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Hedge fund managers allegedly running Ponzi schemes, investment banks going belly-up, Treasury officials flip-flopping about how to fix the economy. Who's left worth listening to when it comes to your money?
Here's one suggestion: Trust the folks with track records. One place to find records of success is among investment newsletter writers. Not just any newsletter -- there are hundreds, and some are pretty close to scams -- but those whose performances rank among the best, as measured by the Hulbert Financial Digest.
It's what I do once a year at this time, with Hulbert's help: Find out where the best newsletter stock pickers are saying to put your money. And this year there's a related question: Is this the best time in decades to buy stocks or the start of the next Great Depression?
Here are the top nine and their answers:
The Prudent Speculator
Rank: No. 1 for 20-year performance.Annualized returns: 13.7%.
(My rankings are calculated by excluding newsletters that recommend mutual funds only. Annualized returns are for the time frame during which they earned their rank.)
The big picture: Prudent Speculator editor John Buckingham believes the current sell-off has created "one of the best buying opportunities you can get." He thinks the broad stock indexes could finish next year 20% to 25% higher.
Favorite picks: As a value investor, Buckingham looks for cheap companies with enough financial strength to power through the hard times. VF (VFC, news, msgs), for example, makes brand apparel, and consumers are on a buying strike. So it has been hammered.
But VF still has enough cash flow to cover debt payments and survive until consumers recover. Meanwhile, it pays a 5% dividend yield. Manitowoc (MTW, news, msgs) has a crane business that should do well if Barack Obama follows through on plans to boost infrastructure spending.
Buckingham also likes GameStop (GME, news, msgs) one of the top sellers of video games, now the largest entertainment market in the world.
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The Oberweis Report
Rank: No. 3 for 20-year performance.Annualized returns: 11.3%.
The big picture: Oberweis Report editor Jim Oberweis expects the economy to bottom in the third or fourth quarter and the market to finish the year higher.
Favorite picks: Oberweis thinks small-capitalization growth stocks may be the best way to play a rebound because they have been beaten up so much -- trading at valuations not seen since the early 1970s. Three he likes the most are Green Mountain Coffee Roasters (GMCR, news, msgs), which sells single-serving coffee makers and coffee; VisionChina (VISN, news, msgs), which distributes advertising in China; and Illumina (ILMN, news, msgs), which makes tools used in DNA analysis.
Turnaround Letter
Rank: No. 4 for 20-year performance.Annualized returns: 9.8%.
The big picture: George Putnam, the value investor who pens the Turnaround Letter, expects a sharp snap-back rally later this month or in early January as hedge funds back off on selling because year-end redemptions ease up.
Favorite picks: Two top picks that should benefit -- and do well next year and beyond -- are semiconductor equipment maker Teradyne (TER, news, msgs) and Qwest Communications International (Q, news, msgs), a phone company.
Teradyne controls more than a third of the market for chip test equipment, and it's financially sound with $1.80 a share in cash and no debt. Many of its competitors aren't so well off. As the weak economy grinds them down, Teradyne will either buy them or pick up more market share because they go bust, believes Putnam.
Qwest has stable cash flow that's backing a 10% dividend yield, and it should see growth in the medium term from the sale of new services, such as video over its phone lines.
The Chartist
Rank: No. 5 for 20-year performance.Annualized returns: 9.8%.
The big picture: The Chartist's Dan Sullivan has been in cash since the middle of January, and that's where he plans to stay. The reason: We're still in a bear market, and there's no sign that it's over -- in part because no new leadership has emerged among stocks to show the way.
Sullivan isn't tempted by arguments that stocks look cheap. He cautions that analysts said the same thing during much of the 1970s bear market, but stocks got cheaper. "It's just a real risky environment," he says.
Favorite picks: none.
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The Value Line Investment Survey
Rank: No. 6 for 20-year performance.Annualized returns: 9.6%.
The big picture: Value Line sees lots of great opportunities now to buy cheap stocks ahead of an expected economic turnaround in the second half of 2009.
Favorite picks: Johnson & Johnson (JNJ, news, msgs) stands out for its solid financial strength, secure dividend yield of 3.2% and predictable earnings, says Gregg Brewer, who heads up Value Line's stock research.
Next, McDonald's (MCD, news, msgs) looks like a buy because strapped consumers will continue to go for cheap eats. New products and expansion into additional foreign markets will support growth in the medium term. Value Line also likes W.W. Grainger (GWW, news, msgs), which makes maintenance and safety products used in industry, because it will continue to take market share.
Continued: Investment Quality Trends