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Richard Band: Does the Skinflint Really Buy Cheap?

| Last Updated: August 2, 2010 | Posted in: Individual Gurus

Guru Accuracy Rating
This is about average. Current guru average is 47%

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:

  • He focuses on fundamental factors both for timing and stock selection. (Is it cheap?) His highlighted stock recommendations are generally large-capitalization, blue-chip companies.
  • Richard Band’s forecast sample is small, so confidence in the measurement of his accuracy is low.

Here are additional notes to augment the tabular summary:

From Mark Hulbert in MarketWatch (9/24/07): “Since [the beginning of 1991], …his model portfolios have produced an average return of 9.3% annualized. Though that is below the 11.9% annualized return for the Dow Jones Wilshire 5000 index over this same period, Band’s portfolios on average were 35% less risky than the overall stock market. On a risk-adjusted basis, Band’s portfolios come out ahead of the stock market itself.”

From Peter Brimelow in MarketWatch (5/28/07): “Over the past 12 months, Profitable Investing is up 16.88% as monitored by the Hulbert Financial Digest, vs. 14.52% for the dividend-reinvested Dow Jones Wilshire 5000. Over the past three years, Profitable Investing has slightly underperformed the dividend-reinvested DJ Wilshire, 11.34% vs. 13.31% annualized. But it has done so while incurring about two-thirds of the risk.”

From Peter Brimelow in MarketWatch (11/27/06): “According to the Hulbert Financial Digest, [his] portfolios are up an average of 7.12% annualized over 10 years, slightly less than the dividend-reinvested…Wilshire 5000’s 8.85% annualized gain.”

From Peter Brimelow in MarketWatch (4/9/03): “His portfolios lost 22.1% on average over the past year through March 21, according to the Hulbert Financial Digest. But the Wilshire 5000 was down 24.0%. So Band beat the market. He also has beaten the stock market over the past five years…”

Note that, in general, timing accuracy is less important for long-term investors than for short-term or intermediate-term traders. Over periods of years and decades, the secular uptrend of the market eventually dominates the effects of timing decisions.

See Guru Grades for a snapshot of the accuracy of various experts in predicting the direction of the U.S. stock market, including links to evaluations of the commentaries of other individual market pundits and gurus.

    S&P 500 Index  
Date Comments from:  Richard Band via MarketWatch and Money Show Digest 21-Day Return 63-Day Return 126-Day Return 254-Day Return  
8/2/10 If business activity keeps chugging along, as I believe it will, stock prices will bounce back. However, the recovery process will likely take several months. … it wouldn’t surprise me at all if the blue-chip stock indexes were to retest their July 2 lows..and perhaps undercut them by a couple of percentage points sometime in the next four to 10 weeks.  -6.8% 5.1% 13.4% 11.9% +
6/30/10 …Band says he will continue to operate on the assumption that recent weakness is a “normal mid-course correction” within a longer-term bull market.  6.9% 11.4% 22.1% 30.0% +
4/9/10 “We’re overdue for another pullback of 5% or more on the major indexes. Although I’m not expecting another breadth breakdown a la 2007, we want to be ready if the climate begins to change.”  -2.9% -10.4% -10.4% 10.9% +
6/30/08 “We’re in a very tough phase for the stock market, and there may well be more thunder and lightning before the storm passes. But a sharp bounce is coming.” 0.3% -5.2% -31.8% -30.0%
3/28/08 …the stock market [is] ready to “rocket higher” in an “uptrend that could carry the blue chip indexes to all-time highs by late 2008 or early 2009. Dow 16,000 here we come!” 5.8% 0.5% -9.8% -39.3%
3/17/08 “…people are downright scared to buy stocks, and some folks are even beginning to feel a sort of revulsion toward the market. Ironically, though, that’s when the buying opportunities are best. …Think back to 2002…” 6.9% 6.5% -2.0% -38.6% +
2/22/08 “I continue to recommend a defensive posture…”
Currently, Band is 69% stocks, 31% fixed income.
0.0% 2.8% -5.8% -43.5% +
2/15/08 “More likely…, the S&P 500 index will revisit its January low (1,310) at some point.” -1.4% 5.5% -4.2% -42.3% 0
11/26/07 “We can expect more bombshells to hit before the coast is clear. In the near term, though, a rally is overdue — and it could be violent. …This is no time to turn bearish. Hang on to what you own; and if you’re feeling feisty, pick up some…’double bull’ funds.” 6.5% -1.8% -1.5% -36.9% +
9/24/07 “Looking out a year, …I think a 20%-25% rise in the blue chip indexes is well within the realm of possibility,” 0.1% -3.8% -10.9% -20.3%
8/27/07 “We’re not out of the woods quite yet, but it’s looking more and more likely that the blue-chip indexes will touch new highs during the fourth quarter maybe even before. In the very near term, …the advance will level off a bit as the market goes through a brief, normal phase of profit-taking….take advantage of any down days in the coming week to get fully invested. …at the ultimate peak, sometime around Election Day 2008…, the market could zoom more than 30% from its recent…low.”  4.0% -1.8% -5.8% -11.3%
5/28/07 “To be honest with you, I’m delighted with this state of affairs. It suggests that the advance will last longer, and climb to far greater heights, than the majority of observers now expect. …Most U.S. stocks these days, large or small, are fairly valued…you can still earn superb profits in a fairly valued market.”  -0.8% -2.6% -5.1% -7.8%
11/27/06 Band is still bullish… “While it’s possible that a brief pullback could follow…Thanksgiving…, we think the market will be higher by Christmas and higher still by the end of January.” Band thinks the Dow will gain 15-20% in 2007. 3.3% 1.8% 10.7% 7.2%
5/4/06 Stocks have repeatedly dodged the “correction” that normally occurs by now in a midterm election year. That doesn’t rule out the possibility that the indexes could pull back 3%-5% anytime, purely on some random provocation. But the market’s resilience suggests we’re going significantly higher by year end (perhaps dramatically higher in 2007). Result: we’re actively buying again. -3.6% -2.6% 5.0% 13.7%
2/20/06 …we’re in for a stock market boom over the next few years. …By Election Day 2008, most major stock indexes (with the likely exception of Nasdaq) will be fluttering at all-time highs… On the other hand, I doubt that the rally we saw in the opening weeks of 2006 was the real McCoy. …The Fed’s vise grip on the short end of the maturity spectrum is preparing the way for a sharp economic slowdown in the second half of 2006 (maybe sooner)…a correction, possibly exceeding 10 percent on some indexes, still looms…build up your cash reserves and your holdings of long-term Treasury bonds… 1.7% -1.2% 1.5% 13.0%
11/4/05 We’re now in the midst of what will likely prove to be the best opportunity of the next few years to buy high quality bonds. …the far greater risk right now is that the Federal Reserve will push us toward deflation. 3.2% 3.4% 4.7% 13.6%
8/19/05 Now the time seems ripe for a modest pullback — not a panic or a crash, but a dip that will let you fill out your portfolio with some of America’s finest companies. 0.1% 0.9% 5.5% 6.0%
5/5/05 …stocks will probably need to test the April lows again before a sustainable rebound can kick in. Hold back on new buying for the next few days. At 1140 on the S&P, you can step up to the plate again. 2.1% 6.2% 2.6% 13.0%
2/15/05 …relative strength (or weakness) in Nasdaq tends to foreshadow the direction of the overall market. So we suspect the ‘correction’ that began in early January has further to run. -1.6% -3.7% 2.0% 6.4% +
1/27/05 The stock market finally seems to be shaking off a bit of its January malaise… Today’s…rally…could set the stage for a surprisingly strong bounce into early February. 2.5% -1.5% 5.3% 9.0% +
1/19/05 …the bottom is in, and the market will soon be heading up again. Watch for the Dow and the S&P, perhaps even the Nasdaq, to hit new recovery highs by late January or early February. 1.4% -2.7% 3.8% 6.7%
6/10/04 …the stock market will soon find its footing — and push back to new highs for 2004. In fact, the rally may carry us all to Election Day (and beyond.)…the market needs a bit of a rest… I suggest waiting for a pullback to the 1120-1130 area on the S&P 500 before throwing new money at stocks.”  -1.9% -1.6% 4.1% 5.9%
5/11/04 …if you were thinking of selling stocks, you’re too late. This is a time to buy, with gusto. 3.7% -1.5% 6.3% 5.3% +
3/15/04 The market should establish a firm bottom in the area of yesterday’s lows, maybe 1-3% lower. Then we’ll be off to the races again… 2.1% 1.9% 1.9% 7.8% +
10/24/03 …we are now in “a confirmed bull market.” But he also said, “Keep a little cash in your kitty. I think you’ll be able to buy virtually all of our recommended stocks and mutual funds a few percentage points cheaper by the end of the month.” 2.3% 12.3% 10.4% 9.6%
5/15/03 Band is decidedly bullish — for the short term anyway. …we’re now in an upswing and the real question is how far does this thing go on the upside? It’s possible we’ve already seen half of the bull market that’s to come. 6.8% 3.9% 10.6% 15.3% +
3/13/03 …it’s time to step up our buying. 4.4% 19.9% 21.5% 33.5% +
1/23/03 …the market is “rolling over and headed down… probably down to the area of October’s lows.” …Last year hurt Band. He was down 18.1%… -6.2% 3.6% 11.4% 28.9% +
10/16/02 [Ricard Band] sent an all-out buy signal to his subscribers last Friday, and S&P 500 Spyders (SPY) are his “favorite vehicle.” 5.1% 6.8% 2.3% 21.5% +
6/10/02 Do you hear what I hear? It sounds like the growl of a dying bear. -10.7% -13.3% -12.0% -3.1%
5/27/02 The end is near! Band wrote recently, quickly adding he meant “the end of this long, troubled chapter in market history.” -9.4% -12.4% -13.1% -10.3%


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