Is stock-picking just another hobby for men?

By Felix Salmon
November 28, 2012

I had a fascinating lunch, a couple of weeks ago, which lodged in my mind the idea that stock picking, at least when practiced by individuals, is best analyzed as an upper-middle-class hobby rather than as purely profit-focused investing activity. Once you start looking at it that way, suddenly a lot of behavior, which looks irrational under most lights, starts making a lot of sense.

For instance: subscriptions. These things are serious money-makers, whether they’re old-fashioned newsletters, whether they’re Barron’s subscriptions ($149/yr), or whether they’re slightly more high-tech products like the various subscription products at (between $152/yr and $1,040/yr), Minyanville (between $499/yr and $899/yr), or, now, at Seeking Alpha ($2,388/yr).

These prices aren’t always completely transparent (good luck trying to find the Minyanville prices on their website, for instance), but they’re high for a reason: they’re sending the message that the subscriptions are meant to make you money. At the same time, however, if you compare these sums to the sort of money that the upper-middle classes spend on, say, golf, then they don’t look quite so large. A golf habit is unlikely to cost you less than $5,000 a year, and can cost tens of thousands, not including the extra amounts that many people pay to buy real estate on the golf course.

What’s more, the number of golfers in America is significantly larger than the number of stock-pickers. This is a niche market, which means again that prices need to be high: you’re never going to sell millions of subscriptions to anything.

One thing worth noting here: stock picking, even more than golf, is an overwhelmingly male hobby. Put aside all the mathematics about how individual investors consistently underperform the market and pay enormous fees to various financial-service middlemen; all you really need to know is that if something is done only by men, it probably isn’t particularly sensible.

Still, the Seeking Alpha model is an interesting one: they’re basically crowdsourcing their subscription product, by offering their contributors between $100 and $500 per article (or more, if the article gets lots of page views), if they consider the post high-quality enough to qualify for the Seeking Alpha Pro product.

You can do the math: Seeking Alpha says that it wants to feature five “Alpha-Rich” articles per day on its pro site, for which it will pay $500 apiece. Let’s say it also features a couple of dozen Pro articles at $100 a pop: that adds up to an editorial budget of $5,000 per day, or about $1.25 million per year. Divide that by $2,388, allow some budget for in-house editors and the like, and the product looks like it will break even once it gets to about 600 subscribers. Which is not all that many, considering Seeking Alpha gets about 4 million visitors per month from the US alone.

I would never recommend any stock-picking subscription, just as I would never recommend stock-picking. But the Seeking Alpha model is quite a clever one: the articles are behind a paywall for 1-3 days, then they get opened up to the public, where they can accumulate a decent comment stream and give the author (as well as the subscription product) the oxygen of publicity. After that, they go back behind the paywall, because even old analysis is valuable when you’re dealing, as Seeking Alpha wants to do, primarily with undercovered small-cap stocks.

What’s more, it stands to reason that a crowdsourced product is likely to provide more value than product with just one or two authors: no individual can come up with that many insightful ideas, and Seeking Alpha Pro is able to prominently feature ideas from contributors who might only have one or two great analyses per year.

Still, the ultimate value of any such product is ultimately likely to be negative rather than positive, if only because once you’ve paid for it, you’re going to want to act on it. And the minute you start trading stocks on your own, you become the dumb money.

How much is the real cost of a subscription, then? The $2,388 a year is just the up-front cost, but on top of that you need to layer on your trading fees and your general underperformance. What’s more, if you’re subscribing to Seeking Alpha Pro, you’re probably subscribing to other products, too. Call it $5,000 a year, all-in.

Which is actually not that much, compared to other hobbies: I know people who can spend $5,000 on a single bicycle. If you’re into classic cars, $5,000 is nothing. And similarly, if you’re skiing or flying around in small planes or even just taking a luxury vacation once a year, $5,000 can be a relatively modest sum for a reasonably affluent person. And none of those hobbies come with the extra thrill of dreaming that they could end up being highly profitable.

One thing I would note, though: from a financial-media perspective, you’re limiting yourself enormously if you spend too much time chasing that small group of hobbyists — especially if you’re not trying to sell them subscriptions. Look at the enormous number of websites which put stock tickers next to company names, so that the hobbyists can see exactly what the stock in question is doing that day. It makes the site seem as though it’s targeted at silly males, rather than at a broader, smarter audience.

As a rule: if you want to attract women (and most men for that matter) as well as the stock-picking men, get rid of those tickers and sparklines and constant reminders of what the market did today. Most of the hobbyists are perfectly capable of reading a news article about Apple without being told what the company’s ticker symbol is. But the rest of us find such things incredibly annoying.


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“But the Seeking Alpha model is quite a clever one: the articles are behind a paywall for 1-3 days, then they get opened up to the public”

ah hahhhh. sounds to me like SA is trying to sell early access to information which they think will move markets…

Posted by KidDynamite | Report as abusive

LOL! Okay, you got me there, Felix! Yeah, stock picking is a bit of a hobby for me. In one of my retirement accounts I trade more frequently than I need to implement a sensible strategy (which is “rarely if ever”), and I’m always curious to see if the latest batch of trades put me ahead or behind where I would have been if I had sat on my hands. (Overall doesn’t seem to make much of a difference, so I indulge my hobby.)

Two major reasons why it is a predominately male hobby. First, men have traditionally managed finances in families, and there aren’t many people younger than 40 with enough money saved to be worth the trouble. Second, women (even today!) are socialized to seek certainty and avoid risks — and there is never any certainty in the stock market. (If you think an investment is a sure thing, you are being taken for a sucker.)

But I agree with you, it is idiotic to spend money on stock-picking publications (unless for amusement only). Even counter-productive, since you introduce an asymmetry in the information processed. Hard to weigh alternatives evenly if one was featured on your stock-picking list and another was not.

Ultimately, for me, the reward isn’t a dream of becoming wealthy — it is peace of mind. As everybody does, I began as a naive mutual fund investor (i.e. “stupid money”). Got taken to the cleaners by Janus Funds, as they promised sound value-driven management and delivered massive losses in the bubble. Oops! Started taking it seriously in 2004 when I took a retirement account rollover. Finished rotating out of mutual funds in early 2007 when I was aghast as some of the commentary I was reading. (This particular fund manager was advocating home builders and big banks at the time. Again, THAT is your “stupid money”.)

Five year cumulative returns of just under 50% aren’t going to make me rich, but that isn’t the goal. I just don’t want to lose what I’ve worked so hard to save. I don’t always call them right — but I’ve never done as poorly as the people I was previously paying to lose my money.

What price, peace of mind?

Posted by TFF | Report as abusive

I dunno. Have I, by reading Grant’s Interest Rate Observer ($965/yr) since the late 80s, been engaging in — what Felix calls — “an upper-middle-class hobby rather than as purely profit-focused investing activity”?

Yeah, I spose so. But who can forget when Grant famously wrote in his December 2006 newsletter that CDS protection on CDOs was way too cheap? As Lewis reported in The Big Short (p. 178):

“In Jim Grant’s [Dec. 06] essay, Steve Eisman found independent confirmation of his theory of the financial world. ‘When I read it,’ said Eisman, ‘I thought, Oh my God, this is like owning a gold mine.’ ”

Of course Grant has been wildly wrong on very many other predictions. But he sure is fun to read.

Posted by dedalus | Report as abusive

TFF nailed it as usual!

And as a PS to Felix my bank manages 150millionish for customers and we’re almost big enough to afford a Bloomberg subscription at a cool $1,750/month!

Posted by y2kurtus | Report as abusive

The 62 year old conservative saver ‘hobbiest stockpicker’ does not appreciate the Eddie James salesman having them fill out a survey, the results of which directing to put half their money into a bond fund yielding less than the salesman’s fees. Further, the salesmans’s mutual funds are expected to do less well than the market. Throw in some intellectual and emotional stimulation as yes, these men enjoy a $100 year subsciption site such as mine.

Posted by JJButler | Report as abusive

You seem to have a blind spot when it comes to passive investment strategies.

Markets are basically weak form efficient, which is that they aggregate the opinions and views about the future of those traders who trade in them.

However, this creates a natural inefficiency about time frames. Most fund investors have one year time frames, and most day traders are much shorter, so there is large inefficiencies due to a lack of large investors with long time frames. These are prime conditions for the buy and hold strategy ala Buffet, Graham etc. There remains the opportunity for (reasonably well informed) retail investors to beat the market by having a long enough time horizon.

Passive investing is essentially a variant of buy and hold. However, ETF’s have become too popular, and they are crowding the trade. In the UK, for example, share prices get bloated or hammered just by being promoted into the indices. As soon as ETF’s have become big enough to affect the market, they are creating an inefficiency, and inefficiency means they are creating the ability for active investors to add value, just be researching shares that are not inside the ETF bubble.

ETF’s were a great idea when they were small, they were benefiting from the efficiency of the market. Now they are the dumb money, which is distorting the market, and creating the ability for fund managers to outperform the index.

Look at, for example, the Horizon Asset Management Hedge Fund letters, comparing similar companies that are more and less popular among ETF builders. The less popular offer around 2% better return.

Posted by phil_20686 | Report as abusive

Thought provoking post as usual Felix. I think you’ve pretty well nailed this but I’d also add in another aspect. I think there is a bit of the psychology of gambling involved as well. I think a lot of amateur investors look at stock picking as a form of scratch off ticket in which they think that they can tip the odds in their favor with a bit of (usually misguided) research. It’s just like blackjack where everyone thinks that their method is superior and that they’ll come home from the casino rich.

Posted by spectre855 | Report as abusive

Mr. Salmon, if Seeking Alpha’s subscription program is dumb money, why don’t you make a bet on it?

Posted by modernist | Report as abusive

Sound investing is easy. Buy quality, let it ride.

Stock-picking is devilishly hard. Keeps me humble! HPQ anyone? :)

Posted by TFF | Report as abusive

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