From: morrison@next3.corp.mot.com (Darren Morrison)
Subject: Re: Wall Street Week recommendations
Expires: 30 Aug 1992
Organization: MOTOROLA 
Distribution: usa
Date: Tue, 18 Aug 1992 15:24:16 GMT
Keywords: stocks

In article <1992Aug16.204806.25481@porthos.cc.bellcore.com>  
tony2@prefect.uucp (21131-gozdz) writes:
> 
> We measured the price performance of the 200 recommendations over  
several 
> periods, adjusting for the general market trend over the same period.  
[...]
> 					Excess performance of
> 					recommended stocks
> second week before show				+0.4%
> week before show				+0.8%
> day after show					+2.1%
> remaining 4 days of week after show		-0.3%
> second week after show				+0.4%
> next six weeks after show			-3.2%
> 
> [...] The overall conclusion, however, is that if want to make money 
> on Wall Street Week recommendations, you can't do it by watching the 
> show - you'll have to locate a _forthcoming_ guest and find out what 
> he plans to recommend when he appears.

Hmmm...

I think that the overall conclusion that you "can't make money by watching  
the show" assumes that you are going to follow exactly what was said.  I  
have never watched the show, but it seems that I could make money on the  
Wall Street Week recomendations based on these numbers.  Why don't I try a  
different approach using all of the information that I have:  1)  a Wall  
Street Week recommendation and 2)  percentages on how Wall Street Week  
recommended stocks perform directly after the recommendation.

What if I wait for all of the people who watch the show to bid up the  
price by buying the stock long on the Wall Street Week recomendation.  (I  
am assuming that they give a recommendation to buy a stock.)  The price  
peaks the day after the show - so I sell short.  My margin account  
currently charges between 6% and 7% annualized interest compounded weekly.   
Therefore, it will cost me somewhere around 1% in interest on the amount I  
margined for a six week loan.  I wait six weeks for the price to drop and  
then buy the stock back.  Roughly speaking I have made about 4% on my  
investment minus brokerage fees.

Of course I realize that this is the optimal scenario.  Calculating the  
peaks and valleys of the stock price is extreamly difficult and will  
affect the outcome. In addition, the percentages that we are basing our  
assumptions on are an average of 200 recommendations.  At this point we  
know nothing about the variances of the actual percentages.

Would I recommend this?  It depends on how risk averse you are.  A move  
like this one is not for the feint of heart or anyone who cannot afford to  
lose some money.  You have an opportunity to make 4% on average (minus  
brokerage fees) on your money in six weeks with a high degree of risk.  My  
savings account is currently paying 4% a YEAR with no risk.  Your mileage  
may vary.  I would definitely like opinions on the feasibility of this  
position.  Has anyone tried it?

Alternatively, if they are telling you to buy the stock - and you really  
want to own it, assuming that it has long term potential.  Why not wait  
six weeks for the price to drop and then buy it?

--
Darren Morrison		email:  morrison@next3.corp.mot.com
Motorola, Inc.		Phone:	1.708.576.4322
1299 E. Algonquin Rd.	  FAX:	1.708.576.6388
Schaumburg, IL 60196		All opinions expressed are mine and
USA				not necessarily those of my employer.