This analysis is from John Derrick, U.S. Global Investors Director of Research. The market has rallied dramatically since the March 9 low, with the biggest beneficiary of this rally being low-quality companies. This intuitively makes sense, given that companies with the most troubled outlooks are the ones most likely to have a strong recovery when the dire outcomes predicted at the bottom of the crisis failed to transpire. Quality may have different meanings to different investors, but in a recent research piece, Citigroup ranked performance based on multiple definitions of quality. Samp;P earnings quality ranking, debt-to-capitalization ratio and return on equity were used as proxies for quality. The research universe was the small-cap Russell 2000 Index, but I believe broader market conclusions can be drawn as well. Based on Samp;P earnings quality rankings, companies with C or D (the two lowest categories) ratings returned about 55 percent over the past six months, while the ...

Amidst all the soundbites and data tidbits about the condition of the U.S. fiscal and debt situation, it may be helpful to look at the data produced by the Congressional Budget Office.  While they may be way off, it is a good idea to know what figures your government is using to make its spending and tax policy decisions.

The downloadable PDF file provides an historical perspective from 1968 through 2008, and projections for 2018 for taxes, spending and public debt.

click image to download PDF file

On the economic projection front, the CBO sees real GDP growth for 2009, 2010, 2011 and 2018 at: -2.5%, 1.7%, 3.5% and 2.2% respectively.

They see unemployment for the same periods being: 9.3%, 10.2%, 9.1% and 4.8%.

For CPI, the CBO sees -0.5%, 1.7%, 1.3% and 2.0% for

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This article is adapted from the latest edition of U.S. Global Investorsrsquo; Weekly Investor Alert, published each Friday and distributed free to subscribers. Click here to view the entire Investor Alert. The stock market has been on a tear since bottoming out in early March 2009, with the strongest performance being seen in small-cap stocks. The Nasdaq, heavy with small-cap companies, was up 65 percent through last Fridayrsquo;s close from the March 9 low, while the large-cap-loaded Samp;P 500 Index and Dow Jones Industrial Average had gained 54 percent and 47 percent, respectively, over the same period. The two charts from RBC Capital Markets below drill down deeper into the inverse relationship between market cap and performance over the past six and a half months. Figure 1 ranks the performance by capitalization benchmark from the March low through the market close on September 23. Leading the way is the Russell Microcap Index (2,000 small-company ...

This article is adapted from the latest edition of U.S. Global Investorsrsquo; Weekly Investor Alert, published each Friday and distributed free to subscribers. Click here to view the entire Investor Alert. The stock market has been on a tear since bottoming out in early March 2009, with the strongest performance being seen in small-cap stocks. The Nasdaq, heavy with small-cap companies, was up 65 percent through last Fridayrsquo;s close from the March 9 low, while the large-cap-loaded Samp;P 500 Index and Dow Jones Industrial Average had gained 54 percent and 47 percent, respectively, over the same period. The two charts from RBC Capital Markets below drill down deeper into the inverse relationship between market cap and performance over the past six and a half months. Figure 1 ranks the performance by capitalization benchmark from the March low through the market close on September 23. Leading the way is the Russell Microcap Index (2,000 small-company ...

The “style is dead” meme has been around for a decade, Dave, and it’s been wrong the whole time.

 

Your recent blog presents the same tired argument: Growth and value show high correlations to one another. Therefore, why bother using them in a portfolio?

I’ll tell you why: Because they work.

People who argue differently have their heads stuck in the ivory tower, too worried about “correlation quotients” to think about what actually matters to investors, which is returns.

Let’s take a simple case. Since the market bottomed on March 9, the rolling three-month correlation between the iShares Russell 3000 Growth ETF (NYSEArca: IWZ) and the iShares Russell 3000 Value ETF (NYSEArca: IWW) has been well over 0.90. To academics, the two are essentially identical.

But in the real world, there’s been a huge difference: IWV has outperformed IWW by more than 7 percent, in a period of just 6 six months. It

...

Growth and value investing has been on life support for a long time now. Last year, someone finally pulled the plug.

A quick search of the ETF database will show you something quite telling—71 ETFs are dedicated to a slice of the market self-defined as either “growth” or “value.” That’s nearly 10 percent of the U.S. ETF market.

But honestly, why?

First, there’s a definitional issue. Russell (just to pick one index provider) defines their growth and value universe based on two characteristics: price-to-book and “projected growth” based on IBES (Institutional Brokers’ Estimate System) consensus estimates. This very distinction makes the indexer in me cringe. By taking the market and slicing it into buckets, and then picking one, investors are fundamentally picking stocks, and I still believe that rarely makes sense.

Let’s take a look under the hood at one family of growth and value: the iShares Russell 3000 series.

 

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NYM, Nymagic Inc.

XOHO, XO Holdings Inc, XOHO.OB

DrStockPick Watch List!

 

DrStockPick Watch List! for Tuesday August 4, 2009

 

My Picks for Tuesday August 4, 2009 are:

**************************************************************

NYM, Nymagic Inc.

NYM is an insurance holding company that specializes in commercial lines property and casualty and ocean marine insurance, traded on the New York Stock Exchange and is a constituent of the Russell 2000 and the Russell 3000.

NYM owns and operates New York Marine And General Insurance Company, Southwest Marine And General Insurance Company, and Gotham Insurance Company.

The New York Marine Group, composed of NYM’s three insurance company subsidiaries, is rated “A” by A.M. Best.

NYM‘a investment portfolio

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Last week, American Physicians Service Group, Inc. (AMPH) announced its inclusion in the Russell 3000 Index. The Russell 3000 Index measures the performance of the largest 3000 U.S. companies that represents about 98% of the investable U.S. equity market. The membership in the Russell 3000 remains in place for one year.

Headquartered in Austin, Texas, AMPH is a leading provider of medical professional liability insurance services for physicians, dentists and other healthcare providers in Texas, Arkansas and Oklahoma. Its insurance subsidiary, American Physicians Insurance Exchange (API), has written business for over 30 years.

Currently, the company insures over 6,200 physicians, dentists, and other healthcare providers, the vast majority of which are in Texas. Its competitors include companies like American Physicians Capital (ACAP), Proassurance (PRA) and FPIC Insurance (FPIC).

A.M. Best has assigned a financial strength rating of A- (Excellent) and issuer credit rating (ICR) of a- to. A.M. Best

...

Now that the dust has settled on the annual Russell rebalance, let’s take a closer look at the shiny new indexes and see what they say about the market.

The total-market Russell 3000 Index has seen some sizable changes in its sector weightings, although the top 10 remain very much the same. Figure 1 shows the new 2009 sector weightings according to the Russell sector classification system. Not surprisingly, financial services is no longer the largest sector: It now takes second place to technology, which is weighted at 16.19% versus financials at 15.27%. In 2008, those sectors were reversed, with financials at 17.24% and tech at 14.19%.

 

Figure 1: Russell 3000 Sector Weights In 2009 & 2008

Sector

2009

2008

Technology

16.19%

14.19%

Financial Services

15.27%

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Cardiovascular Systems, Inc. (CSII) recently announced that it has received the honor of being included in the Russell 3000 Index. The index measures the performance of the 3,000 largest U.S. companies by market capitalization. The constituents of the index will remain in place for a year.  Cardiovascular Systems develops interventional systems for treating vascular disease. The company's main product, the Diamondback 360 Orbital Atherectomy System, is a minimally invasive catheter system used in the treatment of peripheral arterial disease (PAD). It's our estimate that PAD affects eight to twelve million people annually with only 25% being diagnosed in the United States. Of the diagnosed patients, only 20% seek treatment, posing long-term risks of amputation and death.

We believe that strong demographic trends, under-diagnosis, and increasing patient awareness should support long-term growth in this name. The incidence of PAD increases with age, obesity, and diabetes - three

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