Stick with the best and the brightest, especially when choosing investment advice in trying times.
Three of the nation's investment letters -- the Chartist, BI Research and Medical Technology Stock Letter -- feature eye-popping results derived from strategies that have held up over the long haul.
"It's always difficult to beat the market and only about one-fifth of investment letters will do it over five to 10 years," observes Mark Hulbert, editor of the Hulbert Financial Digest, which gauges investment letter performance. For the past dozen years, Hulbert has tracked a hypothetical $10,000 portfolio for each of the nation's investment letters, based on their specific recommendations. His efforts have led to greater clarity and accuracy from individual editors.
"Newsletter advice should translate to a specific portfolio that enables the subscriber to call up his broker and take action," Hulbert says.
Based on Hulbert's figures, the star newsletters quickly emerge, each with distinct goals, methodology and editorial personality.
"The president of this newsletter buys the stocks he recommends and has never lacked backbone when it comes to making unpopular decisions," declares Dan Sullivan, president of the Chartist.
The Chartist ranks first among investment letters in total return over the past 12 years with a 665 percent portfolio gain; second the last eight years with a 338 percent increase; and third the past five years with a 98 percent gain. Professing to be "super cautious" about the stock market at this time, Sullivan has only 48 percent of his portfolio in stocks and the rest in money-market funds or 90-day Treasury bills. Many investors, he notes, are afraid that the stock market will sell off following the presidential election.
Sullivan, rather than buying beaten-down stocks, chooses those that are already on the rise and likely to lead the way in any bullish movement of the overall market.
Current stock holdings of the Chartist include Amgen, Alza Corp., Dell Computer, Genzyme Corp., Imcera Corp., Microsoft Corp., Pfizer Inc. and Reader's Digest. The Chartist, P.O. Box 758, Seal Beach, Calif. 90740, has an annual subscription rate of $150 for 17 issues.
"I recommend only eight to 10 stocks a year, use a shirt-sleeves approach to do the research myself, and then take my own advice and buy the stocks I recommend," says Tom Bishop, editor of BI Research. "I focus on the stock groups I can understand, and, as a result, biotechnology with its high price-to-earnings ratios doesn't do much for me."
BI Research is the top-performing investment letter over the last eight years with a 534 percent gain; best the last five years with a 211 percent increase; and first the past 12 months with a 47 percent rise. It also ranked second for the three-year period with a 158 percent return.
The stock market should move sideways the remainder of the year, until the economy shows signs of recovery, Bishop believes. He most recently recommended stock in Rally's Inc. drive-through burger chain. New Line Cinema, responsible for the "Nightmare on Elm Street" horror films; Tyco Toys, which acquired Ideal Toys; and United Healthcare, an industry leader in health maintenance organizations, are holdings that have prospered. BI Research, P.O. Box 133, Redding, Conn. 06870, has an annual subscription rate of $90 for issues published "about every six weeks."
"The medical technology sector has inherent attractiveness and we emphasize long-term investment in the better developmental companies that aren't well-followed by Wall Street," says Jim McCamant, editor of Medical Technology Stock Letter. "It's important that there is a rational thought process behind any newsletter's success, so you can gauge whether there will be continued success."
Medical Technology Stock Letter is the top investment letter over the past three years with a 204 percent return and fourth-ranked the last five years with a 96 percent rise. The stock market's next significant move will be up, rather than down, McCamant believes. His successes have included Amgen, Chiron Corp. and U.S. HealthCare. He still has Chiron, but has sold the others. Medical Technology Stock Letter, P.O. Box 40460, Berkeley, Calif. 94702, has an annual subscription rate of $260 for 24 issues.