The best performing investment newsletters of the year

The 2021 Investment Bulletin Dashboard illustrates how Wall Street has become a market for individual stocks rather than a monolithic stock market.

The distinction has to do with whether stocks march to the beat of their own individual beaters or rather tend to rise and fall along with the others. In the first case, we should focus on stock picking. When it’s the latter, market timing is more on the agenda.

Consider how little correlation there is between the major stock indexes of the past year and the returns of the top performing investment newsletters. The message from these indexes was that the largest stocks dominate the market, as the top 50 stocks gained 30.1%, according to the Russell Top 50 Mega Cap Index, more than doubling the return of 14.8 % of Russell 2000 Mid and Large Cap Index. small cap issues. Yet the best-performing investment newsletter, among those tracked by my performance audit firm, is much closer to the small end of the market cap spectrum.

I refer to Investor advisory service, edited by Douglas Gerlach. My company calculates that the newsletter model portfolio produced a return of 53.8% in 2021. Although Gerlach does not focus exclusively on small-cap stocks, his portfolio is currently heavily skewed in that direction. Of the 33 stocks it currently rates “Buy,” for example, 18 have market caps below $10 billion. To put that into context, the largest stock in the Russell 2000 Index has a market cap of over $20 billion.

(Full disclosure note: Investor advisory service, along with all of the newsletters my performance tracking company monitors, pays a flat fee to have their ROI audited. Since each newsletter pays the same fee, my company has no incentive to point out that one company did better than another.)

The same goes for the second-place newsletter for 2021 performance: The Cabot’s Recovery Letter, edited by Bruce Kaser, whose three model portfolios produced an average gain of 52.8%, according to my firm’s audit. Nearly half of the stocks Kaser currently rates “Buy” (15 out of 33) have market capitalizations below $10 billion.

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Lest you think that only small cap newsletters did well last year, consider the fourth and fifth place newsletters for last year’s performance: The investment journalist (published by MPL Communications of Canada) and Blue Chip Investor (edited by Steven Check), with audited returns of 32.8% and 32.5%. The average stock market capitalization currently recommended by the former is $135 billion; for the latter, it is 176 billion dollars.

A similar contrast is evident when focusing on the role played last year by growth and value styles. Many (but not all) of the top performing newsletters favored the value end of the value spectrum over growth. Yet at a broader market level, growth has beaten value: the S&P 500 growth index produced a 32.7% gain last year, compared to 24.9% for the value index. S&P500.

To illustrate the value focus of some of the top performers: Consider that more than half of the stocks on the top performing newsletter’s buy list (Investor advisory service) have lower price-to-book ratios than the S&P 500. This ratio is the standard academic yardstick for determining where a stock sits on the growth-to-value spectrum.

How to invest when it comes to a stock market

The message from the performance dashboards is clear: we are in an “equity market”. As mentioned above, this means that we should focus less on the overall market trend or various sector or style benchmarks. Instead, we should focus our analytical energies on finding particular companies whose investment logics seem most compelling, whether they fall into the large, mid or small cap camps, or whether they are ranked in the “growth” or “value” category.

By definition, this means that it is difficult to generalize. “Buying high-quality stocks at reasonable prices” sounds good in theory. But the devil is in the details.

To give you some ideas, here are the actions currently recommended by the greatest number of newsletters that my firm follows. I am including market cap and price to pound ratio data in the table only to illustrate the wide range that exists for top performing newsletters. But, as I’ve explained in this column, you shouldn’t base your valuation of any of these stocks on this data.

These stocks are currently recommended by the largest number of newsletters tracked by Hulbert Ratings.

Source: Hulbert Ratings

Store Market capitalization Price/book ratio

3M CO (MMM)

$102.67

7.02

ALPHABET INC (GOOG)

$1,730.48

7:30 a.m.

APPLE INC (AAPL)

$2,847.82

40.34

CARDINAL HEALTH INC (CAH)

$14.56

9.71

COMERICA INC. (CMA)

$12.66

1.68

CVS HEALTH CORP (CVS)

$140.05

1.85

DISNEY WALT CO (DIS)

$287.06

2.97

FEDEX CORP (FDX)

$67.74

2.53

INTEL CORP (INTC)

$226.88

2.43

MY INTERNATIONAL BUSINESS (IBM)

$117.90

4.77

KEYCORP NEW (KEY)

$24.35

1.51

LEGGET & PLATT INC (LEG)

$5.51

3.54

MANNKIND CORP (MNKD)

$1.04

n / A

PFIZER INC (PFE)

$314.57

4.25

SMUCKER JM CO (SJM)

$15.29

1.78

SNAP ON INC (SNA)

$11.42

2.74

WALGREENS BOOTS ALLIANCE (WBA)

$46.72

1.71

Harry L. Blanchard