Ranking the tipsters

Hello. Please excuse the long preamble and noobish content. I've flagged the important bit below, if you want to scroll to the point of the post.

I'm at a stage where my poker bankroll will soon be bigger than I really need. I can divert some of that profit into adventures at limits that I'm not really good enough for, but I feel I'd be well advised to divert at least some of money into the stock market.

I have a part-time job which involves reading the finance sectors of UK and US newspapers. In the UK, most of the major broadsheets carry a stock tips section.

All in all, I see about 25 tips a week in the course of my work. This is useful information, but some tips will be more useful than others, and I'd like a way of ranking it.

- - - - - - WAFFLE ENDS, POINT BEGINS - - - - - -

I'm planning on keeping a spreadsheet, keeping track of these tips. It's going to become quite large, quite quickly, so I'm only going to update the figures in it once a week. Not ideal, but otherwise it's too much work. The question is -

How long should I keep track of each individual tip for? Clearly you'd expect to see some fairly quick return on a Buy or Sell recommendation, but if the tip is to hold a stock in expectation of improved results or dividends, how long should you wait before you write that tip off as bad advice?

I'm currently planning on holding the info for six months. Does this sound absurdly short-termist?

Sorry again for this probably foolish post, but all answers/advice will be greatly appreciated.

Cheers.

clemon.

[DesertCat]

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This isn't useful information, [b]so it's a waste of time to rank it.[b]

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FYP.

How annoying. Ordinarily, I scan every post I make on internet forums to ensure I haven't left a quick and easy opportunity for someone to make a heeeelarious content-free reply, but I was quite tired last night, and thought maybe I'd get away with asking a simple question without surrounding it with disclaimers and sundry other barricades. Talk about naive!

*sigh*

Let's assume that I've already assessed the overall usefulness (or otherwise) of this information, shall we? Thank you for your input, such as it is, but these matters are subjective, and in *my* instance I believe that it will be worth *my* time to rank this info. You'll notice that I'm not asking anyone else to devote their time to this task, beyond answering one simple question, which I will reiterate here for the benefit of anyone who still cares -

How long should one hold a "hold" stock for? (Assuming that you have to apply one period of time to all such recommendation). Is six months adequate, or not?

That's two questions. Damn.

Yeah, I hate FYP posts.

I'm glad someone's doing this. I'd like to see the results. My intuition is that those stocks won't outperform the market, but it's certainly worth testing. Rather than test them as they come out, you might do it all at once by going through back issues of the paper at the library and get your samples that way.

How long should you test them for? I think it depends on what grounds the paper is making their recommendations. If the analysis talks about business fundamentals, a few years. If it talks about what will happen in the next quarter, 6 months or less is a good length of time. If technical factors, 1 month or less (and in that case I'd say you're more likely to be wasting your time).

I know the Wall Street Journal has contests between readers' stock recommendations and stocks chosen randomly. Has anyone ever compiled them all to see whether the readers' picks are better than the random ones?

[DesertCat]

[ QUOTE ]

Let's assume that I've already assessed the overall usefulness (or otherwise) of this information, shall we? Thank you for your input, such as it is, but these matters are subjective, and in *my* instance I believe that it will be worth *my* time to rank this info. You'll notice that I'm not asking anyone else to devote their time to this task, beyond answering one simple question, which I will reiterate here for the benefit of anyone who still cares -

How long should one hold a "hold" stock for? (Assuming that you have to apply one period of time to all such recommendation). Is six months adequate, or not?

That's two questions. Damn.

[/ QUOTE ]

My post was far from content free. You really need to put some more thought into what you are doing since you sound like you are headed for disaster.

Let me relate what the worlds greatest investor (Warren Buffett) does.

- He never listens to tips.
- He never listens to brokers or wall street.
- He never looks at charts or cares about technical analysis.
- He has no opinion or idea whether a stock will go up or down in the short run. He doesn't believe anyone else can predict this either. Same for the market as a whole and the economy.
- He just tries to buy good businesses at attractive prices. He holds them for as long as they stay cheap, and sells them when they get expensive. He'll hold a stock for the rest of his life if it meets those characteristics. He's owned his Washington Post stock since 1972, and his Coke stock since 1987.

Now when you use the word "tip", my mental image is of your broker hissing in your ear and saying "xyz corp is announcing hot news tommorrow, buy as much as you can today". If by tip you just mean reading regular business press on companies, and finding ideas there, sure, that's a great avenue of research.

But you have to be able to value what you find and decide if it's cheap or expensive. You have to assess it's business risks. You have to decide if it's cheap enough to compensate you for those risks.

My (very general) rule of thumb is the more positive PR you read about a company, the worse investment it really is. Often it means it's mgmt team cares more about selling stock to suckers than selling their real products to real customers. Even in cases like GOOG, where they are a great company, they end up getting way over-priced

[DesertCat]

I'm not sure if you can read the link below, but it's a wall street journal report on whether stock research appears more reliable with recent changes. But note two things, the average four year return for these research firms recommendations is about zero. And the only two firms that have positive recommendations on GM, appear to have investment banking business with GM.

WSJ report on analyst recommendations. (http://webreprints.djreprints.com/1244390306218.html)

Which leads me to the conclusion that wall street research still has inherent biases, and usually worthless.

[Sniper]

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How long should one hold a "hold" stock for?

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"Hold" is Wall Street code for Sell!!! /images/graemlins/wink.gif

[Sniper]

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Let me relate what the worlds greatest investor (Warren Buffett) does.

[/ QUOTE ]

Just because Buffett does well, doesn't mean that his way is the only way to make $$$.

That said, it is generally a bad idea to blindly follow a Tip... why?

1. You don't know the reasons why you are getting the tip.
2. Even if the tip is a good one, you won't know when the tipster changes their opinion.

Finally, there is a whole industry around providing investable information to the public, in the form of newsletters, etc. Hulbert, is a rating service for these financial newsletters.

Folks -

Thanks for your input on this. My objective here was to determine which, if any, of the newspaper tipsters are worth reading, but sadly I remain too damn lazy to collate the information!

Your concern is noted, DesertCat, and I appreciate it. I'd feel the same way in your position, reading A. RandomN00b's noobish posts. Fortunately for me, I absolutely *hate* losing money, which is why I'm looking to determine some reliable sources of information on stocks.

I also hate hard work, though. I'll think more on this before committing my valuable time...

Thanks

[buffett]

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I absolutely *hate* losing money...I also hate hard work

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As long as the first part of the above quote is considered with a multi-year time horizon, why not just dollar cost average into the Vanguard Total Market Index?