EDITOR’S NOTES: March 1980
With your indulgence. I’d like to brag a little. A few close readers of Money Letter/Wall Street (page 9) have recently phoned or written to applaud the quality of the investment advice it conveys, so we decided to measure our own performance. Reporter Pauline Tai followed up every stock mentioned favorably in the Letter during 1979 except those mentioned specifically for income rather than capital gains. She compared the price at the time of publication with the price last month, and then contrasted that gain or loss with the change over the same period in Standard & Poor’s 500-stock index. For the 103 stocks measured, the average gain, not counting dividends, was 31.7%, compared with 12.5% for the S&P 500. Overall, 72 of the stocks rose (30 of them by 50% or more), 29 fell and two were unchanged.
“Money Letter/Wall Street doesn’t make its own stock recommendations—it picks recommendations from those made throughout the securities industry,” explains staff writer Charles Rolo, who produced 10 of last year’s 12 Letters. The challenge, of course, is to judge whose recommendations seem to make the most sense. To this task Rolo brings 15 years of experience as a broker, security analyst and research director on Wall Street. “Each month, I scan a couple of hundred brokerage house research reports and market commentaries and several dozen advisory services,” he says. “I also talk regularly to the sharpest people in the investment business. I make the selections in the same way as any money manager would if he had to rely on outside research. My starting point is a decision as to which types of stocks should be avoided and which are likely to do best. I prefer to stick with recommendations made by analysts and investment advisers whose records I know and respect. And I try, whenever possible, to check a recommendation with other analysts or—if the stock is one of the 1,700 on which data are supplied by the Value Line Investment Survey—to make my own evaluation.”
Obviously, the Letter’s future performance may or may not maintain last year’s high standard; we’ll keep an eye on it and let you know. But Rolo promises to stay on the job—and to stay flexible. “Last year and earlier, my premise was that market conditions would reward an aggressive approach and penalize a conservative one. Now, with institutions switching from bonds into stocks and small investors becoming more stock-minded, the character of the market is changing. Ferreting out neglected stocks or offbeat issues should remain a profitable approach for individuals in 1980. But I also suspect there will be more opportunities this year than last in the mainstream of the market.”
Rolo brings literary and sartorial as well as analytical distinction to Money. He’s almost certainly the only investment writer around who was once literary critic of the Atlantic Monthly, and he’s unmistakably the only Money staffer with a London tailor—Messrs. Scherer & Nilsson, of Old Burlington Street.
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