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Wednesday, July 6, 2022

The top performing investment newsletter of 2017

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The editor of last year’s top-performing investment newsletter does not forecast a rising stock market in 2018.

An example of the kind of stock he recommends is Equifax (EFX), the provider of consumer credit and marketing information whose stock plunged last fall after revealing a major data breach. Since Linde recommended the stock in early October, it has gained 14%. (Read my column in October devoted to Linde’s recommendation.).

The stock that Linde most recently recommended to his clients is Alarm.com Holdings (ALRM), a provider of home-security solutions. To be sure, the company is hardly undervalued in any conventional sense, trading as it is with a forward P/E of 39. Linde believes that investors have yet to take into account the boost the company will receive from a lower corporate tax rate.

Usually it takes longer than three months for the market to detect the value Linde detects in a stock. The average holding period of his recommendations is 12 months. Despite Equifax’s quick run-up, however, Linde continues to own the stock in his newsletter portfolio, though he currently classifies it as being “fairly valued” rather than undervalued.

Linde is so uninterested in timing the stock market that, in his monthly newsletter, he doesn’t even mention how stocks have performed since his prior issue.

As the occasion arises, in coming days I will devote additional columns to the strategies pursued by other newsletters that sport both good long-term records as well as being top ranked for 2017 returns. In the meantime, below are the top 10 services among those I monitor for 2017 returns.

This top performer is the Linde Equity Report, edited by Teal Linde. My performance tracking service ‘calculates that it gained 47% in 2017, more than doubling the dividend-adjusted S&P’s 21.8%. Linde is so uninterested in timing the stock market that, in his monthly newsletter, he doesn’t even mention how stocks have performed since his prior issue.

An example of the kind of stock he recommends is Equifax (EFX), the provider of consumer credit and marketing information whose stock plunged last fall after revealing a major data breach. Usually it takes longer than three months for the market to detect the value Linde detects in a stock. Despite Equifax’s quick run-up, however, Linde continues to own the stock in his newsletter portfolio, though he currently classifies it as being “fairly valued” rather than undervalued.

Don’t be alarmed. This top-performing editor is not forecasting a bear market, either. Instead, he doesn’t even engage in market timing in the first place.

He points out that, based on data from Thomson Reuters Eikon, the consensus of the 12 analysts who cover Alarm.com Holdings is that the company will pay a 34% tax rate in 2018 and a 36% rate in 2019. He believes that the company’s stock price will rise as those analysts alter their estimates to reflect the 21% corporate tax rate that goes into effect this year.

Instead, his focus is on finding “stocks with strong growth rates, high gross margins, expanding product demand, seasoned management, and a share price valuation providing for downside protection and room for significant price/sales and price/earnings multiple expansion,” to quote from his newsletter.

Newsletter 2017 Last 10 years (annualized)
Linde Equity Report 47.0% 15.4%
Nate’s Notes (Portfolio average) 33.4% 13.7%
Fidelity Monitor & Insight (Equity portfolio average) 23.4% 7.5%
PaulMerriman.com (Equity portfolio average) 21.1% 5.9%
Investment Reporter (Portfolio average) 21.0% 10.4%
Chartist Mutual Fund /ETF Letter (Equity portfolio average) 20.7% 6.0%
Investment Quality Trends (Portfolio average) 20.7% 11.0%
Buyback Letter (Portfolio average) 19.3% 9.2%
Investor Advisory Service 18.9% 11.4%
Prudent Speculator (Portfolio average) 18.7% 7.2%
S&P 500 (including dividends) 21.8% 8.5%
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