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Peter Brimelow Archives | Email alerts
March 12, 2012, 12:01 a.m. EDT
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By Peter Brimelow, MarketWatch
NEW YORK (MarketWatch) "” Will the Dow break 13,000? A top performing letter says: who cares?
It's still not clear if the Dow Jones Industrial Average's /quotes/zigman/627449 DJIA +0.11% failure to break 13,000 is really significant. But the idea has attracted more worried attention since I first wrote about it. See February 27 column.
Charles Mizrahi at Hidden Values Alert doesn't care. He's always fully invested, picking stocks on a strictly fundamental (earnings, assets, competitive advantage etc.) basis.
Mizrahi's only recent comment on the stock market:
/quotes/zigman/627449 DJIA 12,922.02, +14.08, +0.11%
"For the second half of 2011, stock prices were highly correlated to the S&P 500 /quotes/zigman/3870025 SPX +0.36% "” stock picking added very little value. In 2012, that's no longer the case. Mr. Market is once again making distinctions between strong companies and weak ones"¦ and stock picking once again is adding value."
Mizrahi is quite right that markets differ greatly in character. But his stock-picking method seems to have ridden out many storms.
Over the year to date through February, Hidden Value Alert is up 18% by Hulbert Financial Digest count vs. 9.37% for the dividend-reinvested Wilshire 5000 Total Stock Market Index /quotes/zigman/123822 XX:W5000FLT +0.47% . That makes it the eighth-best performer out of 180-plus followed by the HFD.
But over the past 12 months, notwithstanding the difficult climate, Hidden Values Alert also beat the market, 9.29% vs. 4.38% for the total return Wilshire 5000.
And over the past three years, the letter is up an astonishing 49.87% annualized vs. 26.36% annualized for the total return Wilshire.
Over the past five years, the letter was up an annualized 8.26% vs. 1.88% annualized for the Wilshire.
Mizrahi usually leads each monthly issue with an entertaining story, perhaps because his stock-selection method tends to make somewhat dull reading. ( See July 18, 2011 column ). At one time, he leaned heavily on anecdotes about Warren Buffett, although he seems to have backed off as Buffett has come in for criticism. See April 6, 2011 column.
Mizrahi's most recent letter starts grimly:
Click to Play $(function () { $("#video_738840FC-8751-4874-96E6-BE304272DC39").click(function (e) { e.preventDefault(); MarketWatch.Video.loadAndStartVideo('738840FC-8751-4874-96E6-BE304272DC39', 'video_738840FC-8751-4874-96E6-BE304272DC39', '287', '162'); }); }); U.S. Week Ahead: Fed, consumer sentimentWith Greece on the backburner, investor attention could turn to a Fed meeting, consumer sentiment, and what both reflect about an improving labor market and rising oil prices. MarketWatch's Laura Mandaro reports.
"Study after study on investment performance has continually pointed to the same conclusion: beating the stock market is very hard, if not impossible, to do.
"A Morningstar study showed that the average stock investor, over a 10-year period ending 2011, trailed the S&P 500 by 24%. Another study over a 20-year period ending 2010, by Dalbar, showed the average U.S. stock investor achieved a 3.8% annual return compared with the S&P 500 return of 9.1%.
"Professional investors are not doing a whole lot better. Only 4% of diversified US stock mutual funds have beaten the performance of the S&P 500 Index over the past 10 years."
Mizrahi then discusses one of the few exceptions: a Utah money manager, Allan Mecham, who according to a recent Smart Money profile has achieved a compounded annualized return of 14.3% by investing in exactly the same sort of large cap, financially strong companies that Mizrahi favors.
This is precisely the conclusion that I reached in "The Wall Street Gurus", my 1985 (!) book on Mark Hulbert's monitoring work: It's very hard to beat the market, but a small number of advisors do achieve it consistently; over the long run, returns in the 15% compounded range are about the most you can hope for. (But it adds up).
The only difference: Hulbert's work also suggests that, in the right hands, almost any method "” not just fundamental analysis "” can achieve those results. I can't think why this should be so, but the data was very clear, and it still is.
That's why we're so nice to astrology letters "” you never know! See Feb. 6, 2012 column.
In Hidden Values Alert's most recent issue, Mizrahi was recommending
Marathon Oil Corp. /quotes/zigman/292008/quotes/nls/mro MRO -0.57% (Below $33)
Ezcorp Inc. /quotes/zigman/71753/quotes/nls/ezpw EZPW +2.52% (Below $30)
/quotes/zigman/627449 Add to portfolio DJIA Dow Jones Industrial Average 12,922.02 +14.08 +0.11% Volume: 103.24M March 9, 2012 5:30p var embeddedchart70394702Chart = new EmbeddedChart('#embeddedchart70394702', NormalChartStyleNoDecimals, 240, 80, '1dy', '5mi', null, null, null, 'US:DJIA'); jQuery.data($('#embeddedchart70394702').get(0), 'embeddedchart', embeddedchart70394702Chart); /quotes/zigman/3870025 Add to portfolio SPX S&P 500 Index 1,370.87 +4.96 +0.36% Volume: 517.23M March 9, 2012 5:48p var embeddedchart124732823Chart = new EmbeddedChart('#embeddedchart124732823', NormalChartStyleNoDecimals, 240, 80, '1dy', '5mi', null, null, null, 'US:SPX'); jQuery.data($('#embeddedchart124732823').get(0), 'embeddedchart', embeddedchart124732823Chart); /quotes/zigman/123822 Add to portfolio XX:W5000FLT Wilshire 5000 Total Market Index 14,225.42 +66.71 +0.47% Volume: 0.00 March 9, 2012 6:30p var embeddedchart1063881902Chart = new EmbeddedChart('#embeddedchart1063881902', NormalChartStyleNoDecimals, 240, 80, '1dy', '5mi', null, null, null, 'XX:W5000FLT'); jQuery.data($('#embeddedchart1063881902').get(0), 'embeddedchart', embeddedchart1063881902Chart); /quotes/zigman/292008/quotes/nls/mro Add to portfolio MRO Marathon Oil Corp. $ 33.34 -0.19 -0.57% Volume: 4.32M March 9, 2012 5:02p var embeddedchart1038067174Chart = new EmbeddedChart('#embeddedchart1038067174', NormalChartStyleNoDecimals, 240, 80, '1dy', '5mi', null, null, null, 'US:MRO'); jQuery.data($('#embeddedchart1038067174').get(0), 'embeddedchart', embeddedchart1038067174Chart); /quotes/zigman/71753/quotes/nls/ezpw Add to portfolio EZPW Ezcorp Inc. Cl A $ 31.37 +0.77 +2.52% Volume: 191,043 March 9, 2012 5:00p var embeddedchart2060081064Chart = new EmbeddedChart('#embeddedchart2060081064', NormalChartStyleNoDecimals, 240, 80, '1dy', '5mi', null, null, null, 'US:EZPW'); jQuery.data($('#embeddedchart2060081064').get(0), 'embeddedchart', embeddedchart2060081064Chart); //$(document).ready(function() { var storywidth = $('#mainstory').width(); var maxwidth = storywidth; $('#maincontent pre').each(function (index, value) { var thiswidth = $(value).width(); if (thiswidth > maxwidth) maxwidth = thiswidth; }); var offset = maxwidth - storywidth; if (offset > 0) { var margin = 13; var blanketwidth = $('#blanket').width(); var contentwidth = $('#maincontent').width(); $('#blanket').width(blanketwidth + offset + margin); $('#maincontent').width(contentwidth + offset + margin); $('#mainstory').width(storywidth + offset + margin); } //});var OB_permalink= 'http://www.marketwatch.com/story/is-stock-picking-back-2012-03-12'; var OB_Template="marketwatch"; var OB_widgetId= 'AR_1'; var OB_langJS ='http://widgets.outbrain.com/lang_en.js'; if ( typeof(OB_Script)!='undefined' ) OutbrainStart(); else { var OB_Script = true; var str = ""; document.write(str); } Most Popular Weekend Investor
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About Peter Brimelow RSS News feedPeter Brimelow has been an editor at Barron's, Fortune and Forbes and is the author of "The Wall Street Gurus: How You Can Profit From Investment Newsletters."
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