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Value Line's Ranking System Failed Miserably in 2009

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Jan 25, 2010
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Value Line released its own figuresfor the record of their timeliness rankings for 2009 in their Jan. 29, 2010 edition [available on-line today].


In the Value Line system Group 1’s are their highest rated stocks for year-ahead performance and Group 5’s are their ‘must sell’ projections for the worst year-ahead price action.


Here are the dismal results for those that actually followed their advice:




Average % Change in Price for 2009 - Allowing for Changes in Rank Each Week


(Arithmetic averaging)



Group 1



13.1%







Group 2



23.5%







Group 3



45.0%







Group 4



119.4%







Group 5



208.0%












Average % Change in Price for 2009 – Without Allowing for Changes in Rank


(Arithmetic averaging)



Group 1



16.0%







Group 2



22.4%







Group 3



41.5%







Group 4



95.0%







Group 5



175.4%












Average % Change in Price for 2009 - Allowing for Changes in Rank Each Quarter


(Arithmetic averaging)



Group 1



17.7%







Group 2



19.9%







Group 3



41.9%







Group 4



108.6%







Group 5



207.4%










If you followed their recommended strategy of buying/holding only shares ranked 1 & 2 for timeliness and selling those ranked 4 & 5 you had the worst possible results last year whether you adjusted or didn’t adjust throughout that very volatile environment.


In today’s new issue of Value Line they also reviewed how various stock market strategies performed last year. Once again the Group 1’s underperformed in a big way.




Average % Change in Price for 2009



Low Price to Sales



131.2%







Low Market Cap.



106.8%







Low Price/Book Value



101.0%







Low Price/Earnings



41.0%







Value Line Group 1’s



8.1%







Value Line (geometric) Avg.



36.8%



For their 1700 stock universe






I am a long-time subscriber to Value Line as a great source of stock information in what I see as the most useful format in the industry. I am, and have been, a long-term critic of their momentum based timeliness system.


Use the data. Ignore the timeliness ranks.





Disclosure: None

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