On January 31st,1901 Charles H. Dow wrote in the Wall Street Journal:
"A person watching the tide coming in and who wishes to know the exact spot which marks the high tide, sets a stick in the sand at the points reached by the incoming waves until the stick reaches a position where the waves do not come up to it, and finally recede enough to show that the tide has turned.
This method holds good in watching and determining the flood tide of the stock market."
The Value Line Enigma: The Devil is in the details
The Value Line Centurion Fund which manages a portfolio made of group 1 stocks has underperformed group 1 by 1,100 bp !
The Value Line Enigma: Possible reasons for underperformance
High turnover = high transaction costs (the portfolio has to be rebalanced every week):
- bid-ask spread
- brokerage fees
However, ( transaction costs + fund overhead ) don’t add up to the difference
The Value Line Enigma: More on possible reasons for underperformance
Measuring performance against prediction assumes the stock is purchased on Wednesday at close, yet the fund re-balances the portfolio on Friday and the readers read the survey on Friday morning .
Group 1 is being re-evaluated The bulk of the price increase in group 1 stocks takes place between Thursday and Friday. The survey reaches the public The VL Centurion Fund rebalances its portfolio Group 1 is being re-evaluated The survey reaches the public The VL Centurion Fund rebalances its portfolio Wed Thu Fri Sat Sun Mo Tue Wed Thu Fri Group 1 stock stock price Group 1 stock stock price