As a third year of the great millennial equity bear market draws to a close amid a cheerless holiday season, it's time to reflect on investment strategies that worked and failed over the past 12 months. At SuperModels, we enjoyed a bull market in skepticism as the best results came from our most cynical, go-against-the-crowd efforts. Whenever we went with the flow, we drowned.
Capital contrariness here begins with our jaundiced view of the Standard & Poor's indices. These represent investment industry standards and consensus -- for what reasons, other than good marketing and accidental success during the '90s bubble, we're not sure. Once again in 2002, as in 2001 and 2000, the S&P team led by eccentric economist David Blitzer managed to expel winners and add losers to its mid-cap and small-cap indexes with stunning regularity. S&P kicked 25 companies out of its SmallCap 600 Index in 2002 through Dec. 16, for reasons other than merger or promotion to another index. Eighteen of those subsequently went up, while just seven went down. The average return of all expellees was 43.6%, led by a 302% advance in Factory 2-U Stores ( FTUS) from its closing price on its last day in the index (Oct. 11) to Dec. 16. Then there was a 255% advance in Aspen Technology ( AZPN) from Oct. 11; a 212% return in Stratos Lightwave ( STLW) from June 12; a 94% move in Brightpoint ( CELL) from Feb. 7 to date; and a 98% move in Trenwick Group ( TWK) since Nov. 14. These results include four stocks that lost virtually all their value after getting the boot: Mutual Risk Management ( MLRMF), Organogenesis ( ORG), Mississippi Chemical ( GRO) and Advanced Tissue Sciences ( ATISQ). But index makers shouldn't feel too smug about pushing these out, as they had all already fallen more than 80% in the 24 months prior to expulsion.