Sick and tired of a Wall Street that lies to us and then assumes we’re too stupid to figure it out? MarketWatch’s Mark Hulbert advises don’t get mad — get even.
Consider one of the more outrageous examples of Wall Street mendacity, which occurs like clockwork every December: window dressing. Mutual-fund managers will sell a losing stock near the end of the year in order to avoid having their disastrous bets memorialized in year-end reports. Note carefully that there is no legitimate investment reason for this activity. After all, it is pursued for appearance’s sake only, since selling a stock after it has already lost does nothing to recover the loss. In fact, there is some research suggesting that window dressing can actually hurt a fund’s performance.
Here’s how to get even: Be prepared to step up to the plate in coming sessions to buy those stocks that are both heavily owned by mutual funds and which have suffered large year-to-date losses. These are the stocks that are most likely to bear the disproportionate share of fund managers’ window dressing — and stand a good chance of bouncing back in January, even if their long-term prospects are questionable…
One adviser who recommends such a strategy every December is George Putnam, editor of the Turnaround Letter advisory service. Over the last 24 years, which is how long the Hulbert Financial Digest has tracked his model portfolios, they have beaten the stock market by an average of 1.7 percentage points per year on an annualized basis…
http://www.marketwatch.com/story/dont-get-mad-at-wall-street-get-even-2011-12-06?link=MW_story_latest_news
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