Nate Pile's home office has everything he needs -- plus an aquarium and a washer and dryer. FIFTEEN YEARS AFTER STARTING the Nate's Notes investment newsletter out of his home in California's wine country, is still picking tech stocks for loyal subscribers around the country.
And nearly 30 years after they quit working for a wealthy investor, sisters and are cranking out The from their home in Costa Rica. But has outlasted them all. The founder and editor of The Chartist has been tracking the zigs and zags of the stock market for four decades.
You might have thought that, by now, the tidal wave of free information on the Web would have drowned subscription-based investment newsletters. But that's not quite what's happened. Indeed, the number of investment newsletters that charge actually increased 60 percent from to , before leveling off after the financial crisis, according to publication database MediaFinder. The fact that they're still around—with many charging hundreds of dollars for an annual subscription—isn't the only shocker in today's newsletter industry.
They're also starting to turn heads with their ability to make people some serious money, in good markets or bad. Newsletter editors say even some hedge funds and analysts have a newfound interest in what they have to say and are quietly buying subscriptions. Any investor with a brokerage account or k plan knows the stock market has been a lousy place to park money in the past decade, even with the gains of the past two years.
Shareholders who reinvested all their dividends would have seen an average annual gain of 1. Some newsletters provide a stark contrast: Those tracked by The Hulbert Financial Digest have an average annual gain of 3. Many have been helped by being in the right place at the right time, recommending a mix of stocks and bonds or foreign shares and natural resources stocks that have outpaced most domestic stocks. But loyal subscribers also say they've benefited from some savvy calls on when to ride the wave of a rising market—and when to get out of the way.
Not all newsletters are racing ahead, of course. Some trip up with the same mistakes made by many mutual funds, picking risky stocks that can shoot higher one year only to fall the next. One well-known newsletter, The VALU, Value Line's director of research, says the newsletter focuses on small- and micro-cap stocks, which are often volatile, and that it added more-conservative small-cap stocks last year.
The year-old market timer has even owned a couple of racehorses in his day. But when it comes to putting money on the table, he'd rather stick with the stock market: Working from his office in Los Alamitos, Calif.
He's been picking stocks in his original newsletter, The Chartist, since , and he started his mutual fund newsletter nearly two decades later. In both, he tries to predict major market inflections—sometimes swinging from recommending being fully invested to holding just cash, within a matter of days. Last spring, for example, he advised subscribers of both newsletters to move entirely to cash. While he didn't "expect Armageddon," he told them he was trying to protect them from a bear market.
The market did indeed go down, and both newsletters moved back into the market in November—a bit late, Sullivan later said. Anyone who's going to recommend stocks, he says, "should be willing to buy them. That's not to say Sullivan doesn't have his losing streaks. Of course, Sullivan tries to get out of the market before such dips. Mary Anne and Pamela Aden Subscription: WHEN THEY MOVED to Costa Rica from Los Angeles more than three decades ago, Mary Anne and Pamela Aden huddled around a shortwave radio every afternoon to hear the market wrap-up on the BBC.
There was no World Wide Web, and The Wall Street Journal arrived two days late. Today, of course, they can get all the news and stock quotes by powering up their computers. But they still like to retreat to each other's homes for their most important job of all: Although the world has changed radically in the past 30 years, Pamela says investors still want pretty much the same thing: The sisters, now in their early 60s, settled in Costa Rica because they like the beaches and the easygoing lifestyle.
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But their Central American location symbolizes their global outlook as they pick investments for subscribers from Argentina to New Zealand. Like other success stories in the newsletter business, the Adens are good with numbers.
They sift through reams of data to create a portfolio that includes global stocks, currencies, precious metals and energy. They try to explain the fundamental trends—like the rise of China or the fall of the euro—behind the charts.
Although some market watchers think the shiny metal is in the throes of a major bubble, the Adens see it as a safe haven from economic uncertainty around the world. ANCIENT MARINERS believed that "pilot fish" led their vessels to shore, and a good technical analyst performs a similar role for investors.
For more than a decade, Kevin Kennedy has been navigating the ebbs and flows of the markets, using his own formulas to pick stocks and exchange-traded funds. He publishes four newsletters on stocks and exchange-traded funds under the Coolcat label, a name that he says comes from a character in one of his daughter's school plays in the s. It's not a bad life: Kennedy works from his house in California's sun-drenched Central Valley, a place where almonds and fig trees are more plentiful than stock pickers.
Like many market timers, he has hot and cool spells. But it's hard to argue with his long-term results. Although the five-year average annual returns are just so-so for the Coolcat Explosive Small Cap Growth Stock Report, the year record is strong. Kennedy, 54, employs a similar approach in all four newsletters, using his knowledge of statistics to winnow down the list of potential stocks or ETFs to a manageable number. Kennedy isn't exactly a buy-and-hold investor, as he issues regular recommendations to purchase and sell individual stocks and ETFs.
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Critics say such a short-term approach can lead to high trading costs and capital-gains taxes. But Kennedy says his subscribers want more-frequent advice about when to get out of the market.
About a year ago he ditched the monthly publishing model in favor of e-mailing brief updates to subscribers two to four times a month. UNLIKE the editors of The Chartist or Coolcat, who use technical analysis to pick stocks or funds, Nate Pile is an old-fashioned stock picker, regularly issuing brief recommendations on the roughly 20 holdings in his model portfolios. Occasionally, he'll add a new stock if he thinks the company has great products.
Pile's first taste of the newsletter business came when he landed a job stuffing envelopes and answering the phone for a biotech-stock newsletter while he was an undergraduate at the University of California at Berkeley. After graduation, he started his own newsletter focused on small-cap stocks, particularly those in the high-tech and biotech industries.
Today he works from a spare bedroom in his home, ensconced between a television blaring CNBC and a gallon saltwater aquarium. For nearly a decade, Pile toiled away on his newsletter after getting home from his full-time job as a math teacher at a local junior high school. Then, in , he decided that Nate's Notes was bringing in enough money for him to quit teaching and focus on the newsletter full-time.
Although Pile has compiled a strong long-term record, he still feels the competition from free websites. While most investment newsletters follow a wide range of stocks or mutual funds, a handful focus on just one family of funds. Among the more than half a dozen newsletters that follow Fidelity, Monitor has the best returns over the past decade, according to The Hulbert Financial Digest. Recent issues have covered topics such as sector funds, gold prices and the risk of municipal default.
Bowers bought a competing newsletter in , Fidelity Insight. The newsletter, with 30, subscribers, has four model portfolios composed of Vanguard funds. Wiener, 55, says he owns the funds mentioned in his newsletter. Instead, it focuses on company news and performance at American Funds, one of the largest fund firms.
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