CHICAGO (Reuters) – Traders are nervous as Wall Street waits for the Federal Reserve to reveal its next quantitative easing move. Last week marked the third week out of the last four in which major indexes turned negative.
What if you ignored the market’s mood, though? Would it make a difference?
If you can find managers focused on buying and holding the best stocks – no matter how the rest of the market is behaving – you might reap higher gains over time.
C. Thomas Howard, professor emeritus at the University of Denver, has found that managers who invest in what he defines as the “best markets” for overall stock performance and the stocks that represent the “best ideas” will outperform market indexes. Howard identified hundreds of companies that fit his criteria and could have been bought at bargain prices.
Examining a period from April 2003 to March 2013, Howard found in a recent paper that his “best idea” group of 400 stocks, which includes Google, Ethan Allen Interiors and MasTec, gained almost 17 percent, compared with 9 percent for the Russell 3000 Index.