Murphy's flaws
For two years, Jack Hanbury, an Ashland, Ky., litigator turned day trader, has subscribed to Technology Investing newsletter, which is composed by widely quoted tech guru Michael Murphy. Last week Hanbury was sufficiently disgruntled with the collapse in tech stocks that he sent a six-page critique of the performance of the newsletter's stock picks to various reporters. Among other things, Hanbury took issue with Murphy picks such as JDS Uniphase, EMC, Corning, Sun Microsystems, Nokia, Check Point Software and Scientific Atlanta, noting their price collapses following Murphy's recommendations. He also cited Murphy's "consistent" bullishness "while tech stocks were in a free fall." His biggest bugaboo is the advertising on Murphy's newsletter that proclaims him "America's # 1 hi-tech stock picker." Writes Hanbury: "I'm no mathematician, but Murphy's subscribers ... lost half their money since January of 2001."
Murphy's advertising has been the subject of criticism before, specifically by Hulbert Financial Digest, which tracks the performance of newsletter writers. Murphy blames his distributor, Phillips Publishing. Hulbert notes that California Technology Stock Letter, Murphy's oldest newsletter, ranked in second place for the 10-year trailing period back in March '97. Since the end of '82, Hulbert says, CTSL's recommendations have fallen 71.7%, versus a 979% gain for the Wilshire 5000 and an 843% gain for the Nasdaq. Technology Investing has a slightly better track record. Since the end of '98, its recommendations are down 8.1%, compared with a 13.5% loss for the Wilshire and a 33% drop for Nasdaq.
Returns in Murphy's tiny mutual funds, which invest in tech and biotech plays, have suffered too. In fact, assets are so depleted that Murphy is considering merging Monterey Murphy New World Technology and Monterey Murphy New World Core Technology. Of Hanbury's critique, he sighs: "Fundamentally the guy is right, if you start from a high in the tech market. It's been a terrible market for tech stocks. We still think these big tech names are in a substantially better position because so many erstwhile competitors have run out of money. The computer revolution has hardly begun."
From "Barrons", August 5, 2002
