Jan

10

It's fairly well known that Value Line's Ranking System hasn't been working all that well over the past decade, but a separate question is how reliable are Value Line's self-reported performance numbers, and how achievable they are in live trading. It's easier now to answer that question because since 2004, there has existed an etf, ticker FVL, that holds the 100 rank 1 Value Line stocks, equal weighted, with quarterly re-balancing.

The table below gives the annual returns of FVL (taken from Morningstar), along with the returns of rank-1 stocks as reported by Value Line. Value Line reports the results for both "allowing changes each week" and for "allowing annual changes", and these two options are shown in separate columns. Because FVL re-balances quarterly, it can't be expected to match either of these two options exactly.

The table shows that FVL is tracked reasonably closely with both of Value Line's self-reported performance. FVL's annual average return of 4.6% is just a bit below the two self-reported averages of 6.0% and 4.7%, which is in line with what you'd expect based on management fees, trading costs, etc. (Year 2012 is an odd duck — VL's self-reported return of 17.2% for "allowing annual changes" is a bit of an outlier.)

This finding shows that Value Line's self-reported results can be matched fairly closely in the real world.

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