Value Line Takes a Few Chips Off
The bloggers in Ticker Sense’s Sentiment poll might have turned into raging bulls this week, but the granddaddy of investment newsletters is turning more cautious.
Of course, Value Line has been at the game much longer than any blogger. The bloggers are considered seasoned if they have been at it for 25 months, in contrast with 25 years for Value Line Investment Survey. The firm’s ranking system is far older, but Mark Hulbert’s data only reaches back that far:
The bull market developed a chink in its armor on Thursday, when a top-performing investment newsletter adopted a more cautious outlook on equities’ prospects.
The newsletter in question is the Value Line Investment Survey, one of the top performing newsletters over the last 25 years for risk-adjusted performance, according to the Hulbert Financial Digest.
For the first time since February 2005, Value Line Inc. has altered its recommended stock allocation in equity-oriented portfolios. Since that date more than two years ago, Value Line’s recommended asset allocation has unwaveringly been to be 80% invested in equities. As of Thursday, however, the firm reduced that recommended allocation to 75%.
You might be tempted to dismiss the significance of a shift that involves a change of just five percentage points in recommended allocation. This temptation might be further fueled by recalling that a 75% allocation to equities was what Value Line was recommending prior to February 2005, which subsequent events have shown to be a very good time to be in the stock market.
But we should not be too hasty in downplaying the significance of Value Line’s shift. In describing the factors that led it to make the change, the firm wrote that, in its opinion, “most of the money has been made in the stock market in 2007.”
Some surmise that the flip-flopping bloggers bowed to a combination of peer pressure and the animal spirits. By contrast, Value Line’s quantitative approach leaves little room for waffling. No doubt rising stock prices diminished the longer term appeal of stocks, leading them to recommend taking a few chips off the table. But don’t sell everything.
They still recommend a 75% allocations to equities.
Value Line raises some cash
MarketWatch
Mark Hulbert Commentary
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