In my personal search for a research provider, I recently googled the term “Top Stock Picks Australia 2015” and the second search item that came up was an article from the Motley Fool Australia site, a well known investment recommendation site. So, how have their share picks performed so far in 2015…..
Before we go on, this is not meant to be a critical article of Motley Fool Australia, but it does highlight the value of your adviser is not in stock picking but in helping you achieve your goals.
So, if I were to have followed the Motely Fool's contributors 3 top stock picks for 2015 versus the market, how would I have performed to date (acknowledging we are only 3 quarters of the way there). I aggregated all the contributors tips - two stock recommendations overlapped, that of "Shine Corporation" and the other of "Slater and Gordon". I have assumed we would "double up" on these investments.
In summary:
- 7 recommendations outperformed the ASX200
- 16 recommendations underperfomed the ASX200
- 1 recommendation has gone into liquidation
We saw an average loss on the investments over 9 months of approximately 12.27% versus an ASX200 loss of 9.10%.
So, what does this tell us?
- Firstly, stock picking is not an easy game....as research professionals, we should obviously be looking at their longer term picks before we make any judgement on their ability to outperform the market.
- Secondly, it is not your adviser's responsibilities to be stock pickers - they rely on the research of their licensee's affiliated research house.
- Thirdly, if you are in individual stocks, make sure you have a good exposure to a wide variety of the market (often when one sector is underperforming, another is over-performing).
- Fourthly, don't use online research and "top stock" selection articles to inform your share investment strategy!
See the full list below
ASIC's MoneySmart website provides good tips on what investing in the stock market entails, as well as information on complex investments.
by Angus Woods, MD, Adviser Ratings
Article by:
Comments7
"I agree with Michael's comments. You've completely missed the point of the article. Those stock picks are the picks from the writers, not the Stock Advisors on each of the Motley Fool's subscription services (which are all beating the market substantially). The article is not meant to be "Ok setup your portfolio and buy all these stocks", as you have assumed. As you also noted, each writer picked 3 stocks individually, with no consideration for what the other writers would pick. How successful do you think your performance would be if you asked 10 financial advisers for the same thing? 3 stocks is not enough diversification in any portfolio, and 9 months is not enough time to evaluate a long-term stock idea. "
Mike 09:35 on 30 Oct 15
"Thanks Michael for your comments - as stated, this wasn't meant to be critical of Motley Fool, as indicated by the author, our MD's last comment, about arbitrarily using one article to inform your strategy. In addition, if we did use the December 19 date (when the article was published), the variance would be similar / slightly worse - ASX 200 had a loss of 7.41% over that period against the articles stock selections loss of 10.64% for a total variance -3.23%."
Adviser Ratings 15:44 on 05 Oct 15
"Motley Fool Australia have 5 paid advisory services of which I Subscribe to 4. Your list contains 19 companies that are not "stock picks" in those four services. Currently 3 of the four are doing better than the relevant indices that they compare themselves to, the fourth has only just started so there is no comparison as yet. Quite apart from the shares being discussed not actually being recommended bt the Mötley Fool, it's a bit pointless measuring performance form an arbitrary point, 31 December 2014 in this case, surely one would measure from the date it was recommended. All up, a misleading article using incorrect data and poor analysis."
Michael 20:55 on 03 Oct 15
"Great article Angus ! The stock picking firm you refer to is often quite critical of financial planners , and yet refer to themselves as " investment advisers " on their website . Even their FSG states" they provide financial solutions for investors of every kind... " How this can be achieved by simply providing stock selection recommendations under general advice is beyond me . It will be interesting to see the impact of enshrining the terms financial adviser and financial planner on such " advice firms " "
Jason 16:12 on 01 Oct 15
"This is gold - if only the stock picking spruikers were held accountable to provide their track record in terms of performance and volatility compared to the index we might break the back of the ridiculous world of spruikers selling performance - IMO this is the single greatest blight on our industry and it is what leads people to doubt the credibility of the entire wealth management industry."
Shane 10:36 on 30 Sep 15
"Great article, and I agree that many adviser's aren't necessarily expert stock pickers. However, in defense of the advisers, sometimes it becomes a case of their clients asking them which stocks look good to buy and they are then forced into the position of answering them with some kind of stock pick and research that sounds convincing just to hold their position of financial authority. My take? Best to leave the stock picking up to the fund managers and focus on doing what we advisers do best - growing wealth and designing lifestyles."
Jeremy 10:08 on 30 Sep 15
"I dont believe many stake holders / consumers are fooled into believing that "advisers"are "stock pickers" we all know from trials that school children ,blind dart throwers , bingo callers can all out perform the so called experts as "pickers" not fooled there then. The people to be convinced from my experience is the so called advisers and the backers of these often educated fools that think and believe that they can help themselves to other people hard earned cash by right. FULL TRANSPARENCY [wash my mouth out] would be a good starting point. he who pays the piper calls the tune !! independent non tied ASIC ,FOS, AFP ect would be a dream come true. ."
ernie 09:21 on 30 Sep 15