Don’t trust some financial journalists

Investment professional Dan Solin writes for U.S. News & World Report why some financial journalists are not to be trusted.

Solin writes, “CNBC is a rich source of useless financial information. Typical is Cramer’s recent endorsement of Facebook. He now believes the stock is a buy because it has entered a ‘virtuous cycle’ in advertising.

“Respected journalist Allan Roth reviewed Cramer’s stock-picking skill in a scathing blog post. The results aren’t pretty. Roth calculated the odds of Cramer’s four erroneous sell recommendations for stocks that turned out to be the best performers out of 749 different stocks for the six-month period ending in May 2013. They were 1 in 13.1 billion.

“Cramer may be right or wrong about Facebook, but his track record does not inspire confidence.  Relying on his stock picks is gambling and not investing.

“Motley Fool. This popular website clearly has an identity crisis. I have seen some very good postings that note how difficult it is to beat the markets and advise readers to consider index funds. Yet the site clings to the notion that its insights on the merits of stocks and actively managed mutual funds are valuable, with columns like ‘How Stocks With Strong Fundamentals Beat the S&P.’

“Here’s what is not well-known. Motley Fool is the fund manager of three funds bearing its name:  The Motley Fool Independence Fund, the Motley Fool Great America Fund and the Motley Fool Epic Voyage Fund. According to its latest semiannual report, each of these funds underperformed its relevant index over the six-month period from November 1, 2012, through April 30, 2013.

“Presumably, if the Motley Fool had stock-picking expertise, it would be reflected in the performance of its proprietary funds.”

Read more here.