By Mark Hulbert, MarketWatch | 5 October 2007
ANNANDALE, Va. (MarketWatch)— Now what? In early August, when I last surveyed the stock market forecasts of the 10 market timers with the best long-term records, they on balance were quite bullish. And, as we now know with the benefit of hindsight, they were right to be bullish. See Aug. 1 column
What are these top timers saying now? Are they any less bullish now?
As I did for my early-August column, I focused on a select group of top stock-market-timing newsletters. Specifically, my group included the 10 services with the best risk-adjusted market timing returns over the past decade, according to the Hulbert Financial Digest. I chose a 10-year period because I wanted to make sure that I would include neither bullish stopped clocks (and who thus looked like geniuses in the late 1990s) nor bearish stopped clocks (and who shined during the 2000-2002 bear market). And I focused on risk-adjusted performance because I didn't want to give undue credit to a newsletter whose raw return was caused by nothing more than a willingness to incur inordinate amounts of risk.
As I did in early August, I eliminated one of the 10 top performers because it is a purely mechanical model based on the calendar. Its good performance notwithstanding, its current posture tells us little about the market's term prospects. What follows is a brief synopsis of the current forecasts of the nine remaining newsletters, listed alphabetically.
Blue Chip Investor: Bullish. Editor Steven Check's model portfolio is 92% invested in equities. Check's equity valuation model is based on the stock market's earnings yield relative to the yield on corporate bonds; that model now classifies stocks to be slightly undervalued.
Bob Brinker's Marketimer: Bullish. In his most recent issue, published in early October, editor Bob Brinker wrote: "We expect significant additional stock market progress into next year as investors discount growing corporate earnings in an environment of low inflation and benign interest rates." His model portfolios are fully invested.
Chartist and Chartist Mutual Fund Timer. Bullish. Editor Dan Sullivan wrote earlier this week that, "Technically the market remains bullish and it should be a matter of time before the other major indexes follow the Dow and hit all time highs." Sullivan's model stock portfolio currently is 72% invested, and his model fund portfolio is currently 98% invested.
Investors Guide to Closed-End Funds: Moderately bullish. Editor Thomas Herzfeld's "U.S. Equity Funds" model portfolio is around 48% invested.
Medical Technology Stock Letter: Bullish. It may seem odd to include a newsletter oriented more toward the medical technology and biotech sectors than to the overall market. But this letter, edited by John McCamant, deserves to be included for the simple reason that its track record places it in the top 10 for risk-adjusted timing-only performance over the last decade. McCamant's model portfolio currently is 93% invested, while his "Trader's" portfolio is aggressively bullish, with 183% invested (83% on margin, in other words).
No Load Fund Investor: Neutral. Editor Mark Salzinger wrote in his September issue: "Our stance on the markets hasn't changed. We believe the volatility in the stock and bond markets will continue to be higher than average. Assuming your own portfolio allocation is appropriate for your needs, we would not add to positions for the time being but would not sell now, either. The subprime 'crisis' and 'contagion' is not finished, but neither will they impact the economy so much as to cause a bear market. However, they should keep a lid on the market's upside for the time being and cause some big down days as bad credit news drips out periodically." Salzinger is currently allocating 70% of his "Wealth Builder" portfolio (his most aggressive) to U.S. equities.
Timer Digest: Bullish. Editor Jim Schmidt bases this newsletter's market timing model on a consensus of the top market timers. His consensus of the top 10 based on performance over the last 52 weeks is bullish, with 9 bulls and 1 bear. His consensus of the top 10 for performance over the past two years is also bullish, with 10 bulls and no bears. The newsletter's model portfolios currently are about 60% invested in stocks, on average.
Vantage Point: Bullish. Editor John Harris wrote in his early-October issue: "Four primary pillars of support for the stock market are now in place and foreshadow higher stock prices in the months ahead— sentiment readings, monetary conditions, seasonality and a favorable long-term trend. ... Historically, the risk of a serious market decline is almost nonexistent when the sentiment, monetary, major trend and seasonal stars are aligned as synergistically as they are now. If history is any guide, stocks are much more likely to advance in the next 12 months than they are to fall. And if they do fall, the damage will be minimal." His model stock portfolios are fully invested.
The bottom line? None of these nine top timers is bearish. The average equity allocation among all nine is 86%.
To be sure, this 86% is slightly below the level from early August, when it stood at 90%. But the current reading is still quite high. And it is particularly bullish relative to the average forecast of the 10 stock market timing newsletters with the very worst risk-adjusted performances over the past decade. Their average recommended equity exposure right now is 40%.
In other words, the best market timers are, on average, have more than double the equity exposure of the 10 worst market timers.
There are no guarantees. But to bet on a new bear market right now, you have to bet against the timers with the best long-term records and with those whose records have been awful.
Telecoms among October's better bets, but watch out gold
By Jim Lowell, MarketWatch
WATERTOWN, Mass. (MarketWatch)— October's markets, while hardly bountiful, aren't nearly as troubling or dangerous as consensus rhetoric would have you believe. In fact, without having to go too far out on a limb, our proprietary beta weighted seasonality (BWS) charts show us that there's money to be made in October.
Here, by nature of this column's frequency, the focus is perennially that of each given month. The objective couldn't be simpler; scare up more treats than tricks no matter how ghostly or ghastly the rhetoric. (The lionhearted can also use BWS as a short-selling indicator.)
From the crow's nest of October's perch our BWS charts cry nevermore for diversified international stocks of all capitalization stripes and suggests that mid— and small-cap blends and value are houses whose bells you don't want to ring.
On the other hand, large-cap growth stocks and a blend of large-cap growth and value stocks, and even mid-cap growth stocks, wear October well— trends that we mentioned last month as reflected in technology's multimonth seasonal upswing which runs through November. As you can see, when it comes to our BWS sector map, the few apples you might want to bob for are technology and telecom.
There are some straight arrows in our October quiver that ought to hit their mark. First off, however, you'll need to pull them out of last month's target where our picks ranging from Fidelity's Select Energy Services (FSESX) to the iShares COMEX Gold Trust hit 9% and 9.1% respective bull's eyes for the month.
According to our BWS' view, the only way to make money in these two areas this month would be to short them.
The flip side: consumer discretionary, technology and telecom are at the opposite ends of each other's risk/return spectrum and, as such, make for an interesting counterbalance approach.
And while consumer staples looks like a dim bulb compared to consumer discretionary names, I'm going to tell our BWS chart something it wouldn't know; the consumer is weakening, hence, spending on staples ought to be favored over discretionary spending.
As such, opt for what we put in the basket last month: Fidelity's no load Select Consumer Staples (FDFAX) which ended last month up 5.1%— not half bad for a bag of goods that have 25% less risk than the S&P 500 (SPX) (which delivered 4.0% last month).
As for technology and telecom, I'd opt for another no-load Fido fund; Fidelity's Select Telecommunications (FSTCX) . Some 86.3% of the fund is invested in diversified telecom service names like AT&T, Qwest, Verizon, with wireless service names like Crown Castle, Sprint Nextel, and American Tower dialed into a concentrated (47-issue) portfolio. Manager Gavin Baker's top 10 picks amount to more than 70% of the fund's assets. There's also 12% stake in information technology which enables telecom to do what it wirelessly does.
Technology isn't for the sheepish, but I wouldn't bet more than one corral on the ranch that tech will do much more than break above wherever it may crash between Oct. 1 and the month's Halloween finish. As such, I'd take a diversified approach and use the iShares Russell 1000 Growth (IWF) to cover the fact that the charts don't yet signal a ringing endorsement for tech, just the indication that some profits may be there. This still keeps an open hand for the BWS treats that large— and mid-cap growth names bestow (technology names account for around 27% of this ETF's portfolio).
Looking at the BWS intramonth volatility factors, October can leave a haunting impression for those trick or treaters who get their timing dead wrong. But, given what our BWS charts have to say about the treats, I'll be donning my Jedi costume and, light saber in hand, fencing for profits.
Normxxx
______________
The contents of any third-party letters/reports above do not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.
The content of any message or post by normxxx anywhere on this site is not to be construed as constituting market or investment advice. Such is intended for educational purposes only. Individuals should always consult with their own advisors for specific investment advice.
No comments:
Post a Comment