Evaluating Investment Advisory Service Buy Recommendations

A subscriber requested evaluation of Investment Advisory Service stock picking ability based on a sample newsletter obtained in mid-April 2023. The offerors state that they follow “a sound, buy-and-hold approach to identifying well-managed, high-quality companies” that “highlights emerging and oft-overlooked stocks with excellent growth potential and reasonable valuations.” The sample newsletter, dated January 2022, includes a December 14, 2021 list of 90 stocks apparently representing a recommended portfolio. Of these 90 stocks, 31 have buy recommendations as of that date. To assess the usefulness of the buy recommendations, we calculate total return for each from the close on December 15, 2021 to the close at the end of 2022 and compare the equal-weighted average of those returns to total returns for SPDR S&P 500 ETF Trust (SPY) and (based on the service description) Vanguard U.S. Quality Factor ETF (VFQY) over the same period. For most of the stocks, we use dividend-adjusted price data from Yahoo!Finance. Two of the stocks change name/symbol after the start of the sample period (FB–>META and INS–>CCRD). For one stock with price data no longer available at Yahoo!Finance due to a post-2022 merger (IAA), we use historical data from Barchart.com. Using the specified price data during December 15, 2021 through December 30, 2022, we find that: (more…)