Butch Cassidy and the Sundance Kid marveled (in the movie at least) at the tenacity of the paid posse of characters tracking them relentlessly for reward money. Perhaps an indication of the mind-set separating guys looking for a quick hit (Butch and the Kid) and those willing to doggedly pursue a profit (bounty hunters).
The source of this musing was a note from the Boys at Bespoke (highly recommended, https://www.bespokepremium.com) talking about current trends in the sentiment of investment newsletter writers. An interesting group and one generally viewed a bit warily here at Invest-Notes. There are a few grizzled veterans held in high esteem, folks like Ned Davis and Barry Ritholtz, because they focus on providing context. They help us think about stuff often not found on our personal radar due to both bias and ignorance. They don’t tell us what to do, they teach us how to think.
At the opposite extreme are pundits who focus on the stock du jour. My favorite example is the guy who provided a list of “Ten Stocks to Hold Forever.” His newsletter was aggressively priced, but as I was often told by subscribers he was an entertaining writer and his reasoning seemed pretty good. But it left me wondering; if I only need ten stocks and I’m done, what do I need a monthly newsletter for? Worse, each year featured a new set of “Ten Stocks to Hold Forever” and how is that supposed work? Add ten new stocks every year, or replace your forever stocks annually? Is this guy the criminal or the posse?
I have no hard data to back up this claim, but I’ll make it anyway. Most newsletter writers likely make their money from subscriptions fees, not from the results of their stock picking. To support this idea let’s go back to the Bespoke Report. On a graph overlaying the sentiment found in newsletters with the performance of the S&P 500 starting in 2002 displays little to inspire confidence. This sentiment measurement comes from a weekly survey by Investors Intelligence where the spread between the number of bears (negative on stocks) is subtracted from the number of bulls (positive on stock ownership).
Combine this with a necessity to continually come up with new investment ideas – to keep people reading and renewing their subscriptions – and there is little evidence that any investment strategy based on continual turnover of a portfolio is going to provide value over time. In many ways this concept has the sound of a do-it-yourself mutual fund where the investor gets to churn his account instead of an advisor.
In many cases the best to be said is that the majority of newsletters shared with me by Invest-Notes readers (usually to solicit an opinion on stocks being suggested) is the selections tend to be smaller, and often obscure, equities not much covered by the Wall Street crowd. Though it was Bolivia, a smaller and generally obscure, recommendation about where to go next that lead Butch and Sundance to a regrettable ending.