Zacks In The News
Some Model Portfolios Outperform in the Worst of TimesChicago, IL- March 16, 2009- Amid a bear market, credit crisis, rescue packages, stimulus bills and more, investors continue to search for investment advice they can trust. As they try to contain their emotions, use extreme caution in bucking the headwinds and attempt to navigate around the minefields in the wake of a total S&P 500 return in 2008 that was -37%, Zacks Investment Research has released the year-end rankings of model portfolios of some of the streets retail brokerages.
This is the third consecutive survey during a volatile stock market. Even though all posted negative total returns, its noteworthy that , in the second half of the year, almost half outperformed the benchmark indicator in what was an ugly year for Wall Street. The Top six performers moved up in rank from their mid-year 2008 levels. For the full year 2008, eight out of fourteen brokerages turned in a better return than the S&P 500, with positive excess returns versus the index. “The top performing brokerages for the year were invested in the sectors that produced the best performance in 2008”, says Tracey Ryniec, stock analyst for Zacks.com. “Although all sectors finished lower for the year, consumer staples was the top performing sector and was considered to be the best performing defensive area during the stock market’s rough ride. Not surprisingly, the top model portfolios were heavily weighted in consumer staples stocks.”
Ryniec also points out that the technology and healthcare sectors, also among the top performing sectors in 2008, counteracted losses the portfolios saw in the financial sector. “All three top performing model portfolios used an outsized investment in either technology or healthcare to boost returns. Technology was among the top two sector holdings of the three best performing portfolios. Additionally, oil and energy, the top performing sector of the first half of 2008, saw such large first half gains that it provided an extra boost to portfolios going into the second half of the year which aided full year performance. “
The top three winners for 2008 were Edward Jones, Credit Suisse and Morgan Keegan respectively. Edward Jones is also the first place taker in the three year category, while Morgan Keegan ranks first in the five year.
The top 14 ranked brokerages for year-end 2008 (12/31/07 to 12/31/08) are as follows…
Rank
Brokerage Firm
Total Return
Excess Return vs. S&P 500
1.
Edward Jones
-30.34%
6.66%
2.
Credit Suisse
-34.56%
2.43%
3.
Morgan Keegan
-35.27%
1.73%
4.
Wachovia/A G Edwards
-35.93%
1.07%
5.
Smith Barney
-35.96%
1.04%
6.
Raymond James
-36.25%
0.75%
7.
Matrix
-36.58%
0.42%
8.
Morgan Stanley
-36.89%
0.10%
9.
Merrill Lynch
-38.08%
-1.09%
10.
McAdams Wright Ragen
-38.13%
-1.13%
11.
Charles Schwab
-39.18%
-2.18%
12.
New Constructs
-41.32%
-4.32%
13.
Goldman Sachs*
-43.71%
-6.72%
14.
Wedbush Morgan
-50.79%
-13.80%
*Goldman Sachs changed their model portfolio at the end of the 3rd Quarter.
2008 Q1 – Q3: Buy/Attractive List
2008 Q4: Conviction Buy List
When Goldman changed their list at the end of the 3rd Quarter 2008 they were charged the standard 1% commission rate. Zacks complete one-, three-, five- and seven-year rankings are available to the media upon request. Zacks calculates the performance of the brokerage "model portfolios" it tracks, on an equal-weighted basis. Total return performance figures include stock price changes, dividends and hypothetical trading commissions of 1% for each addition and deletion to the model portfolios.
The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor's. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index.
Zacks Investment Research, Inc., developed the concept of the EPS Surprise and created the first quantitative model to predict stock prices based on patterns, estimate revisions and surprises, called the Zacks Rank. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities.
The leading brokerage firms employ analysts who produce recommendations for hundreds of stocks, which can not all be bought for a client portfolio. These brokerage firms then create model portfolios from all of the stocks each firm is following. These can be used as a starting point in the stock selection process to meet a specific client's risk & return needs. The process to create these lists range from a bottom up quantitative methodology, to a top down fundamental process. The model portfolios in the Zacks survey include U.S. traded equities including ADRs.