Best Tech Stock newsletter
Nate Pile's home office has everything he needs - plus an aquarium and a washer and dryer.
FIFTEEN YEARS AFTER STARTING the Nate's Notes investment newsletter out of his home in California's wine country, is still picking tech stocks for loyal subscribers around the country. And nearly 30 years after they quit working for a wealthy investor, sisters and are cranking out The from their home in Costa Rica. But has outlasted them all. The founder and editor of The Chartist has been tracking the zigs and zags of the stock market for four decades. And he's still going strong, with 13, 000 subscribers coughing up $240 a year for advice on when to take advantage of a rising market—and when to bail out.
You might have thought that, by now, the tidal wave of free information on the Web would have drowned subscription-based investment newsletters. But that's not quite what's happened. Indeed, the number of investment newsletters that charge actually increased 60 percent from 2005 to 2008, before leveling off after the financial crisis, according to publication database MediaFinder.com. The fact that they're still around—with many charging hundreds of dollars for an annual subscription—isn't the only shocker in today's newsletter industry. They're also starting to turn heads with their ability to make people some serious money, in good markets or bad. Newsletter editors say even some hedge funds and analysts have a newfound interest in what they have to say and are quietly buying subscriptions.
Any investor with a brokerage account or 401(k) plan knows the stock market has been a lousy place to park money in the past decade, even with the gains of the past two years. Shareholders who reinvested all their dividends would have seen an average annual gain of 1.4 percent in Standard & Poor's 500 over the past 10 years. Some newsletters provide a stark contrast: Those tracked by The Hulbert Financial Digest have an average annual gain of 3.9 percent over the same period. Many have been helped by being in the right place at the right time, recommending a mix of stocks and bonds or foreign shares and natural resources stocks that have outpaced most domestic stocks. But loyal subscribers also say they've benefited from some savvy calls on when to ride the wave of a rising market—and when to get out of the way. a retired electronics salesman in Reno, Nev., says one call prompted him to pull his money out of stocks before the dot-com bust. "That gave me a lot more firepower when I got back into the markets, " he says.
Not all newsletters are racing ahead, of course. Some trip up with the same mistakes made by many mutual funds, picking risky stocks that can shoot higher one year only to fall the next. One well-known newsletter, The VALU, -0.25% Special Situations Service, was down an average of more than 4 percent a year in the past 10 years, according to Hulbert. Value Line's director of research, says the newsletter focuses on small- and micro-cap stocks, which are often volatile, and that it added more-conservative small-cap stocks last year.
We searched for newsletters with strong performance and colorful owners.
Photograph by Robyn Twomey for SmartMoney.
The Chartist Mutual Fund/ETF Letter
Editor: Dan Sullivan
Subscription: $240 a year
Five-yr. avg. annual return: 7.0%
Ten-yr. avg. annual return: 7.1%
Top picks: VWO, -0.06% ; XME, +0.99%
has been hooked on horse racing ever since he started trailing after his father at the racetrack more than 60 years ago. The 75-year-old market timer has even owned a couple of racehorses in his day. But when it comes to putting money on the table, he'd rather stick with the stock market: "It's a winnable game."
Working from his office in Los Alamitos, Calif., Sullivan interprets stock market charts the way old-time sea captains read the stars. He's been picking stocks in his original newsletter, The Chartist, since 1969, and he started his mutual fund newsletter nearly two decades later. In both, he tries to predict major market inflections—sometimes swinging from recommending being fully invested to holding just cash, within a matter of days. Last spring, for example, he advised subscribers of both newsletters to move entirely to cash. While he didn't "expect Armageddon, " he told them he was trying to protect them from a bear market. The market did indeed go down, and both newsletters moved back into the market in November—a bit late, Sullivan later said. "We should have gotten on board the rally at least a month earlier, " he told subscribers. Unlike many newsletters that use hypothetical model portfolios, Sullivan's clearly shows what he has at stake, disclosing returns on the $1 million he has invested in his model portfolios. Anyone who's going to recommend stocks, he says, "should be willing to buy them."
The Chartist—one of the oldest stock market newsletters—claims an average annual return of 12 percent since 1982, while The Chartist Mutual Fund/ETF Letter is up nearly tenfold since it was created in 1988, well ahead of the Wilshire 5000 index's sevenfold increase in the same period. That's not to say Sullivan doesn't have his losing streaks. In the worst 12 months for the Mutual Fund/ETF Letter, from late 1999 to late 2000, the portfolio plummeted 23 percent, compared with a loss of 6 percent for the Wilshire 5000 stock index, according to Hulbert.
Of course, Sullivan tries to get out of the market before such dips. a 75-year-old grandfather who gets both newsletters, says he saved money—and slept better—by moving to cash when Sullivan recommended it. "Very few people can sit there and watch a $100, 000 portfolio turn to $50, 000, " he says.
The Aden Forecast
Editors: Mary Anne and Pamela Aden
Subscription: $250 a year
Five-yr. avg. annual return: 10.0%
Ten-yr. avg. annual return: 10.6%
Top picks: RIO, -0.44% ; FCX, +1.75%
WHEN THEY MOVED to Costa Rica from Los Angeles more than three decades ago, Mary Anne and Pamela Aden huddled around a shortwave radio every afternoon to hear the market wrap-up on the BBC. There was no World Wide Web, and The Wall Street Journal arrived two days late. Today, of course, they can get all the news and stock quotes by powering up their computers. But they still like to retreat to each other's homes for their most important job of all: discussing their stock picks. Although the world has changed radically in the past 30 years, Pamela says investors still want pretty much the same thing: "Guidance on when to buy and sell."
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