Buy the Worst of Barron’s 500
Every year, Barrons publishes a ranking of the top 500 companies. A subsidiary of Credit Suisse (Holt) is the entity that has come up with the methodology for these rankings. I will not bother to explain the methodology since the point of this post is not to critique nor endorse these rankings. Rather, I looked at the last 3 years (2004, 2005 and 2006) rankings, and came up with some interesting observations that I wanted to share.
Considering that 2004, 2005 and 2006 were all bull years when the S&P returned 8%, 2.5% and 13% respectively, one would have thought that the worst 5 or 10 stocks in the Barrons rankings would underperform the S&P 500 somewhat, let alone outperform the top 5 and top 10 stocks. But if you look at the 52-week performance of these bottom tier stocks leading up to the publish date of the rankings, they lagged the top ranked stocks by a huge margin. In fact, leading up to the rankings, the Top 10 ranked stocks each year were already up 83%, 31% and 56% respectively over 52 weeks. Compare this to the Bottom 5 ranked stocks which were down 23%, 8% and 7% respectively over the same period.
In other words, stocks that have had strong performance leading up to the Barrons 500 Rankings issue tend to be ranked at the top, even though these stocks hardly ever replicate their big move after the rankings. Meanwhile, stocks ranked at the bottom are ranked so on the heels of underperformance, and turn out to be solid value plays in the weeks following.
*BOY above shows gains/losses from the beginning of the year to date of publishing.
*EOY above shows gains/losses from the date of publishing to year end.
If I include 2003, the numbers are even more stellar. The Bottom 5 of 2003 returned an average of over 71% in 52 weeks after the rankings were published, while the Top 5 returned a more normal 34%.
Gap (GPS)
Ford Motor (F)
Tech Data (TECD)
Performance Food Group (PFGC)
Sanmina (SANM)
Solectron (SLR)
Eastman Kodak (EK)
Computer Sciences Corporation (CSC)
BlueLinx Holdings (BXC)
Of the bottom 10, which ones are the bottom 5?
They are listed in order of rank from 491 to 500. So the bottom 5 are Sanmina, Solectron, Eastman Kodak, Computer Sciences and BlueLinx Holdings.
Hi there,
we are two students of economics at the Bern University of Applied Sciences, Switzerland and in the process of writing our dissertation. In this connection we are examining the 10 most important ranking publications world-wide and investigating their influence on the respective stock exchange courses and other key data of the 30 largest enterprises.
During our investigations, we came across your blog and your researches about the Barrons500. We would like to include this ranking and maybe other Rankings from this magazine in our analysis. But we do not find any Rankings of this magazine.
In this respect, we would like to know if you have access to this rankings? If yes, you could maybe send us these rankings?
It would be great i you could help us. In response, we are would gladly send you a management summary of our dissertation, which will include our most important findings and the influence of rankings in general. Many thanks for your efforts and prompt reply.
Remo – I do not have your email address, so I can’t respond to you. Please email me directly at flaljee@mail.stocksandblogs.com
– Faisal Laljee