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21-01-2015, 11:51 PM
Easy way to get rich: Buy the most hated stocks
Published: Jan 17, 2015 9:32 a.m. ET
Stocks shunned by analysts beat the overall market — again
Bloomberg News
Investors can do better than simply following the herd.
By
BrettArends
Columnist
A portfolio of the stocks most hated by Wall Street analysts beat the overall stock market by a wide margin last year.
Again.
The 10 stocks rated the worst investments on Wall Streets by analysts at the start of 2014 produced an overall return of 19% during the year, including reinvested dividends, according to my analysis using FactSet data.
That beat the S&P 500 SPX, +0.34% by a hefty five percentage points — or, to put it another way, it earned you nearly a third as much as again a simple index fund.
Most investors think of the stock market like a casino, where the spins of the wheel are completely outside their control, whereas it’s actually like poker, where we are all betting against each other.
And that isn’t a one-off. I’ve been looking at this data every year for the past seven years, and over that time the stocks the analysts liked the least have outperformed both the stock market index, and the stocks the analysts like the most, by a country mile.
Call this a mild tonic for market mania at a time when everyone is congratulating himself for investing in index funds.
Yes, index funds have a lot to be said for them. But simply wagering your money that Wall Street analysts are wrong seems to have been better.
A year ago, as usual, I asked analysts at Thomson Reuters to put together a spreadsheet of all the analysts’ recommendations for each of the 500 stocks in the S&P 500. It’s a simple experiment I conduct each year to see if the experts’ recommendations — for which they are paid an inordinate amount of money — are any good.
Among the 10 stocks with the lowest ratings a year ago were metals producer Alcoa AA, +1.93% energy company Excelon EXC, +0.83% and freight forwarding and logistics company C.H. Robinson Worldwide CHRW, +0.25% These three produced gains of 30% or more each. Only one of the 10, John Deere & Co. DE, +0.32% produced a negative return and that was just 1%.
I also looked at the 10 stocks the analysts liked the most. As a group overall they did even better, producing returns of 22.7% — mainly as a result of big gains for Delta Air Lines DAL, -0.73% with returns of more than 80%, and medical devices maker Covidien COV, +0.77% , with returns of more than 50%.
Four of the 10 stocks that analysts loved most actually lost money last year.
http://www.marketwatch.com/story/easy-wa...eid=yhoof2
Published: Jan 17, 2015 9:32 a.m. ET
Stocks shunned by analysts beat the overall market — again
Bloomberg News
Investors can do better than simply following the herd.
By
BrettArends
Columnist
A portfolio of the stocks most hated by Wall Street analysts beat the overall stock market by a wide margin last year.
Again.
The 10 stocks rated the worst investments on Wall Streets by analysts at the start of 2014 produced an overall return of 19% during the year, including reinvested dividends, according to my analysis using FactSet data.
That beat the S&P 500 SPX, +0.34% by a hefty five percentage points — or, to put it another way, it earned you nearly a third as much as again a simple index fund.
Most investors think of the stock market like a casino, where the spins of the wheel are completely outside their control, whereas it’s actually like poker, where we are all betting against each other.
And that isn’t a one-off. I’ve been looking at this data every year for the past seven years, and over that time the stocks the analysts liked the least have outperformed both the stock market index, and the stocks the analysts like the most, by a country mile.
Call this a mild tonic for market mania at a time when everyone is congratulating himself for investing in index funds.
Yes, index funds have a lot to be said for them. But simply wagering your money that Wall Street analysts are wrong seems to have been better.
A year ago, as usual, I asked analysts at Thomson Reuters to put together a spreadsheet of all the analysts’ recommendations for each of the 500 stocks in the S&P 500. It’s a simple experiment I conduct each year to see if the experts’ recommendations — for which they are paid an inordinate amount of money — are any good.
Among the 10 stocks with the lowest ratings a year ago were metals producer Alcoa AA, +1.93% energy company Excelon EXC, +0.83% and freight forwarding and logistics company C.H. Robinson Worldwide CHRW, +0.25% These three produced gains of 30% or more each. Only one of the 10, John Deere & Co. DE, +0.32% produced a negative return and that was just 1%.
I also looked at the 10 stocks the analysts liked the most. As a group overall they did even better, producing returns of 22.7% — mainly as a result of big gains for Delta Air Lines DAL, -0.73% with returns of more than 80%, and medical devices maker Covidien COV, +0.77% , with returns of more than 50%.
Four of the 10 stocks that analysts loved most actually lost money last year.
http://www.marketwatch.com/story/easy-wa...eid=yhoof2