Thanks to this, my retirement will be sooner and better!
Written: Feb 12 '06 (Updated Feb 12 '06)
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Product Rating:
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Pros: solid value-based investment advice at a fair price
Cons: they won’t let me buy a lifetime subscription
The Bottom Line: Subscribing to this newsletter was the single best investment decision I have made in my life. This newsletter is well worth the price for portfolios of $20,000 or more.
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| Saxguy's Full Review: Prudent Speculator Magazine |
I have subscribed to this newsletter for years. According to Quicken, the earliest subscription payment I can find was in June 1998. The subscription started sooner, as I subscribed to this as part of a trial through the Select Information Exchange (SIE) service.
Throughout those years, I’ve been very successful trading on the advice included in this newsletter. I have used recommendations from this news letter on almost all of the trades in my individual security portfolios, most of which have tax deferred (IRA/Roth IRA) status. Of my current portfolio, the stocks with gains outnumber the losers by approximately 2 to 1, with the average gain of the winners 85.4% total and 36.4 annualized, and with the average loss of the losers as 19% total and 27% annualized, indicating that many of the losers have been fairly recent purchases. And, you know what, I could have done better. Their trading approach (more below) is a buy-and-hold, and there were 3 stocks that I can remember that I gave up on and sold and subsequently enjoyed substantial gains due to improved operations or acquisitions.
I believe my results are representative. The newsletter cites statistics of approximately 70% winning recommendations, based on the stock price at first recommendation.
The current listed subscription price is $295, but they offer $195 at Forbes.com since they are now owned by Forbes. Renewals are $195 for 1 year and $295 for two. I’ve asked on several occasions but they will not let me renew for longer periods.
Their mission is a simple one:
Combining prudence and selection for profits and tranquility
That’s certainly happened in my case. I don’t know that I am any more tranquil now, but I believe that the newsletter has and will continue to help my retirement happen sooner and better.
Their investment style is value investing. In other words, they research stocks and recommend and trade those that are undervalued according to several fundamental criteria (balance sheet strength, potential growth, cash position, etc.). They do not use much technical criteria, such as interpolating future prices based on the shape of the historical price chart. For each recommended stock they calculate target share prices, the fundamental goal being their realistic target based on their criteria and also a liquidity goal that adjusts the fundamental goal for factors related to number of shares outstanding and trading volume. The goal prices are updated as information becomes available. A stock is recommended if it trades at less than half of its fundamental goal value. There may be a sell recommendation if a stock hits its goals, but, very often, instead they raise the goals, or recommend selling a portion.
So what’s included in a newsletter subscription?
First, the Newsletter
This 10 page publication is still mailed monthly, even though it is available from the service’s website, prudentspeculator.com. The newsletter includes the following sections:
Market commentary One page of commentary by the CEO, John Buckingham, discussing economic factors. He usually finds a way to plug the long-term, buy-and-hold and investment approach, too. Guess there are a lot of sample issues out there.
Stock of the month
There is 1 page devoted to the recommended stock of the month, discussing the stock, competitors, operations and prospects, also including a one year chart.
Portfolio Builder and Alternate Stock of the Month
These share page 3. The Portfolio Builder shows 10 recommended stocks and the suggested amounts to buy of each given a $50,000 or $150,000 or $300,000 portfolio ($2,000 per stock or $4000 or $6000, respectively). The stock of the month and the alternate stock of the month are included. The alternate stock of the month is a couple of paragraphs supporting describing the fundamentals supporting purchase of the stock.
All Currently recommended Stocks
This is three pages of tables showing all stocks recommended for purchase. In other words, these are currently selling at less than 50% of the previously described fundamental goal price.
The table includes the following statistics: ticker symbol, name, price, liquidity Goal, Fundamental Goal, buy limit, Price/earnings ratio, price/cash flow ratio, price/sales ratio, price/tangible book value ratio, long term debt/tangible equity ratio, dividend yield and market capitalization.
The remainder of the third page and a next page is for a Strategy Update of various followed stocks within a sector. In the latest issue, it was tech.
The next page is split between Stocks to watch and Sell Recommendations, Splits and Other Considerations. The stocks to watch are close to their buy or sell limits. The Sell Recommendations…. section does what it says in listing relevant activity for the last month.
The next page rotates between listing the various Model Portfolios followed by a final page of various statistics on the results of the various portfolios and recommendations of the firm, both short term and long term.
As great as this newsletter is, I usually don’t read the paper version much because it’s old news by the time I receive it in the mail. Why? Well, the news letter is available for download by subscribers at www.prudentspeculator.com, generally a few trading days into the following month.
The real value of this subscription is electronic. I receive Hotlines by email, scheduled 3 times per week: Monday morning, which includes more general market commentary and Tuesday evening and Friday evening, with more information on specific stocks. The latter two hotlines generally feature a “hotline special” recommended stock, usually a new recommendation. They also do special hotlines if the Dow Jones average has moved more than 3% or the NASDAQ has moved more than 5%. I generally get the Monday hotline in my email before I go to the day job and the Tuesday and Friday hotlines are usually available before 9pm CST on the scheduled day.
Also available on the web site is a monthly update of goal prices, usually taking place about two-thirds of the way through the month.
An objective service, Hulbert at CBS Marketwatch.com, has ranked this as having the #1 performance for investment newsletters over 10 years, 15 years and 25 years.
I have not tracked overall investment performance for my entire portfolio. That’s too difficult, given that I have put some IRA money in each year and also have bought and sold some shares under taxable ownership. What I have noticed is that there has been steady and substantial improvement in the aggregate value of the portfolio. It truly is helping my retirement come better and faster.
Along the way, I’ve learned a few things:
1. Pay close attention to goal prices
There have been a couple of times where I sold stock that hit a goal price, instead of holding it. The newsletter’s general approach to hitting a goal price is to raise the goal price. This does not always happen, but it frequently does. There were a couple of times I sold too early instead.
2. Buy and Hold is the best strategy
Classic investment theory, which I learned in grad school, holds that transaction costs will weigh heavily on rapidly traded portfolios, and the best way to achieve solid stock returns is to buy and hold. Classic investment theory also holds that it’s tough to outperform the market and that’s a flaw. The theory helped spawn a slew of index funds, which are a key component of my pension portfolios. While trading using TPS' recommendations, I’ve learned that I dislike selling too soon worse than selling too late. Yes, there have been a couple of recommendations that went bust. However, there are also a few positions where I waited and watched for years, got disgusted and sold, and then the positions rose like the Phoenix, seemingly as soon as I sold it.
3. The winners have to win more than the losers lose
Well, duh. However, it’s hard to remember when a loser has gone bust. The thing I have done to diversify is to spend modestly when I buy. The big cap/established stocks will get purchases around $2,000; microcap or riskier stocks will get about half of that. I also tend to shy away from stocks with high debt levels or hogh price-earnings ratios.
4. You not only have to diversify within a portfolio, you also have to diversify portfolios
My individual stock portfolios in total are about 25% of my investment capital, up from about 15% 3 years ago. I’m continuing to put a small amount in and to keep my proceeds in, but I am putting much more current money into the rest of my investments. They are a small number of mutual fund and a couple of pension managers my employers have used that have funds that behave like mutual funds.
I would not recommend that anybody take all their investment money and put it into individual stocks.
I recommend this newsletter highly. At Alfrank.com, named for the founder of the newsletter and related investment management company, they have a free newsletter called The Buckingham Report which doesn’t have a lot of stock recommendations but will give the reader a flavor of the benefits of the subscription. This newsletter is no longer available for trial at Select Information Exchange. There are sample newsletters for The Prudent Speculator and The Prudent Speculator Tech Value Report available from Alfrank.com. I do not subscribe to the Tech Value Report.
I've also found the management company to be responsive by email. Often, I'll email them if a stock hits a goal price in between hotlines or newsletters. They almost always respond that same day with a recommendation.
For wealthy individuals, you can choose to have your investments actively managed by the investment company.
The company also manages the Al Frank Fund, a publicly available mutual fund in which I have a little bit of IRA money. The same investment analysis is used to drive trading strategy for the fund. It is an alternative to buying the newsletter and trading yourself on a very small level.
Thanks for reading. God bless!
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Recommended:
Yes
Primary Reason for Buying: Product Reviews/Information
Recommended For: Personal Finance/Education
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