How You Interpret the Data Makes All the Difference
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It is worth noting that Marcial's picks were up an average 8.8% the day after they appeared in print, compared to an average daily increase of 0 .3% in the S&P 500 Index. Unfortunately investors couldn't buy at the previous days close. Also, unfortunately for investors, studies have shown that when new information is known about a stock, virtually the entire price move occurs in the very first trade. Thus investors likely paid about 9% more for Marcial's picks than the previous close, clearly reducing the value of his picks for those investors that attempted to capitalize on Marcial's skills.

Larry Putnam, a contributing writer for the Web site indexfunds.com, took a closer look at Business Week's claim that stock-picker Marcial "trounced" most indexes and slightly trailed the Nasdaq index in 1999. When analyzing mutual funds or stock picks it is important to make sure you are making apples-to-apples comparisons, something Business Week failed to do (thus providing misleading information). Putnam compared the price performance of Marcial's 155 stock picks to their appropriate benchmarks. Here is a summary of what he found: ·

85 (or 55%) of Marcial's 155 picks traded on the Nasdaq and AMEX. These are typically smaller-cap and technology-related stocks.

70 picks (45%) traded on the NYSE. These are more typically large-cap growth stocks.

When you compare Marcial's picks with a portfolio that is weighted 55% NASDQ Index and 45% S & P 500 Index, his 155 picks should have increased in price an average of 25.5% for the six month period.

Marcial's picks were up 25.9%. When compared to the predicted 25.5% increase, the 25.9% reported increase for Marcial's stock selections no longer look so "sensational."
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