AAII Stock Superstars Report
By Henry Wirth, Whistleblower
As an American Association of Individual Investors (AAII) member, I am regularly subjected to AAII's promotions. During February 2010 I received the following promotion from AAII inviting me to subscribe to the AAII Stock Superstars Report:
James B. Cloonan, PhD, Founder and Chairman of AAII wrote: "I want you to know that the Stock Superstars Report Maintains the Absolute Integrity you expect from AAII."
The Stock Superstars Report Performance Update was enclosed. It claimed that the "Stock Superstars 12-month performance as of 12/31/09 is 30% greater than that of the market. Further, the portfolio has performed 10X better than the market since its inception in early 2002."
For the 12 months of 2002, the AAII's Stock Superstar's website reports a Superstar's gain of 0.5% vs. a loss of 21.0% for the Wilshire 5000 - the Total US Stock Market. This is outstanding performance, but the problem is that the AAII Stock Superstars Report was NOT available to the public until after the August 2002 AAII Journal was published. That means it would not have been possible for anyone to realize the AAII Stock Superstar's outstanding returns during 2002.
Note that this is a well known strategy used by some mutual fund families, and it's perfectly legal. Here's how it works:
1. Register a new mutual fund with the
SEC, but keep it secret from the public.
2. If the fund performs well, then open it to the public.
3. If the fund performs poorly, then terminate it.
A terminated fund and its underperformance disappear from the public record forever. However, if a fund performs well, then its outperformance becomes part of the public record. That's how some mutual fund families can claim their funds are above average. Don't you wish that you could make your underperforming investments disappear forever?
The Hulbert Financial Digest began tracking the AAII Stock Superstars portfolio on January 1, 2003, about four months after it was introduced to the public.
The Hulbert Financial Digest is a digest that has been monitoring financial newsletters since early 1980. During 2010, Mark Hulbert and his squad of analysts monitored almost 200 newsletters in which more than 500 portfolios are included. Mark Hulbert writes regular columns on MarketWatch, a bi-weekly column for the Sunday New York Times and a quarterly column for the Journal of the American Association of Individual Investors.
How well did the AAII Stock Superstars perform during the period after which The Hulbert Financial Digest began monitoring the portfolio i.e., the 8.0 Years ending 12/31/2010?
The Superstars gained 5.7% per year during the 8.0 Years ending
12/31/2010.
The Wilshire 5000 - the Total US Stock Market - gained 7.8% per year during
this period.
The Vanguard S&P 500 Index Fund gained 6.6% per year during this period.
The Vanguard Small Cap Index Fund gained 11.8% per year during this
period.
Also, owing to the fact that the Superstar's returns have been 23% more volatile than the overall stock market, this portfolio lags by even more on a risk adjusted basis.
What has the AAII Stock Superstars portfolio done lately?
How well did the AAII Stock Superstars perform during the Five Years ending 12/31/2010?
The Superstars lost 0.2% per year during the Five Years ending
12/31/2010.
The Wilshire 5000 - the Total US Stock Market - gained 2.9% per year during
this period.
The Vanguard S&P 500 Index Fund gained 2.2% per year during this period.
The Vanguard Small Cap Index Fund gained 5.4% per year during this
period.
A loss of 0.2% per year during the Five Years ending 12/31/2010
ranks the AAII Stock Superstars 118 out of 149 newsletters monitored
by The Hulbert
Financial Digest for Five Years or more. Recognize that a
simple asset allocation model consisting of a 50% Intermediate Term
Bond Index and a 50% Total US Stock Market Index would have returned
5.3% annually during the five years ending Dec. 31, 2010.
Here are the returns of some well known favorites:
Annual Returns for the Five
Years ending December 31, 2010
6.2% Zacks Elite (#36 of 149)
5.4% Morningstar Stock Investor (#43 of 149)
5.2% Bob Brinker's Marketimer (#45 of 149)
4.9% Morningstar Mutual Funds (#46 of 149)
3.6% Louis Rukeyser's Wall Street (#72 of 149)
1.9% Value Line Investment Survey Small & Mid-Cap (#97 of 149)
1.6% Value Line Investment Survey (#99 of 149)
0.0% Prudent Speculator (#113 of 149)
-0.1% Standard & Poor's Outlook (#115 of 149)
-0.2% AAII Stock Superstars Report (#118 of 149)
-2.9% Morningstar Opportunistic Investor (#128 of 149)
-6.5% Value Line Special Situations Service (#137 of 149)
Contact Henry Wirth by writing to AAIIrochester@Gmail.com
The facts above, and others that may be of interest, were originally published on http://www.henrywirth.com/LIESandSTATISTICS.html