Guy Devillier: “My financial institution is now offering Unit Investment Trusts (also known as Defined Portfolios). What’s your take on these? And can you give a better explanation of what they are than the one-paragraph announcement I received?”

Hmm. “A way to grab too high a fee from you for locking you into a fixed portfolio of stocks.” How’s that?

Mike B: “As of this morning, the portfolio of five stocks you recommended last week is up 18.43%. I think your ethics leave something to be desired.”

I disagree. But if Mike is concerned, some others of you may be as well, so this is worth addressing.

What Mike is referring to here is that prior to my mentioning these stocks, I had bought them myself.

This would be unethical if I hadn’t disclosed that fact . . . or if my plan had been to buy them for a quick turn and sell them while you were buying . . . or perhaps if I were charging you for my advice, but buying stocks ahead of your own purchases.

For the record, I try always to remember to let you know if I’m long or short a stock I’m writing about, especially if I think what I’m writing could impact its price in any meaningful way. I almost never buy stocks for a quick turn, least of all value stocks like these, so it is immaterial (to my finances) that they have jumped. By the time I sell, the fact that a few of you may have bought shares last week is likely to have had absolutely no effect.

Also, I think it’s a stretch — albeit flattering — to imagine that my column had anything substantive to do with the jump in prices. The Dow was up 8% in this same brief time period. Surely, I can’t take credit for that. More likely, I think, is that these were for the most part just the kind of beaten down, low p/e, strong balance-sheet stocks that rebounded sharply last week — not just my five — lifting the broader old-economy averages.

I’m afraid we can’t expect the same results every week. Once a year would suit me fine.

 

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