Buffett, Algorithms, and Technical Analysis: The Evolution of the Investment Newsletter

The evolution of investment newsletters

Investment newsletters have been around as long as investments have. Never mind that they used to be delivered snail mail. Then fax. Then email. Given the lag time between publishing and delivery, these old-school newsletters, like the Motley Fool’s Hidden Gems or Al Frank’s Prudent Speculator, mostly gave paid subscribers a pick or two or provided them with a list of stocks — typically, the output of a stock screen.

From static to real-time

But that’s the old model. Given the real-time nature of the web, investment newsletters are morphing into full-blown investment systems. The difference between the old model and new comes in both shape and form:

  • Amount of information: With short-form Twitter content and the 24/7 model of financial news, subscription services have to stay relevant. So, instead of delivering a static recommendation, new subscription services have to continue delivering a lot of commentary and analysis to help their subs decipher the news that envelops them and their portfolios.
  • Frequency of publication: Publishing 1x/month no longer suffices. Newsletters have become quasi-trading desks of info, providing ongoing analysis of markets and their stock picks.
  • Quality of analysis: With high quality analyst-bloggers producing real-time content, I believe we’ve seen the bar raised in terms of the quality of content being produced. There is certainly more of it — I believe it’s getting better as well.
  • Diversity of content products: We’re no longer looking at a two dimensional financial content market made up of the bloods (fundamental analysis) and crips (technical analysis) — new subscription products are becoming really valuable, like the portfolio cloning tools at AlphaClone and the ability to bring history’s best investors back to life via algorithms like Validea has done. Come to think of it — expert networks like Covestor and kaChing are also investing systems as investors subscribe to track and mimic newly-found gurus.

Couple o’ examples

Given their strategies, technical traders and day traders have had systems at their disposal. But it’s only recent that fundamental investors have. We know what investment newsletters look like but what about investing systems? Here are a couple that stand out as interesting examples:

  • StockTwits premium blog network is a good showcase of the types of services available to subscribers. They’re expensive but in return, subscribers get ongoing, daily commentary from the publisher as well as a variety of different types of media (I’m thinking about TV here) to consume.
  • Validea: I’ve written about John Reese’s firm before but I like the way their proprietary stock screener that recreates the investment strategies of history’s top investors is evolving. The Validea Pro product pings subscribers when a certain trigger has fired. Combined with graded reports on numerous stocks, Validea has become a trading system by combining the real-time aspects of trading alerts (buy and sell) as well as the fundamental rigor exemplified by its screening algorithm.
  • Davian Letter: Emerged from seemingly nowhere to provide a variety of real-time trading services — from black box type algorithms to more detailed analysis on tech stocks to earnings recaps.

Of course, some newsletters get it. Others are still playing by yesterday’s rules. What are you using? Let me know if the comments.

**Also, if you manage/contribute/publish an investment newsletter, make sure to download my free ebook, How to Build a Profitable Investment Newsletter.