By Tim Dyer
In the spirit of Valentine’s day, I remember an off Broadway show I saw here in San Diego a few years ago. It was called I Love You, Your Perfect, Now Change. It was a witty and comical view of some of the stereotypical nuances of dating and relationships. The play’s tagline is “Everything you have ever secretly thought about dating, romance, marriage, lovers, husbands, wives and in-laws, but were afraid to admit.” (Wikipedia) If we subtract dating from the above tagline and insert “investing” or “wall street” I think you’d get a similar comedy about what is known but afraid to admit.
I was reading a blog post by Bespoke Investment Group that illustrates this point regarding shares of Ralph Lauren (ticker: RL). The post highlights an unnamed Wall Street analyst, who while looking at the companies fundamental data maintains an Underperform rating on the stock for over two years. During that same two year period the stock of Ralph Lauren appreciated over 175%. It looks like the analyst finally threw in the towel last week, after the company announced earnings, rallying another 8% to reach all-time highs. His recommendation finally changed to “Neutral”. Wow, thanks for that!
Source: Bespoke Investment Group
Just like in relationships things are always more complex than they can appear. We need to make decisions and even in those rare times “admit we are wrong”. Looks like the analyst needed to give a little more love to a stock whose trend was up. I’m sure he could heed the advice of an old Broadway show regarding his recommendation, “I love you, your perfect, now change”.
The January Barometer
Tuesday, February 8th, 2011With January
now in the books its time to look at the always enlightening data from Yale Hirsch over at the Stock Traders Almanac. Mr Hirsch devised the January Barometer back in 1972, which states that as the S&P500 goes in January, so goes the year. The indicator has registered only six major errors since 1950 for a 90% accuracy ratio. What I find interesting is that of the 6 years that were predicted incorrectly, 4 were negative for January and then finished positive for the year. Translation, even though this indicator was wrong in these four years, the market was bullish for the full year. 2009 was one of those years as January closed down 8.6% but the full year return was 23.5%. The S&P500 was up over 2% for the month of January which bodes well for the bulls this year according to the barometer. As you may know, 2011 is also a pre-presidential election year. Full years followed January’s direction in 14 of the last 15 pre-presidential election years. The sole error was in 2003, as a new bull market was beginning. Time will tell if 2011 follows the historical predictions of the January Barometer or the pre-presidential election year trends, but as always, we’ll take all the good news we can get.
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