What Doesn't Work on Wall Street - Part II
- Subscribe to my YouTube Channel HERE.
There truly are some good ideas out there.
The old book, What Works on Wall Street, has a bunch of them (as we talked about last week).
But most ideas aren't good.
And the worst part about those ideas? They sound like they should be effective.
In our last Newsletter, we discussed several portfolios that I currently track and they all seemed fantastic. We had picks from an expert advisor, super smart billionaires, and cherished institutions.
And they were all terrible.
And they're not alone.
This week, we're going to look at more things that seem like they should work but don't. Remember, to find out what might make us money, we must eliminate the things that don't make us money.
Up first this week is Barron's Top 10 for '24. This is the annual panel of expert stock-pickers who give their best picks for the upcoming year and beyond.
How did they do? How would we have done if we followed their wisdom?
They had all sorts of good analysis for all sorts of companies from growth to value to gold.
And, since the article, the portfolio has underperformed badly.
Next up is TipRanks.
TipRanks is on the cutting edge. They take analyst recommendations and track the analysts' pick effectiveness. These are the best picks from the best pickers.
And one article put together a portfolio of stocks that had, according to analysts, 100% upside potential. Who wouldn't want to get on board with that?
Here's the portfolio of stocks ready to skyrocket as of December 2023 :
You see the stock, the price at the time, and the TipRanks projection. For example, NTLA had a 200% upside!
Unfortunately, it didn't come to pass.
NTLA didn't gain 200% like the analysts said. So far, it's lost 65%.
And the overall portfolio has lost 24% while the market has gained 37%. Yikes.
Last, we'll go back to Morningstar. The voice of stability and reason in a world full of charlatans.
Morningstar loves wide moats (just like Buffett). And if you find a stock that has a wide moat AND is undervalued, well, that's how you make a fortune.
Right?
Here's Morningstar's Most Undervalued Wide Moat Stocks for 2024:
Very disappointing. (You can see the Morningstar Fair Value estimate in the "MS FV" column.)
Morningstar used the best value investing tenets they know -- and got absolutely steamrolled by the market.
Not much value from those value picks.
And if we can't trust those trusted sources, what can we do?
Is it hopeless?
Let's take a look.
Instead of fancy stock-picking analysis, let's consider this.
If an ETF beat the market over the past 5-10 years, what are the chances it will continue to do so?
In my simple mind, the chances seem good.
So here's an ETF portfolio I've been tracking since early 2024 (just like the others). The only qualification was that it had to previously be better than the market.
Here's how it's done:
Hmm, look at that.
That portfolio has easily outperformed the market for years...and it's continued to do so. It's up 45% while SPY is only up 35%.
Crazy.
Again, there's a lot of information out there. A lot of it doesn't seem to work.
But some things do.
If we stick to common sense and actual results, maybe we'll be just fine.
Talk to you soon.
DISCLAIMER: This is not financial advice.
It should not be assumed that the methods, techniques, or indicators presented in these presentations will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
