In a recent issue, Barron's makes its predictions for 2012. Keep in mind that Barron's acknowledges that its 2011 predictions lagged the performance of the S&P500 by 500 basis points – a shortfall of 5% in investment returns (ouch!). This time, I suppose, their results will be better.
The history of such matters is not encouraging. A 2008 study at San Diego State University demonstrated that stock performance was, more often than not, the inverse of consensus “buy” and “sell” ratings by professional stock market analysts.
In other words, your returns would have been better had you sold the “buy” recommendations and bought the “sell” recommendations. The SDSU study referenced conflicts of interest that influence analysts, but it's as likely that the poor performance of their recommendations has to do with the generally unpredictable nature of profitability and investment returns.
I'll bet any of my readers a dollar (yes, a dollar – I'm no Mitt Romney) that when we revisit this article after December 31, 2012, that the Barron's predictions will have underperformed the S&P500 – again. Happy New Year!