Stock Columnists’ Dismal Results

One would think that financial journalists would be more upright than fund managers in reporting the accuracy of their stock forecasts. However, James Peltz and Michael Hiltzik in their Stock Exchange column fall into the same obfuscation characterized by the rest of an industry that fails to face up to their dismal performances.

Ignoring the fact that four out of five of the stocks which they recommended as “don’t buy” increased in value for an average gain of 59.8% (!) I thought it might be interesting to take a look at the stocks recommended as “buy” by either of the writers.

The results were an average return for the holding period of 11.7%. Simply purchasing the S&P; index (through spdrs symbol SPY) on the date of each recommendation would have returned 14.7% (a spreadsheet is attached). Thus the journalists’ recommendations under-performed the index by 25.6% for the period.

I don’t fault the guys for trying and providing some entertaining and at times informative analysis. However it would be a lot more forthright if they acknowledged that they, like most mutual fund managers, fail to beat a simple buy and hold indexing strategy. Your readers deserve better than a simple statement that “we’re hitting just under .500 . . . not unlike many top-paid money managers.” It seems to me that most investors would be better off ignoring the recommendations of both journalists and highly paid money managers.

LAWRENCE WEINMAN

Los Angeles