Αρχική | Προηγ. Τεύχη | Χ&Α - 202 | Journal's Dartboard Retires After 14 Years of Stock Picks

Journal's Dartboard Retires After 14 Years of Stock Picks

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Updated April 18, 2002 12:01 a.m. ET

 

After 14 years and hundreds of attempts to pick winning stocks, Wall Street Journal staffers are putting away their darts.

The darts had a good run, even if they didn't often win. More than 200 investment professionals good-naturedly pitted their stock-picking skills against the results of a portfolio assembled by throwing darts at the stock tables, as well as the performance of the Dow Jones Industrial Average. But the contest is now going to be retired.

 

It was all a light-hearted test of the efficient market theory. That theory, popularized by Princeton University economics professor Burton Malkiel in his 1973 book, "A Random Walk Down Wall Street," holds that since all available information is quickly factored into stock prices, all stocks present equal chances for gains.

"Taken to its logical extreme," Dr. Malkiel wrote, the theory "means that a blindfolded monkey throwing darts at a newspaper's financial pages could select a portfolio that would do just as well as one carefully selected by the experts."

The Wall Street Journal never used monkeys, and the dart throwers weren't blindfolded -- too risky, perhaps -- as they threw the darts at stock tables posted on our office walls. But in the end, after 142 six-month contests, the pros came out ahead, racking up an average 10.2% investment gain. The darts managed just a 3.5% six-month gain, on average, over the same period, while the Dow industrials posted an average rise of 5.6%.
The pros also outperformed Wall Street Journal readers, who were invited to join the fray in 1999, although Journal readers narrowly beat the pros in the contest just ended.

Journal readers, whose picks were selected from e-mail submissions to The Wall Street Journal Online, have posted an average 4% loss over 30 six-month contests. That compares with a 7.2% average gain for the pros and average declines of less than 1% for the darts and the industrial average over the same period. But in the latest contest, readers chalked up a whopping 39.1% average gain in the period from Oct. 17, 2001, through March 28, 2002, narrowly beating the 38% average gain for four pros. The darts lost an average 17.8%, while the industrials rose 12.7% during the same period.

The readers' big winner in the latest contest, the selection of C. Brooks Hoffman, a commercial lender in the Boston office of Comerica Bank, was Ariad Pharmaceuticals Inc., a Cambridge, Mass., biotechnology company that soared 80.3% during the October through March period. But a pro pick did even better. Daniel G. Bandi's selection of Ucar International Inc., a Nashville, Tenn., company that produces graphite electrodes used in making steel and aluminum, surged 84.4%. Mr. Bandi is portfolio manager of Armada Small-Cap Value Fund in Cleveland.

What do 14 years of throwing darts prove? Not much, says the man who inspired the competition. Dr. Malkiel, who gamely threw the first dart when the competition began in October 1988, said from the outset that this contest wasn't a fair test of the efficient market theory. The reasons, he maintains, are the small number of stocks involved in the contest and the fact that the "publicity effect" of an article in The Wall Street Journal might make the stocks selected perform better than others, at least temporarily.

"The darts were a nice metaphor, but four darts were not what I recommended," Dr. Malkiel explains. The idea of the efficient market theory, he adds, is to buy a broad cross-section of stocks.

He also says that the pros tend to pick stocks that are riskier, and thus rise faster when the market is going up, as it was for most of the 14 years of the competition. Still, he says, the contest "was fun."

The Wall Street Journal isn't declaring a winner. Indeed, the decision to wind down the Investment Dartboard competition has nothing to do with the results. "The Dartboard feature has been an entertaining way for readers to learn about picking stocks, and about broader market theories, too," said Lawrence Ingrassia, Money & Investing editor of the Journal. "But 14 years is a long time for any newspaper feature. Retiring the Dartboard will free more resources to satisfy our readers' growing appetite for a range of vital financial stories -- not just about stocks and bonds, but corporate finance, mergers and acquisitions, banking, accounting and mutual funds, as well as the names and faces behind the news."

The Dow Jones Industrial Average stood at about 2100 when the competition began in 1988, with publication of the Money & Investing section as a separate, third section of the Journal. It started as a one-month contest, with four investment professionals and four dart throwers each picking one stock and the Dow industrials as the benchmark. In part because of the possible publicity effect, the contest was extended to six months in 1990. For years, there was a waiting list for investment professionals who wanted to participate, although interest has tapered off as the market has been beaten down in the past couple of years, and picking winners has become tougher even for pros.

In the contest, the starting price was the price at 4 p.m. Eastern time the day before publication and the contest ended on the last trading day of the sixth month. Under the most-current rules, the minimum market capitalization was $50 million and the minimum price was $2 a share. Average daily trading volume had to be at least $100,000.

Some of the biggest winners later took the biggest falls. The pros' all-time top performer was Quarterdeck Systems, a computer-software company that soared 244% to $11.625 in the first six months of 1995. By the fall of 1998, it was trading at 37.5 cents and in 1999 it was acquired by Symantec Corp. for $65 million.
The pros are ahead of the darts and the DJIA when wins and losses in the 142 contests since 1990 are tallied. The score is 87 to 55 when the pros are compared with the darts and 76 to 66 in favor of the pros against the Dow industrials. The five contests still in progress will continue to the end. Results will be reported at the conclusion of each contest, at the end of each month, both in print editions and in The Wall Street Journal Online.

Results of the 14-year competition haven't changed the opinion of at least one well-known investor. "I have no intention of abandoning my personal investments in index funds," says John C. Bogle, founder of Vanguard Group and a longtime advocate of index-fund investing. The pros' "gains are short-term," trading costs aren't reflected in the results and "tax-efficiency is horrendous," he adds.

Write to Georgette Jasen at georgette.jasen@wsj.com

 

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