Cover Indicator Update
Conventional wisdom holds that magazine cover stories are contrarian indicators - by the time a company’s success or failure reaches the cover page of a major publication the story is so well known as to be completely reflected in the stock price. Therefore, all good news is priced in and the stock can only underperform or all bad news is priced in and the stock can only outperform.
While simplistic, the magazine cover indicator now has the support of recent academic research. This research did find that cover story headlines on Business Week, Fortune and Forbes tended to indicate that the mood (bullish or bearish) of the story was about to change in the market.
As a result of this research, we have decided to develop a portfolio of stocks based on using those three magazine’s covers as a contrary indicator. We also track this portfolio on StockPickr. This week’s results:
Business Week: International Business News : Business News, Technology Industry News
3M’s Innovation Crisis
Delve into IN5, our supplement devoted to innovation. This issue’s theme: Managing the yin and yang of efficiency and creativity — a delicate balance illustrated by one of the great innovators of American business
Contrarian Take: Bullish on 3M (First bullish pick)
Fortune: The hottest investor in America
Fortune’s Shawn Tully peers deep inside the brain of Carl Icahn, who now portrays himself as a billionaire Robin Hood, hounding CEOs and enriching shareholders to the tune of $50 billion. (more)
Contrarian Take: Uncertain (no company mentioned.) Possibly bearish on Icahn’s current/pending ventures
Forbes: ![param:index.cmsSubIndex.topStory.cmsIndexEntries[0].image.caption](http://images.forbes.com/media/magazines/forbes/2007/0618/0618.gif)
Special Report: Decoding Your DNA Destiny
Super-cheap genetic scanning is set to jolt medicine, offering patients new insights–and painful choices.Contrarian Take: Uncertain. Possibly bearish on DNA testing companies such as Orchid, Life Technologies (LTI) or Lifecodes.
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