HenryWirth.com
Beating the Market since June 2001

Home | Contact | Subscribe

WEIMERandWIRTH System Description

Write to HW-Newsletter@hotmail.com if you have questions.

The table below shows the Quarterly, Annual and Total Returns of WEIMERandWIRTH, the S&P 500, the NASDAQ 100 (QQQ), the Russell Micro Cap Index and the Vanguard Small Cap Index for the 14 year life of WEIMERandWIRTH.

The most appropriate benchmark for WEIMERandWIRTH is the Russell Micro-Cap index.



WEIMERandWIRTH System Description

We look for stocks that have increased earnings and that have positive price momentum. During the nineties, before we shared results with anyone, Doug concentrated primarily on large cap NASDAQ tech stocks. I began monitoring his system in late 1997. During 1998 and 1999 his performance was about as good as the NASDAQ 100, which was admirable.

After the crash of 2000, I took a closer look at what he was doing because his portfolio held up reasonably well, while the bottom fell out of the NASDAQ and everything else. After June 2001 we began sharing our results with anyone who wanted them, and I began investing in WW stocks. I'm glad I did, but during the crash of 2008, WW did not fare any better than the indices, and during 2011 and 2012 WW underperformed ALL the indices. My confidence was restored by the phenomenal returns of 2013, but 2014 was not a good year and the first half of 2015 was no better.

Doug Weimer retired from the financial newsletter business during late 2011 and I decided to retire from the newsletter business on June 30, 2015. I accepted one new subscriber this year, but I did that reluctantly. The primary reason for my reluctance is that I do not want to encourage anyone to put money at risk by using a strategy whose effectiveness seems to be declining. That means that WW will “officially” be terminated on June 30, 2015 (WW’s 14th birthday), but it will unofficially serve its existing members thru at least December 31, 2015.

Why did WW outperform by substantial margins for more than 10 years after 6.30.2001?

A forensic analysis of WEIMERandWIRTH

According to the National Bureau of Economic Research (NBER), which is the private, nonprofit, nonpartisan organization charged with determining economic recessions, the U.S. economy was in recession from March 2001 to November 2001.

From 2000 to 2001, the Federal Reserve in a move to quell the stock market, made successive interest rate increases, credited in part for "plunging the country into a recession." Using the stock market as an unofficial benchmark, a recession would have begun in March 2000 when the NASDAQ crashed following the collapse of the Dot-com bubble. The Dow Jones Industrial Average was relatively unscathed by the NASDAQ's crash until the September 11, 2001 attacks, after which the DJIA suffered its worst one-day point loss and biggest one-week losses in history up to that point. The market rebounded, only to crash once more in the final two quarters of 2002. In the final three quarters of 2003, the market finally rebounded permanently, agreeing with the unemployment statistics that a recession defined in this way would have lasted from 2001 through 2003.

From 1999 thru 2007 US Gross Domestic Product growth rates averaged 5.1% per year. The lowest was 2.4% in 2001. After 2001, GDP growth rates rose steadily thru 2005 to 6.4% per year. They fell slightly in 2006 and 2007, but the economy was still healthy and growing. US and international stock markets, especially emerging stock markets were generally all rising. At its worst, investor sentiment was generally cautiously optimistic; at its best, it was irrationally exuberant from 2002 thru 2007.

The WW strategy

At this point I download data for about 4,000 stocks that report their earnings every quarter. Many of them are duplicates because I download them from different sources. If the market responds positively to the earning’s announcement, and if the stock passes various and sundry filters that have been developed by Doug Weimer and me, then that stock becomes a pick.

That strategy generally worked well during periods of cautious optimism, and it generally worked extremely well during periods of irrational exuberance when “animal spirits” were alive and well.

The strategy did not work during 2008 for reasons that should be obvious, but it did work reasonably well during 2009, probably because a recovery was cautiously anticipated, and it did work well during 2010, probably because there was evidence of a recovery i.e., GDP growth rates went from zero in 2009 to 4.7% in 2010.

What happened during 2011 and 2012?

To be continued ...