avoid the duds. …It takes brains, a willingness to do the homework, plus a little bit of luck. One group that has all those attributes is the team behind Barron’s Daily Stock Alert, an electronic newsletter that delivers a stock pick at 6 a.m. every trading day of the year. Over the past two years, the Alert has picked 435 stocks, which rose 28.8% on average, compared with a 16% gain for the overall market. The Alert’s picks are also well ahead of the market for the past year, six months and three months.”

Is this representation dependable? Using the detailed list of recommendations accompanying the self-assessment, we find that: Keep Reading

As suggested by a reader, we evaluate here Nadeem Walayat’s commentary on the U.S. stock market since mid-2006. Nadeem Walayat is editor of The Market Oracle, “with 25 years experience in trading and investing.” The Market Oracle presents “in-depth analysis from over 500 experienced analysts on multiple views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction.” 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

Reader Mike Korell of ChartsEdge suggested an evaluation of his own S&P 500 Index forecasts for inclusion in Gurus. These “stock market forecasts are based on cycle data which has been analyzed by a Pattern Recognition Program. This use of artificial intelligence reduces the effect of personal bias and allows the simultaneous cycle analysis of many input variables.” To construct a statistical evaluation, we focus on the open and close levels of the ChartsEdge weekly forecasts, apparently issued on Sundays. Using estimates of the forecasted S&P 500 Index open and close levels from inspection of the ChartsEdge weekly charts and actual contemporaneous S&P 500 Index weekly open and close data for weeks beginning 9/8/08 through 9/7/10 (104 weekly returns), we find that: Keep Reading

A reader requested that we evaluate the performance of Jim Rohrbach, president of Investment Models, Inc.. According to his web site, Mr. Rohrbach’s stock market timing service (based on the proprietary Rohrbach Index, or RIX) is “designed for timing retirement no-load mutual funds and individual stocks by avoiding stock market crashes and helping investors keep their IRA in bull markets and out of bear markets using technical analysis timing models.” He advises that: “The stock market can be timed!!! Don’t believe the ‘experts’ who tell you that it can’t be done.” Using his self-reported recent trading record, daily dividend-adjusted closes for S&P Depository Receipts (SPY) and daily yields for 13-week Treasury bills (T-bills) over the period 3/24/03 through 12/31/09, we find that: Keep Reading

A reader requested: “Please research The Gleason Report. He seems to have done very well.” Keep Reading

Navellier & Associates, Inc. offers one Navellier-branded mutual fund, Navellier Fundamental A (NFMAX), “designed to achieve the highest possible returns while minimizing risk.” Selection criteria for fund holdings, re-measured quarterly, “include earnings growth, profit margins, reasonable price/earnings ratios based on expected future earnings, and various other fundamental criteria.” Using NFMAX weekly adjusted closing prices from inception in May 2005 through July 2009 and corresponding weekly levels of the Russell 3000 index as a self-selected benchmark, we find that: Keep Reading

Given Warren Buffett’s long-term record of outperformance via Berkshire Hathaway, rational investors should consider following his lead as the the company discloses its holdings. Why would the market not immediately discount his moves as announced? In their July 2010 paper entitled “Overconfidence, Under-Reaction, and Warren Buffett’s Investments”, John Hughes, Jing Liu and Mingshan Zhang investigate how other experts/large traders contribute to market underreaction to Berkshire Hathaway’s moves. Using return, analyst recommendation, insider trading and institutional holdings data for publicly traded stocks listed in Berkshire Hathaway’s quarterly SEC Form 13F filings during 1980-2006 (2,140 quarter-stock observations), they find that: Keep Reading