Hulbert: Small Cap Sector Shockingly Overvalued

In a recent MarketWatch article, Mark Hulbert reveals a revised calculation that the small-cap sector is currently valued at a whopping 78.7 times earnings. He writes, “the Russell 2000’s true P/E today is higher than it was at either the top of the internet bubble or the 2007 bull market peak.” Hulbert describes the calculation, which he credits to financial services firm INTL FCStone’s Vincent Deluard, who told him that nearly a third of the companies in the Russell 2000 index are losing money. This omission, writes Hulbert, “has huge consequences.” Neither the FTSE Russell (the company that created the […]

Hulbert on How to Boost Returns with Lower Risk

The founder of The Hulbert Financial Digest calls into question the idea that lower risk leads to lower returns, according to a recent MarketWatch article. “I know, I know” Hulbert writes, “That’s directly contrary to what financial planners have always insisted. But this conventional wisdom does not fit the data.” In his review of nearly 300 investment newsletter portfolios, Hulbert found that the “riskiest services have regularly produced some of the very worst returns.” Hulbert explains that the riskiest newsletter portfolio monitored (shown at the bottom right corner of the chart) has the “dubious distinction” of being the worst performer […]

Hulbert: Study Shows Rise in Short-Selling a Bearish Sign

A study recently published in the Journal of Financial Economics found that short sellers “on balance are right more than they’re wrong” writes Mark Hulbert for MarketWatch, arguing “it’s worrisome that the volume of short selling has risen so steadily this year.” According to University of Utah finance professor Matthew Ringgenberg, the reason that short sellers tend to do better is that it’s more challenging to sell a stock short than to buy it—that is, says Ringgenberg, “the markets place a number of hurdles in front of the short seller that don’t exist for investors on the long side” (i.e. […]

Hulbert Cites Bear-Market Warning Indicator

  In a recent MarketWatch article, Mark Hulbert presents a market-timing indicator that “has a better historical track record than the cyclically adjusted price to earnings ratio” made famous by Nobel Laureate Robert Schiller. The indicator, he writes, is the “average portfolio allocation that U.S. households have to equities,” which has reached its current level five other times since the 1980s.” Four of those times, Hulbert asserts, “came right before major stock market tops.” Hulbert reports that, according to recent data from the Federal Reserve, U.S. households have 39.2% of their financial assets in equities. In 2015, it was 38.9% […]

Hulbert Says Momentum Investing Lives

There are still good reasons for investors to pursue a momentum strategy, writes Mark Hulbert in a recent Wall Street Journal article. He offers data collected by Eugene Fama (University of Chicago) and Kenneth French (Dartmouth College) showing that over the past ten years the stocks in the top decile vis a vis performance outperformed the S&P 500 by just 1.3 percentage points. “That is less than one-fifth as much as the strategy’s average annual advantage over the past 90 years, and certainly not enough to pay the considerable expenses…involved in the high turnover of a momentum portfolio.” But Hulbert […]

Hulbert on When to Fire Your Investment Adviser

Market-lagging performance, writes Mark Hulbert in a recent MarketWatch article, is not a good enough reason to fire your adviser. It’s extremely difficult, Hulbert says, to beat the market by “picking individual securities, ETFs or mutual funds—even among those with stellar track records for past performance.” He argues that, even those advisers and investment approaches that outperform will suffer periods of lackluster returns over the long-term. Hulbert cites the example of Warren Buffett and Berkshire Hathaway, noting that over the last eight years the legendary investor has “lagged the S&P 500 by 2.7 percentage points a year on an annualized […]

Hulbert Says War Doesn’t Scare the Stock Market

While the stock market doesn’t like war, the uncertainty that precedes a foreign military operation is typically resolved soon after any U.S.-led hostilities begin, and the market responds very positively. This according to Mark Hulbert in a recent Barron’s article. Hulbert cites the countries “saber-rattling directed at North Korea and Syria” as recent examples corresponding to a dip in the Dow Jones Industrial Average (Validea note: this as of April 20th—the index has since picked up slightly). “This period of market uncertainty,” writes Hulbert,” is likely to continue so long as uncertainty remains elevated.” Note: Hulbert explains that the above-cited […]

Hulbert: Don’t Believe These Old Market Adages

When investors follow popular stock market beliefs and seasonal patterns, the only people who make money are the brokers earnings trading fees from the subsequent buying and selling, writes Mark Hulbert in last week’s USA TODAY. Hulbert, founder of the Hulbert Financial Digest, shared his insights on the following three widely-assumed “strikes” against the market: “Sell in May and go away:” The notion that investors should go to cash on May 1st and not return to the market until Halloween. Hulbert argues that, while over the last ten years the market has tended to show strong performance between Halloween and […]

Hulbert on the Likelihood of a Market Bubble

A new study conducted by Harvard University professors reveals that a share price run-up is not necessarily a precursor to a market bubble, writes Mark Hulbert in a recent Barron’s article. The study also suggests, says Hulbert, that the “mere existence of a major decline doesn’t automatically mean that the previous run-up was a bubble.” [The study defines a bubble as a price increase of at least 100% over a two-year period followed within the subsequent two years by a drop of at least 40%.] When this definition is applied to a small sample, the research reflects that “very few […]

Hulbert Calls Large Cap Strength a “Bullish Omen”

Mark Hulbert argues against the conventional wisdom that small-cap outperformance relative to large-caps indicates a positive trend (the idea being that large caps will “have to perform particularly well just to catch up”). This according to his recent MarketWatch article. After evaluating 20 years of relative performance data for both the S&P 500 and the Russell 2000 (small-cap index), Hulbert concludes that outperformance by the S&P 500 is a “bullish omen,” and that, “none of the correlations provided support for what conventional wisdom would have you believe.” Some of the most significant correlations, he points out, emerge when looking at […]

Hulbert Challenges Harvard’s Lesson on Investing

After a disappointing year in which its endowment fund actually lost money, Harvard University fired half of its investment staff, writes Mark Hulbert in last week’s MarketWatch. However, he argues, “it’s not that past performance doesn’t count; what’s irrelevant is performance over the recent past. Calendar-year performance, for example, tells you next to nothing about whether your manager is a good bet for future returns. The long-term performance of Harvard’s endowment fund is strong, says Hulbert, having beaten its benchmarks by an average of 0.9 percent per year over the past ten years. Over the past 20 years, he notes, […]

Hulbert: Don’t Chase the Winners

 At a time when investors are inundated with the “best of” performance rankings for 2016, a recent MarketWatch article by Mark Hulbert advises against chasing the winners. The best thing to do, he writes, is “sit on your hands.” Hulbert suggests that investors “consider those that were in the top quartile for performance three years ago. Believe it or not, many of them were in the bottom quartile for performance over the last 12 months.” This according to data from the “Persistence Scoreboard,” a report produced by S&P Dow Jones Indices: Regression to the mean, Hulbert explains, is “just another […]

Hulbert: A Balanced Portfolio is the Better Choice

An all-equity portfolio “barely produces better returns than a mix of stocks and bonds,” writes Mark Hulbert in last week’s MarketWatch. This isn’t a prophecy of an imminent bear market, he says, but rather is based on years of data spanning the last 90 years (provided by Ibbotson–a division of Morningstar). The data shows that, since 1926, a 60/40 stock/bond portfolio would have produced an 8.6% return, only 1.4 percentage points lower than the 10% annualized return of an all-stock portfolio. Over the past 20 years, he says, the difference has been even smaller. This begs the question as to […]

October Low Could Signal Rally

Over the last 120 years, the Dow Jones Industrial Average has gained an average of 6.8% from its lowest October close through December 31st, writes Mark Hulbert in last week’s MarketWatch. Given recent dips, we could see a “significant rally through the end of the year,” according to Hulbert. He contrasted post-low monthly gains going back to 1896 and found that those following October lows are the largest. This pattern, Hulbert writes, has led many to refer to October as a “bear killer,” a claim supported by Ned Davis Research data that shows no fewer than eight of the 35 […]

How to Win in the Market: Look Up

It may sound like a mother’s mantra to her tech-obsessed teenager, but turning off your computer and putting away your smartphone might be the ticket to triumph in the market. This according to Mark Hulbert, founder of The Hulbert Financial Digest, in a recent MarketWatch column. Hulbert cites study results published this month by the National Bureau of Economic Research that found performance by those traders who pay the closest attention to the stock market’s “short-term gyrations” to be significantly lower than those who pay infrequent attention. The study’s authors explain that the traders most focused on short-term market movements […]