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Investment Newsletters with Strong Long-Term (20+ Years) Track Records: Nate's Notes & Investment Advisory Service


tparel
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I've been doing some research into investment newsletters. I know that Hulbert Raings audit a large selection of such services and compare their returns over different time periods.


Looking at the results on their website, it is clear that two services stand out, i.e. 1) Nate's Notes and 2) Investment Advisory Service, as having consistently outperformed not only the S&P 500 (by a lot!) but also the Russell 2000, Wilshire 5000 and NASDAQ Composite over different time periods i.e. 3 years, 5 years, 10 years, 15 years and 20 years.


See the information below taken from the Hulbert Ratings website:


Historical Performance of Nate's Notes (Model Portfolio) / Investor Advisory Service / NASDAQ Composite / S&P 500 (with dividends reinvested):

 

  • 3 years: 27.6% / 24.5% / 23.5% / 18.1% p.a.
  • 5 years: 24.0% / 25.6% / 24.0% / 18.0% p.a.
  • 10 years: 20.5% / 19.2% / 19.5% / 16.3% p.a.
  • 15 years: 15.0% / 14.8% / 13.8% / 10.9% p.a.
  • 20 years: 15.7% / 13.5% / 11.3% / 9.3% p.a.

 

Nate's Notes focus on companies with the following traits:
  1. a compelling growth story,
  2. strong financials / balance sheet,
  3. a good probability of attracting institutional interest in the future and,
  4. positive recent price trends / technical analysis indicators.
 
There is less emphasis on traditional valuation metrics such as PE / PEG ratios, historical revenue / income growth rates or discounted cash flow analyses.
 
Investment Advisory Service on the other hand follow the BetterInvesting methodology which I believe is a value / growth based investment strategy i.e. they consider PE / PEG ratios and do take earnings forecasts etc. into account in their analysis.
 

From my research, Nate's Notes has been published from the beginning (1995) by a single person, i.e. Nate Pile. Also, the Editor-In-Chief of Investment Advisory Service, Douglas Gerlach, has held this position since 2003. So for both of these services, it appears that the key people that contributed to the strong historical performance of these newsletters are still active.

 

Despite their impressive record I don't see these newsletters being discussed on investing forums or many reviews of these services online (i.e. when Google searching "Nate's Notes review" or "Investor Advisory Service review"). What am I missing? Does anyone know the reason for this?


Nate's Notes "Model Portfolio" has out-performed the S&P 500 by more than 6% p.a. over the last 20 years and Investor Advisory Service has outperformed by more than 4% p.a. Compounded over 20 years that's a big difference in absolute returns!


I realise that many investors, especially on these forums, have the view that we should not rely too much on stock-picking services but rather it's best to learn how to invest yourself and then pick your own stocks following thorough research. My view is that such stock-picking services can be a good compliment to your own research and in the case of these services, potentially an opportunity to learn methods that have consistently outperformed the market over both very long and short time periods.

 

Anyway, the above are my thoughts following some research on investment newsletters. I'm keen to get views on this from the Corner of Berkshire and Fairfax community: particularly on whether the Nate's Notes and / or Investor Advisory Service newsletters are worth following and also potentially on why these newsletters are not widely recommended on investing forums in general.

 

Also, if you know of any other high quality investment newsletters with a consistent long-term track record please do share this!

Edited by tparel
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  • tparel changed the title to Investment Newsletters with Strong Long-Term (20+ Years) Track Records: Nate's Notes & Investment Advisory Service

I think you can get inspired for your investing ideas by reading many things in life and you never know when one will click in you brain and its a business model you can understand, and a price thats attractive. So if you have benefited from these thats awesome! 
 

I prefer to read annuals, bi-annuals or investment letters from active and concentrated managers that have much of there own wealth in the companies they explain. 
 

You don't have to be a math wizard to understand that if this guy is beating the down by a “43-1” margin over 20 years, it makes much more sense for him to invest every penny he owns into his strategy and also raise as much outside capital as that strategy would support. Selling investment newsletters would be a much worse return as it has not compounded over the years. But, wouldn't he would already know this with that kind of track record? Quite the head scratcher! 🙂 

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I think the MF Stockadvisor and Rulebreakers are similar and have a good track record over the long run. Despite their cringeworthy marketing, I find some of their thinking very insightful. David Gartner had a great talk hosted by Microcapclub, which you can find on youtube for example.

 

it is also very cheap, they have a promo sometimes where you can get 2 years for $99 with Amex (which is what I did).

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34 minutes ago, Fitz said:

I think you can get inspired for your investing ideas by reading many things in life and you never know when one will click in you brain and its a business model you can understand, and a price thats attractive. So if you have benefited from these thats awesome! 
 

I prefer to read annuals, bi-annuals or investment letters from active and concentrated managers that have much of there own wealth in the companies they explain. 
 

You don't have to be a math wizard to understand that if this guy is beating the down by a “43-1” margin over 20 years, it makes much more sense for him to invest every penny he owns into his strategy and also raise as much outside capital as that strategy would support. Selling investment newsletters would be a much worse return as it has not compounded over the years. But, wouldn't he would already know this with that kind of track record? Quite the head scratcher! 🙂 

 

These are Hulbert's rankings, right?  I had always thought people considered his rankings credible.

 

I can see someone staying in the newsletter game.  It is a different thing than raising money and running a fund.

 

I'm not sure how well newsletter returns translate into raising capital, but let's say it takes 5-10 years to establish a track record.  After 10 years, maybe the writer has grown his personal wealth nicely and has a nice newsletter subscribership.  Maybe the author isn't making huge fund money, but could be fine. A newsletter is much less hassle than a fund and there's no guarantee that the fund would be successful.  Might be attractive to just continue with the newsletter.  I can definitely see that.

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The problem with looking at a newsletter's returns as I see it is how much of that return to date is attributable to a handful of good picks years ago vs. their ability to continually make good picks for a new investor.

 

Clearly picks like AAPL a decade+ ago have done well but as an investor looking to allocate capital today are you likely to see that same kind of return in today's picks?

 

Newsletters also have their shady side where an author can have multiple newsletters and then cherry pick results to show clients saying our XYZ strategy has performed awesome, when at inception there was little reason to choose their XYZ strategy over any of the other strategies they offered.

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5 hours ago, Spekulatius said:

I think the MF Stockadvisor and Rulebreakers are similar and have a good track record over the long run. Despite their cringeworthy marketing, I find some of their thinking very insightful. David Gartner had a great talk hosted by Microcapclub, which you can find on youtube for example.

 

it is also very cheap, they have a promo sometimes where you can get 2 years for $99 with Amex (which is what I did).

 

A number of people recommend The Motley Fool's products such as Stock Advisor. From my research, there does appear to be evidence that the Stock Advisor service has historically outperformed the S&P 500 index over different time periods (see the academic paper titled Evaluating the performance of the Motley Fool’s Stock Advisor™ ), however I do have the following concerns about The Motley Fool / Stock Advisor:

- Though Stock Advisor has consistently outperformed the S&P 500 since inception, according to the above academic paper, the strongest out-performance was in the first few years i.e. 2002 - 2006. The out-performance has significantly decreased since then.
- The Stock Advisor recommendations are tech heavy so you could argue that the returns of this service should be compared to the NASDAQ Composite which has performed much better during the last 20 years than the S&P 500. I'm not sure if there would still be an out-performance with this comparison.
- Motley Fool have a large number of services. My understanding is that many such services have been discontinued following significant under-performance relative to the index. This would imply selection bias which could be a cause for concern!
- David Gardner's Stock Advisor picks out-performed his brother, Tom Gardner's, by a lot! David is no longer directly involved in stock-picking, therefore it is unclear how the Rule Breakers team will perform without him.

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6 hours ago, Fitz said:

I prefer to read annuals, bi-annuals or investment letters from active and concentrated managers that have much of there own wealth in the companies they explain. 


Are you able to share which annuals / bi-annuals / investment letters you read?

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5 hours ago, Fitz said:

 You don't have to be a math wizard to understand that if this guy is beating the down by a “43-1” margin over 20 years, it makes much more sense for him to invest every penny he owns into his strategy and also raise as much outside capital as that strategy would support. Selling investment newsletters would be a much worse return as it has not compounded over the years. But, wouldn't he would already know this with that kind of track record? Quite the head scratcher! 🙂 


It makes sense to me that some talented investors may not want the additional pressure and / or admin associated with managing other people’s money.

 

A newsletter is at the end of the day just advise and the final responsibility on whether to invest or not lies with the subscriber.

 

I can think of many reasons why a good investor may want to publish a newsletter, namely:

- If you have found undervalued stocks, it's in your interest for people to find out about this as soon as possible so that your investment appreciates that much more quickly.

- Having a community following your stock-picks could facilitate a more rigorous debate on the merits of your picks. This could reveal flaws in your thesis and aspects that you are either not aware of or had not considered.

- You receive additional income for you to invest and amplify your returns even further!

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13 minutes ago, tparel said:

 

A number of people recommend The Motley Fool's products such as Stock Advisor. From my research, there does appear to be evidence that the Stock Advisor service has historically outperformed the S&P 500 index over different time periods (see the academic paper titled Evaluating the performance of the Motley Fool’s Stock Advisor™ ), however I do have the following concerns about The Motley Fool / Stock Advisor:

- Though Stock Advisor has consistently outperformed the S&P 500 since inception, according to the above academic paper, the strongest out-performance was in the first few years i.e. 2002 - 2006. The out-performance has significantly decreased since then.
- The Stock Advisor recommendations are tech heavy so you could argue that the returns of this service should be compared to the NASDAQ Composite which has performed much better during the last 20 years than the S&P 500. I'm not sure if there would still be an out-performance with this comparison.
- Motley Fool have a large number of services. My understanding is that many such services have been discontinued following significant under-performance relative to the index. This would imply selection bias which could be a cause for concern!
- David Gardner's Stock Advisor picks out-performed his brother, Tom Gardner's, by a lot! David is no longer directly involved in stock-picking, therefore it is unclear how the Rule Breakers team will perform without him.

@tparelThanks for the link to the paper. Great read. I found the service useful as it challenged some of my prevailing views. I also think they are making some avoidable blunders with picking stocks with questionable business models or even frauds ( Lukin coffee). Luck in coffee was an interesting one because short sellers had already pointed out plenty if red flags before the MF SA recommended it. This disaster was totally avoidable.

 

In other cases they piled on with recommendation that went already hyperbolically and in some cases, those that bought  found themselves out of 50% of their ones 2 month later. Some of those were repeat recommendations, so I really don’t get what they were thinking.

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9 hours ago, StevieV said:

 

These are Hulbert's rankings, right?  I had always thought people considered his rankings credible.


Yes, the returns specified in the opening post are from Hulbert’s rankings.

 

My understanding is that investment newsletters pay Hulbert Ratings a fee to be audited. Hulbert Ratings then set up an anonymous subscription so that they can track the returns of the newsletter. Hulbert’s Ratings have been active for 30+ years and since then have been tracking the returns of quite a large selection of investment newsletters / stock-picking services.

Edited by tparel
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13 hours ago, Pelagic said:

The problem with looking at a newsletter's returns as I see it is how much of that return to date is attributable to a handful of good picks years ago vs. their ability to continually make good picks for a new investor.

 

Clearly picks like AAPL a decade+ ago have done well but as an investor looking to allocate capital today are you likely to see that same kind of return in today's picks?

 

Newsletters also have their shady side where an author can have multiple newsletters and then cherry pick results to show clients saying our XYZ strategy has performed awesome, when at inception there was little reason to choose their XYZ strategy over any of the other strategies they offered.


I don’t think these points apply to the investment newsletters mentioned in the opening post i.e. Nate’s Notes and Investment Advisory Service because:

 

1) They have beaten the market significantly over many different time periods i.e. 3 years, 5 years, 10 years, 15 years, 20 years etc. so it’s not just good picks early on that have lead to their strong performance.

2) Both of these services have only had one newsletter throughout most of the last 20+ years. 
 

I do think your points are valid for other investment newsletters such as the Motley Fool’s Stock Advisor.

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