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Most financial newsletters offer advice on selecting stocks or mutual funds that will (hopefully) help you beat the market. But there's one that's different - the Hulbert Financial Digest. Now in its twentieth year of publication, Hulbert analyses financial newsletters, not stocks.

You might call it a newsletter newsletter, or if you think of an investment newsletter as a guide to the stock market, a guide guide.

How it got started is a story in itself. Founder Mark Hulbert attended an investment conference in New Orleans in 1979 where he found the editors of dozens of financial newsletters promising to double or even triple your investments with little or no risk. Ever the skeptic, Hulbert decided to check out these newsletters in detail.

What he found was that these newsletters invariably exaggerated their claims. And so he launched the Hulbert Financial Digest, the first and as far as I know, only newsletter to analyze investment newsletters in depth and compare their performance. Currently the Hulbert Financial Digest follows 160 different newsletters and tracks 450 portfolios recommended by them.

Hulbert himself has been a frequent media commentator and contributes a regular column to the Sunday New York Times. He also hosts a radio broadcast every Monday at 10:00 AM on WFTL in Fort Lauderdale.

The most important lesson Hulbert brings to his readers is that there appears to be a natural upper limit to how well an investment newsletter (or a mutual fund) can do over the long run. While performance in a particular year may be huge, long run performance tends to have an upper limit of around 20-25%. Be sure to read the free online sample where he elaborates on this point.

I started my subscription to Hulbert last fall when I decided to start reviewing newsletters for this website. I'd heard of Hulbert, checked out his site and liked what I saw. I wanted to see how he analyzed newsletters to get some pointers for my own reviews.

He follows very few Canadian newsletters which is my focus but he does offer excellent insights into evaluating newsletters. And he covers some of the biggest names in the business - Howard Ruff, Mark Skousen, James Dines, Joe Granville, Adrian Day, Richard Band, Louis Rukeyser and more. He even follows some well known portfolios that aren't from newsletters but from financial websites, such as the Motley Fool's four portfolios.

What I like about Hulbert is the level playing field he presents in comparing the various newsletters. You know he's applying the same methodology to each, so his analysis is fair. But he has ruffled the feathers of more than a few of the editors he follows.

Why? Well, Hulbert believes advice in a newsletter isn't much good unless you can follow it. So he waits until he gets a newsletter in the mail or by email and then calculates the price at which stocks recommended as "buys" can actually be purchased by subscribers.

This is significant because many newsletters will publish a buy recommendation and use the price of the stock on the day the newsletter was published as the purchase price for the purpose of calculating returns. What good is it if a newsletter recommends a stock at $2 on the day the newsletter is published, but by the time it arrives the stock has gone up to $3? This methodology has resulted in the performance of many newsletters to be much lower than claimed.

Another bone of contention is over rebalancing. Unless a newsletter specifically indicates otherwise, Hulbert assumes the position that a portfolio should be equally divided between all the recommended stocks. The portfolio is rebalanced each issue so it resembles the portfolio a new subscriber would buy if he followed all the recommendations.

Perhaps the most controversial aspect of Hulbert's approach is his interpretation of a newsletter's advice to "hold" a stock. Hulbert takes this as meaning "sell". Hulbert asks, quite rightly, how should a new subscriber interpret a recommendation of "hold"? Should he interpret that to mean he should buy the stock? Is it a good stock to have in one's portfolio or not? "Hold" is ambiguous, he says. And so he interprets it as "sell" unless the newsletter clearly states that "their stocks rated hold are just as highly recommended as their stocks rated buy".

As he puts it, HFD "takes the perspective of the new subscriber and constructs the portfolios out of just the buy rated securities".

Howard Ruff, among others, vehemently objects to this. He argues that if he "recommended Squibb at 64 and made it a hold at 70 until it reached 90, Hulbert's program would close me out at 70". But Hulbert retorts that when he sells a stock from Ruff's portfolio, he doesn't stuff it into a mattress. He re-invests the proceeds in stocks Ruff recommends as "buy", presumably a higher rating than "hold". So how can he possibly object?

Hulbert's goal is to have a better informed investor. Besides reviews of various newsletters, each issue of HFD also includes an article about evaluating newsletters or investing in general. Recent ones include "The Sector Rotation Roulette", "Executions" (about the price at which recommended stocks can actually be bought by a newsletter's subscribers), and "A Bit of History, Please" (about whether the severe market decline in March and April is really a bear market).

Twice a year (in January and July), he publishes a complete list of all the portfolios followed, indicating their returns and how they compare to the benchmark Wilshire 5000 Index. Below is a table of the top performing newsletters as ranked by Hulbert as of March 31, 2000.

For a detailed profile of the Hulbert Financial Digest, including contact and subscription information follow the following link:

Hulbert Financial Digest

Other Links of Interest

Hulbert Financial Digest - The HFD website.
Mark Hulbert Profile - Brief bio at the HFD website (most of which is included in the article above).
Newsletters Followed by Hulbert - Complete list of the newsletters followed by Hulbert (many of them linked to their websites).
Online Sample - Free online sample features the article "Reality Check" about the limits to long run returns.
Forbes Magazine Articles by Mark Hulbert - Archived articles by Hulbert online.
Lessons from Mark Hulbert - Interesting article on Hulbert from FundAdvice.com