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Important investing lesson: Don’t follow the pros Add to ...

BTIG Research has produced a table showing how the various investment picks touted during the last Ira Sohn Investor Conference have fared.

The overall impression (via FT Alphaville) is mixed: The worst (shorting five-year French government bonds, investing in Caesars Entertainment Corp. and J.C. Penney Co. Inc.) have suffered double-digit declines since the May 16 charitable event. The best (Tenet Healthcare Corp., Virgin Media Inc. and Westlake Chimical Corp.) have risen between 46 per cent and 65 per cent.

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Of the 28 investment ideas produced during the conference, 19 have delivered positive results – for a success rate of 68 per cent.

The annual conference is followed closely by the media, with live updates that can move stocks in a big way. After all, when brilliant investment minds present what they believe are their best investment ideas, who’s to argue?

However, index investing has been a better road to success. If you had invested an equal amount of money into each of the 28 ideas presented at the Sohn conference, you would have made 8.4 per cent over the past eight months. That underperforms the S&P 500’s 9.7 per cent return over the same period by 1.3 percentage points – not including dividends.

Admittedly, this assumes the pros’ investment ideas were buy-and-holds; they wouldn’t have bailed out of losing ideas or taken some quick cash on winning ones. It also assumes that the ideas were relatively fresh ideas, and that presenters weren’t merely talking their books prior to shifting directions.

Either way, it says something about following the pros after their investment ideas have been made public. There are better ways to invest your money.

 

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