Jan. 16, 2006, 9:54 a.m. EST · Recommend · Post:
Bowser's nose for low-priced stocksView all Peter Brimelow
Gold hit hard, but bugs buoyant
NEW YORK (MarketWatch) -- Caveat emptor is a good rule to follow, even when investment letters have a great year.
Every year, when we dredge up the 10 top-performing investment letters as measured by the Hulbert Financial Digest, we'll regularly find some little-known diamonds -- and some dross, or at least, letters that make Mark Hulbert squirm unhappily.
This time around, we had Nate Pile's Nate's Notes, a relatively unpublicized letter that made the Hulbert top ten for 2005 and also has had a strong long-term record.
See Dec. 26 column for the rundown of 2005's top performers. See my Jan. 12 column for more on Nate's Notes.
And then we have The Bowser Report, up 29.9%, more than four times the 2005 gain registered by the dividend-reinvested Dow Jones Wilshire 5000.
The Bowser service specializes in stocks worth $3 or less -- not an implausible investment idea, because there's research suggesting lower-priced stocks do better. Selections seem to be made on a fundamental basis: earnings, assets, financial strength.
Editor Max Bowser started off as a journalist but recovered and spent 24 years in the Air Force, retiring as a lieutenant colonel. He's been publishing his letter since 1975.
This looks at first glance like the sort of discovery the HFD's trawling often comes up with, except that there's a problem: Bowser's longer-term record (HFD began following it in 1993) is much poorer.
Specifically, The Bowser Report's portfolios gained by 4.9% on an annualized basis through August 2005, vs. an annualized 10.5% for the dividend-reinvested Dow Jones Wilshire 5000.
In fairness, it has to be said that Bowser's record is affected by some very bad years in the later 1990s, when the bull market was blowing off. Over the most recent five years -- since the market stalled, that is -- Bowser's outperformed the DJ Wilshire by 4.9% vs. minus 1.6% annualized.
Bowser's longer-term problem may partly lie in that it doesn't offer a specific model portfolio. Its introductory material offers various rules, such as, buy Bowser's most recently recommended stock, keep on buying positions until you have a portfolio of 12 to 18 issues, and sell half of any position if and when the stock doubles.
But Bowser's rules could yield very different results depending on individual investors' interpretations. For its part, the HFD follows its usual approach in such circumstances and remains fully invested in Bowser's top picks.
(Of course, it's irritating for investment letter editors to have to fit into the HFD's model portfolio methodology. But, hey, they don't have to have good HFD ratings.)
More recently, Bowser has started a "Beginner's Portfolio," which provides a greater degree of detailed direction. And from 2001 through mid-2005, this approach did outperform the DJ Wilshire, by 8.6% to 0.8% annualized.
As of late last year, Bowser's Beginner's Portfolio consisted of 18 stocks. Namely: Poore Brothers Inc. /quotes/comstock/15*!snak/quotes/nls/snak (SNAK 2.35, -0.03, -1.26%) ; Tofutti Brands Inc. /quotes/comstock/14*!tof/quotes/nls/tof (TOF 1.59, +0.10, +6.71%) ; Wireless Telecom Group /quotes/comstock/14*!wtt/quotes/nls/wtt (WTT 0.89, +0.02, +1.83%) ; Nyer Medical Group /quotes/comstock/11i!nyer/quotes/nls/nyer (NYER 1.84, -0.06, -3.16%) ; Leading Brands Inc. ; Covalent Group Inc. /quotes/comstock/15*!enco/quotes/nls/enco (ENCO 0.25, +0.00, +0.04%) ; Pyramid Breweries Inc. ; Pro-Dex Inc. /quotes/comstock/15*!pdex/quotes/nls/pdex (PDEX 0.49, -0.03, -5.77%) ; DryClean USA Inc. /quotes/comstock/14*!evi/quotes/nls/evi (EVI 1.22, 0.00, 0.00%) ; TII Industries /quotes/comstock/15*!tiii/quotes/nls/tiii (TIII 1.26, -0.01, -0.79%) ; Iomed Inc. /quotes/comstock/13*!bx/quotes/nls/bx (BX 12.65, -0.06, -0.47%) ; Dynatronics Corp. /quotes/comstock/15*!dynt/quotes/nls/dynt (DYNT 1.13, +0.02, +1.80%) ; Netsol Technologies /quotes/comstock/15*!ntwk/quotes/nls/ntwk (NTWK 1.00, -0.02, -1.97%) ; WSI Industries /quotes/comstock/15*!wsci/quotes/nls/wsci (WSCI 1.78, -0.03, -1.66%) ; DGSE Cos. /quotes/comstock/14*!dgse/quotes/nls/dgse (DGSE 1.50, +0.05, +3.46%) ; Cyanotech Corp. /quotes/comstock/15*!cyan/quotes/nls/cyan (CYAN 3.41, +0.09, +2.71%) ; Rada Electronic Industries ; and Bovie Medical /quotes/comstock/14*!bvx/quotes/nls/bvx (BVX 6.53, +0.08, +1.24%) .
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