How Many Are Ahead of October '07 Highs?

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Mark Hulbert

April 7, 2010, 12:01 a.m. EDT · Recommend (2) · Post:

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Contrarian analysis of Dow 11,000

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United, US Airways deal talk stirs skeptics

By Mark Hulbert, MarketWatch

ANNANDALE., Va. (MarketWatch) -- How many of you are ahead of where you stood in October 2007, when the stock market reached its all-time high?

Don't be too hard on yourself if you're not. The stock market itself is still well below its high set then -- more than 20% below, in fact, in the case of the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (INDU 10,942, +44.13, +0.40%) . And we all know how difficult it is to beat the market.

Still, it is testament to the power of the recent bull market that a not insignificant number of portfolios tracked by the Hulbert Financial Digest are at new all-time highs.

In fact, of the more than 400 monitored portfolios, no fewer than 25% are worth more today than at the October 2007 market peak. Last October, the comparable proportion was 16%. ( Read my Oct. 21, 2009 column.)

You might think that it's no big deal for 25% of advisers to be ahead of their October 2007 high-water marks. Many of the newsletter editors on the Hulbert Financial Digest's monitored list are widely diversified into other asset classes besides equities -- notably bonds and gold, both of which have been in bull markets for the last couple of years.

But this objection, while valid in some cases, is unfair in many others.

In fact, both of the two investment services at the top of the leaderboard for performance since October 2007 invest exclusively in stocks. And the model portfolios of both services are fully invested at all times -- so their top ranking is not attributable to a lucky stock market timing call.

Instead, the track records of both are attributable to good stock selection -- which in turn goes to show that a bear market does not have to be the kiss of death, even if you remain fully invested in stocks throughout.

The newsletter in first place for performance from October 2007 through the end of March is the Linde Equity Report, edited by Teal Linde. The Hulbert Financial Digest reports an annualized gain of 15.1% for this period, in contrast to a 7.3% annualized loss for the overall stock market (as measured by the Wilshire 5000 total return index).

( Read Peter Brimelow Feb. 18 column on Linde.)

The second place finisher since the October 2007 bull market top is Forbes Special Situation Survey, edited by Vahan Janjigian. The Hulbert Financial Digest calculates that its model portfolio produced a 13.7% annualized return over this period.

What kind of stocks did these newsletters recommend that led them to so handily outperform the market over the last 2-1/2 years?

By way of an answer, here are the four stocks that are currently recommended by at least three of the advisers who are above their October 2007 high water marks:

Aflac Inc. /quotes/comstock/13*!afl/quotes/nls/afl (AFL 55.49, +0.21, +0.38%)

Apple Inc. /quotes/comstock/15*!aapl/quotes/nls/aapl (AAPL 240.09, -0.51, -0.21%)

Peabody Energy Corp. /quotes/comstock/13*!btu/quotes/nls/btu (BTU 46.11, -1.04, -2.21%)

Priceline.com Inc. /quotes/comstock/15*!pcln/quotes/nls/pcln (PCLN 260.66, +0.85, +0.33%)

Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.

Mark Hulbert is editor of the Hulbert Financial Digest, which since 1980 has been tracking the performance of investment advisory newsletters. The HFD became a service of MarketWatch in April 2002. In addition to his regular columns for MarketWatch, Hulbert writes a column on investment strategies for the Sunday New York Times, a monthly column for Barron's.com and a column on newsletters for the Journal of the American Association of Individual Investors. Dow Jones and MarketWatch are launching a weekly newsletter, Hulbert on Markets: What's Working This Week.

US Airways and UAL Corp. have been down this path before, writes Jim Jelter.

1:32 p.m. Today1:32 p.m. April 8, 2010

Personally, I'm ever so slightly ahead of my Oct 07 portfolio values. Unfortunately, I didn't jump back in with both feet in 2009. Probably a bit late to consider doing that now. For some reason, the "sell" gremlin on my left shoulder is starting to get a little louder than the "buy" guy on my right shoulder. No, seriously.... they are there..... I hear them."

- SteveTheHawk | 6:25 a.m. April 7, 2010

"Mark Hulbert: Some worth more than in October 2007 http://on.mktw.net/98lTXT" 12:02 a.m. EDT, April 7, 2010 from MktwHulbert

"Mark Hulbert: Contrarian analysis of Dow 11,000 http://on.mktw.net/dvKNWG" 11:48 p.m. EDT, April 5, 2010 from MktwHulbert

"Mark Hulbert: Meaning of Presidential Election Cycle for 2010 http://on.mktw.net/abFeCT" 11:37 p.m. EDT, April 1, 2010 from MktwHulbert

"Mark Hulbert: Making bold bets on health care http://on.mktw.net/9ha3hC" 11:13 p.m. EDT, March 31, 2010 from MktwHulbert

"Mark Hulbert: Why bond yields are headed much higher http://on.mktw.net/byEKCi" 11:15 p.m. EDT, March 30, 2010 from MktwHulbert

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