There was an article published on stock screens in the last edition of the ShareSoc Informer Newsletter which has just been issued. It reviewed a number of published screens and the performance overall was poor, mainly because few of them tipped mining or oil sector stocks.
So how did the national newspapers share tipsters perform in comparison? Private Eye just published a report on that subject. It said only one national newspaper, the Sunday Times, beat the index with its collective tips. Most failed to get even close with the Guardian being the worst at minus 12 per cent.
The Telegraph only managed an average gain of 5% and the Times only up 2.4% (in comparison with the FTSE-100 up 14.4%). The wide spread on the individual tips from all the tipsters also suggests that they were picking speculative stocks or “special situations” which did not work out in a lot of cases.
Now I said in our last newsletter that my portfolio performance was disappointing in 2016, but I am feeling a lot better now as I made a reasonable profit and better than most of the “expert” tipsters it seems. Even experienced investor John Rosier who writes a diary for the Investors Chronicle managed to lose 4.1%, including dividends.
Perhaps the moral to be drawn from this news is that it might be best to do your own research rather than pick up tips from others and rely on them for investment purposes. Reading the national press or other publications might be useful for picking up ideas, but you should consider any tips with an appropriate amount of scepticism until you have researched the companies and fully understood what they do and their financial structure. In other words, don’t simply believe what you read.
I’m not sure I want to defend newspaper share tips but last year was exceptional, the performance of different companies diverged dramatically and it was largely driven by external factors, especially the oil price and the level of sterling, which aren’t likely to be captured by company-level analysis.I keep monthly statistics and one thing I look at is the correlation between the FTSE 100 and mid-250 indices. Usually it’s been 80% or more with the 250 ahead; last year the correlation was under 30% with the 100 ahead. The 250 made 3.7% (without dividends) and even that was probably driven by companies with international exposure, so 3-5% for UK-oriented companies would be reasonable.