This is a transcription from the April 14, 2011 Mullooly Asset Management podcast.
Lauren: Welcome to the Mullooly Asset Management podcast for April 14, 2011. I’m Lauren O’Grady and with me is Tom Mullooly from Mullooly Asset Management in Wall Township, New Jersey.
So, Tom, it looks like you’ve been reading John Dorfman’s column again today. Dorfman is a money manager and also a syndicated columnist for Blumberg. So what does Dorfman mean by his elite 30-30 club?
Tom: John Dorfman wrote this column, Five Stocks Top the Rest in My Elite 30-30 Club and he’s trying to make an analogy between some stocks that he likes and the 30-30 club in baseball. And for those that don’t know, the 30-30 club, about 20 years ago was a pretty elite group, because it was very hard for players to get 30 home runs and 30 stolen bases in the same season. But now that everybody’s on steroids, it happens a lot more frequently.
He mentioned Bobby Bonds and Barry Bonds on his list, he also mentioned that Willie Mays has done it as well, but, you know, he skipped Alfonso Soriano, who has done it four times, even regular guys like David Wright and Howard Johnson, and even Preston Wilson is on this list. The 30-30 club is just not a big deal any more.
And this is my whole point after reading Dorfman’s column this week. Dorfman makes a big deal about the names on his 30-30 list. His list is comprised of names that have companies that have a 30% return on stockholder equity in the last year and 30% average annual earnings growth over the last 5 years. That sounds pretty good. Does that mean, though, that these stocks are a good investment now?
Honestly who cares if the stockholder equity grew by 30% in the past year? Most folks want to know what’s happening this year. Otherwise, we’re left to guess and make predictions and for those people who have been getting my emails or listening to the podcast, you know at Mullooly Asset Management, we don’t make predictions.
Lauren: Okay, Tom, but how about the names on this list, are they any good?
Tom: You know what, Lauren? A lot of the names on his list are, they’re in positive trends, they’re on buy signals, and from a technical perspective, a lot of the names on the list look actually, you know, pretty good. But I just don’t like relying on fundamental analysis. Things like stockholder equity or the average annual earnings growth. And I don’t like relying on them because if you buy a stock just because some analyst expects or predicts that the average annual earnings growth will be 30%, you’re sunk if those earnings don’t come through as predicted. And likewise, if you buy a company stock because they’ve posted great earnings growth over the last 5 or 10 years, what’s the likelihood they’re going to continue that kind of growth? Again, you’re making a prediction about the future.
Now, some of the stocks that he’s mentioned on his elite 30-30 club are terrific on their technical charts. But since it’s not really prudent for an investment advisor to make blanket recommendations, we suggest that you call the office or contact us and we’ll be happy to share our feelings about each and every name on his list.
And again, we strongly suggest that before you make an investment decision, you talk it over with an investment advisor. If you don’t have an investment advisor, you can certainly call us at Mullooly Asset Management. You can find us on the web at www.Mullooly.net, that’s M-u-l-l-o-o-l-y.net, or you can call us in New Jersey at 732-223-9000.
But Lauren, here’s the kicker. Near the end of his article, Dorfman discloses that of all the names on his so-called elite list, he only owns one of them for his clients, out of all these names.
Hey, John, if you really feel a particular stock is elite, do your clients a favor—buy it. It might be a good investment.
That’s it for this week, we’ll talk to you again this week, take care.
Never miss a post...and we deliver!
Get our updates delivered right to your inbox. Sign up today!
