Value Line Mutual Funds Trail Investment Survey

The Value Line system of ranking stocks has worked so well over the years that it’s been studied by academics, and its Investment Survey newsletter has been highly rated by investment professionals.

Yet the same system doesn’t always work as well for Value Line’s mutual funds.

The Hulbert Financial Digest, which rates newsletters, pegs Value Line’s Investment Survey as the No. 1 newsletter since 1980, boasting an 18 percent annual return. But the flagship Value Line Fund didn’t even rank among the top performers over nearly the same period.

Morningstar Mutual Funds says the Value Line Fund ranked No. 177 out of 415 funds during the last 15 years, with an average annual return of 12.8 percent. Its more aggressive cousin, Value Line Leveraged Growth, came in No. 121, with a 13.6 percent return. By contrast, No. 1 Fidelity Magellan Fund posted average annual gains of 22.7 percent.

“It’s somewhat of a mystery,” said editor Mark Hulbert. “You have a newsletter that has done spectacularly well and funds (based on it) that don’t do as well. Maybe it is because the newsletter is only hypothetical.”

To many investors, the Value Line survey has become a bible of statistics and advice on individual stocks. The weekly survey ranks them with an easy-to-understand 1 to 5 scale for both timeliness and safety. And because Value Line isn’t a Wall Street brokerage, where analysts are sometimes pressured to color their opinions, the service enjoys a reputation for being unbiased.

In theory, an investor could just buy the stocks ranked No. 1 for timeliness and watch the profits roll in.

It hasn’t been so simple for the Value Line Fund, which lost 4.5 percent last year. But perhaps it is because Value Line is somewhat of a misnomer: Value Line is a growth system, and it performs best when growth investing, not value, is in vogue.

Morningstar analyst Pat Regnier agrees that it just hasn’t been Value Line’s kind of market.

“For the last couple of years there hasn’t been a good enough wave for the fund to catch. Its growth system is tough to do right now.”