Can you beat the market reading stock market bulletin boards?

Wednesday, Jul 27 2016 by
Can you beat the market reading stock market bulletin boards

If you are anything like me, when you started investing in the stock market you read furiously to generate ideas. I subscribed to every newsletter I could get hold of. I hunted high and low for stocks that had the capacity to change the world. I searched the web for proof that other investors were buying them. This led me to the big bulletin board websites.

As a UK investor, I found advfn, iii and lse where there seemed to be thousands of investors bantering on almost every stock imaginable. I lurked for months, intimidated by the apparent expert knowledge of all the loudest voices before gradually contributing myself. It was the most expensive mistake I’d ever make.

I’ll explain why it was so expensive for me in a short while, but it wasn’t just me. Reading bulletin boards may be the most expensive mistake that anyone makes.

Since my own calamities in 2008, I’ve taken a huge interest into how and why bulletin boards are able to so deceive us into losing money. A few years ago I decided to start tracking the performance of the 100 most discussed stocks on the most popular online bulletin boards. I first revealed this chart at the UK Investor Show and haven’t updated it since, but even so, the results are damning.


It’s a picture of heart-wrenching ups and downs and consistent underperformance. For every story of someone who paid off his mortgage and sent his kids to private schools by ten-bagging on Rockhopper, there are hundreds of others whose crowd following have led to serious capital losses.

The typical punter investing in a collection of the most discussed stocks online would have been zeroing in on failure. A 10% average failure per year. So much for the wisdom of crowds !

Why do we get pulled into mob thinking?

It was the bull period between 2003 and 2009 that I used bulletin boards the most. I had some savings from my time as a wealth manager and had bolstered my funds with an inheritance after my mother passed away. Being Scottish, I had very good discipline ‘on the buy’. I never liked to overpay. At the time I used a strict rules-based purchase criteria that was very Jim Slater inspired, and for much of the period my exit rules were solid.

But Bull Markets create…

Unlock this article instantly by logging into your account

Don’t have an account? Register for free and we’ll get out your way


As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>

Do you like this Post?
78 thumbs up
0 thumbs down
Share this post with friends

56 Comments on this Article show/hide all

tombuz 28th Jul '16 37 of 56

Thank you Ed. for a great article that has generated excellent commentary. Next up, broker 'buy' recommendations and the City as a savings skimming machine. I can't wait.

| Link | Share
james1n 28th Jul '16 38 of 56


Great article and builds on the comments you made at the UK Investor Show (I still think it was brave of you to show the bubble chart with all the the companies participating plotted!).

When I started investing, I looked on bulletin boards for information sources as did many others and was quickly put off by the general unpleasantness as dissenting views were shouted down and I developed doubts as to the qualifications of those who expressed strong certain opinions. There is a great quote I came across today:

"The whole problem with the world is that fools and fanatics are always so certain of themselves, and wiser people so full of doubts." Bertrand Russell

Perhaps this explains both the allure and folly of bulletin boards in one!

By contrast, I enjoy the blogs and columns on Stockopedia because a variety of views are exchanged, dissenting opinions expressed and debated, and uncertainty acknowledged. As a result I have learnt a huge amount. Keep up the good work!

| Link | Share
Ramridge 28th Jul '16 39 of 56

Here is how you can profit from BBs. I will use advfn as an example.

- there are, believe or not, a few good posters who genuinely add value and deep knowledge. Yes, it is rare.
- make a note of these posters and follow their posts.
- on advfn, you can do this by simply doing a search on posters. This brings up all current and past posts by this poster
- browse the companies he comments on
- do your own research on those that attract you

From memory, I found two companies in the past year in this manner that turned a good profit.

I would emphasise that this method is just another way of identifying potential companies, and the heavy lifting of doing your own research remains your responsibility.

| Link | Share
pka 28th Jul '16 40 of 56

I'm not trying to promote the Motley Fool, but, as an owner of Arm shares, I think there are some excellent posts about the recent takeover offer on Motley Fool's Arm bulletin board:

There are also, of course, many excellent posts on Stockopedia's bulletin boards.

So it is not true that all posters on all bulletin boards are idiots. But one has to be discerning in one's choice of bulletin boards!

| Link | Share
Flackwell 28th Jul '16 41 of 56

Surely the acroynm DYOR has never been more apt?

By all means use the bulletin boards - but don't simply believe what you read, research it for yourself

Simple as that imo

| Link | Share
Effortless Cool 31st Jul '16 42 of 56

I don't get the plaudits for this article. Yes, 95% of posters on bulletin boards are clueless. However, used intelligently, bulletin boards can be an extremely valuable source of information and ideas for investors. Used stupidly, by contrast, they will cause you to lose money. I find it hard to think of a stupider way of using bulletin boards than investing in the most discussed shares. All the author has done is taken an obviously foolish approach to investing and showed that it lost money. Big deal. Further, he seems to entirely miss the point that (as Paul Scott indicates) the methodology he has applied could potentially form the basis of a powerful shorting strategy.

| Link | Share | 1 reply
Effortless Cool 31st Jul '16 43 of 56

In reply to post #145038

LOL. The downvoters might want to think a bit more about this part of the article:

"Firstly, the initial frames for a stock pitch are often made by just a few very vocal, highly intelligent and confident people. People often defer to authority figures (known as authority bias) and so these ideas are shared and accepted by a growing number of people without critical thinking. This creates an information cascade that denies independence of thought, especially amongst time poor private investors. It also leads to over-confidence.

Secondly, diversity of opinion on bulletin boards is not welcome. Time and again when a critical, bearish thinker appears on a bulletin board he’s blasted as a ‘deramper’ or a ‘troll’. Often he’s banned from the thread. Investors only seek confirmation and confidence that their decision to stay long is correct, they seek to silence challenging or contrary opinion.

Thirdly, while most investors may sit in their home offices or at work, they often aggregate in a single forum to think and share all information together. This is the antithesis of decentralisation.

All these factors are completely contrary to wise crowd formation - and they tend to lead to groupthink".

| Link | Share
rhomboid1 31st Jul '16 44 of 56


You're bang on the money imho , I always check BB activity the less it is or the more despairing the better...but only if the numbers stack.

| Link | Share
smallcapman 31st Jul '16 45 of 56

Uncharacteristically, Ed has produced an article that, although interesting, is rather incomplete. The focus he chose is on the most discussed stocks on one site's bulletin boards. That's not what he asked though. He moved seamlessly to the specific from the general.

The answer to his question is without a shadow of a doubt yes, as two colleagues have proved over 15 & 12 years respectively.

I also, like Ramridge, read the better posters output. I would not be surprised to find that many discerning investors do likewise.

Of course, Ed's not going to produce an article that suggests using Stockopedia rankings and/or stock reports is inferior to another method! I'm not actually disagreeing with the thrust of his article by the way,  I just felt that he was selecting an obviously flawed strategy to examine.



| Link | Share
Effortless Cool 31st Jul '16 46 of 56

Cheers, rhomboid1. Are you my fellow PEG investor on ADVFN, or is that a different unequal parallelogram?

| Link | Share | 1 reply
emptyend 31st Jul '16 47 of 56

Yes -interesting article, and undoubtedly there is plenty of evidence of groupthink on active bulletin boards.

I've contributed to bulletin boards now for some 17 years, mostly on a handful of stocks, and have from time to time been thought of as a "guru" of sorts on one or two of them.....not that I've ever styled myself that way - the debates about the merits of a stock were always a matter of the quality of the arguments for and against for me, rather than a question of who was making those arguments.

I would observe that the quality of discussions has deteriorated markedly over the last ten years, especially since financial crisis of 2008. The most active contributors nowadays seem to be strongly motivated to drive the share price up or down on a short term basis, rather than making assessments that deal with the stock's merits over normal investment timeframes. The result is, in essence, lots of hot air and smoke - but not much light!

Disappointingly, also, there seems to be a sub-culture of negativism and a willingness to denigrate other posters with the aim of discrediting them and dissuading them from posting. This can apply to either bulls or bears. Its a sort of Gresham's Law for bulletin boards - the bad drives out the good.

I'd also observe that two sectors have, from time to time, dominated discussion boards - namely oil and gas stocks (other than the majors) ....and what I might loosely call "tech" - which basically encompasses all stocks that might be considered to have high growth potential based on some novel aspect of their business. Widget-makers and other companies that make their money from day to day trading activities are far less interesting to speculate about than those which appear to have transformative growth potential.......

.....and these same two sectors have had specific issues which can lead to the sort of investment disaster referred to in the article:

In the case of "tech" there is the issue of fraud (as you mention) as well as the technical failure of the proposition - or the failure to commercialise it properly. Such failures (other than frauds) often have at their root the fact that such companies are led by techies who love tech - and not by hard-nosed accountants or business people. Such tech companies also attract techie groupies on bulletin boards - and it can be tough to cut through to establish whether there is a viable business there or another Betamax opportunity to lose cash.

In the case of the oil and gas sector.....which has been widely discussed and speculated over throughout my time on bulletin is impossible to escape the fact that commodity prices are a massive driver of investment returns. Broadly, 1999-2008 was highly positive for commodity prices and returns, and 2008-2016 has been neutral to negative (especially the last two years). I would argue that virtually all oil and gas stocks have been bad to disastrous investments for the last two years - quite independently of the amount of discussion on bulletin boards!.

I'd be interested to see what conclusions would be drawn from the same set of data if the results of the oil and gas sector were excluded (for reasons of the commodity price influence which dominated stock-specific factors in the returns). I doubt it would be as clear-cut.


| Link | Share | 2 replies
rhomboid1 31st Jul '16 48 of 56

In reply to post #145062

Yup ..

| Link | Share
Edward Croft 31st Jul '16 49 of 56

In reply to post #145068

Yes it's true that the majority of 'most discussed' stocks are Energy / Mining shares.  About 65% are in the latest batch.  But even stripping them out you find the same general theme.

I'd be interested to see what conclusions would be drawn from the same set of data if the results of the oil and gas sector were excluded. I doubt it would be as clear-cut.

It's late on Sunday, so I'm not doing a full analysis... but using my April 2015 collection if you remove the Energy and Basic Materials sectors from the set and analyse the last 12 months here's what you get:


That's an 11% worse performance than the FTSE All Share which is flat in the same timeframe. You'd probably find that the Energy & Basic Materials stocks did better than that.

The list that makes this charts is full of household name stocks (like the major banks, supermarkets, airlines) and speculative biotech and tech names.   Frankly, that sums it up... people love to chat about things others know about too (availability bias) or lottery tickets.  Both are expensive traits. 

| Link | Share | 1 reply
gus 1065 1st Aug '16 50 of 56

In reply to post #145068

Hi emptyend

I agree with much of what you say. However, with regards to O&G stocks (and for that matter resources in general and gold in particular), there has been quite a marked turn around since the lows in early February 2016. Albeit from a very low base level, there have been some real gems in these sectors. I alluded earlier in this thread to an alternative non-Naps portfolio I have been running since the start of the year which includes several natural resources stocks which is now up over 60% YTD including Pantheon Resources (LON:PANR) Ithaca Energy Inc (LON:IAE) and more recently Sound Energy (LON:SOU) (as well as miners Lonmin (LON:LMI) and Glencore (LON:GLEN) ). I suspect several, if not all of these have been pretty active on the BBs (although this is not the reason that I am invested in them).



| Link | Share | 1 reply
emptyend 1st Aug '16 51 of 56

In reply to post #145077

Hi Gus,

Yes they generally are well off the lows - but if you look at the boards you will find sibstantial negative sentiment and total disengagement with the great majority of contributions being from people who were long from much higher up - and bitter about it.
Accordingly I think the volume of posts to currently be a very poor guide to stock-specific sentiment.

My clear and strong view is that most investors continue to avoid the sector, even as industry players are taking greater interest and M&A dicussions seem on the increase.

rgds see that Sound Energy (LON:SOU) has nearly quadrupled in the last six weeks after flat-lining for months.  I dare say there will be others that have decent prospects but have lain unloved in a sector few with fresh money are following

| Link | Share
emptyend 1st Aug '16 52 of 56

In reply to post #145074

Thanks Ed. 

.....but your closing point just reflects reality - you can't have a discussion unless there are sufficient willing participants, and that generates the bias towards high volatility stocks or the  FTSE100 stocks that many people have in their portfolios. The interesting bit from an investment perspective is often the Bit in the middle.....


| Link | Share
dodge1664 3rd Aug '16 53 of 56

Good article - I've reached much the same conclusion from my own experience, which is why I rarely bother posting these days. Some examples of investor herding that spring to mind are:
(1) the High Yield Portfolio board on TMF
(2) the army of commodity bulls a few years ago here on Stockopedia.
(3) the Economy board on TMF for poeple who think we're going to hell in hand basket
(4) Bert's refuge on TMF for people who think everything's great

I think the thumbs down feature on Stockopedia is a bad idea because it facilitates exactly the behaviour you describe. Many posters will give a post the thumbs down when it doesn't act as a confirmation of the conclusion they want to hear. Often they will be unable to articulate any logical counter argument, but will give you the raspberry anyway.

Bulletin boards can be a useful source of information about a particular stock - along the lines of Paul Scott's excellent posts. But the challenge is to read posts without getting sucked in. If poster after poster is singing the praises of a stock, its only human to start viewing it in a more favourable light.

| Link | Share
bendipa 3rd Jul '17 54 of 56

Very good article. But it basically states what I've realised for many years now. The worst example of this herd-like behavior are found with many AIM penny stocks. You'll see the BBs populated by a few 'know-it-alls' dominating, making ridiculous positive claims for such stocks, and the other contributing PIs regarding their pearls of wisdom as gospel. If any BB member challenges their views they are quickly turned on with no shortage of abuse.. When these stocks bomb as most inevitably do the know-it-alls make a quick disappearance from such BBs never to be heard from again.

| Link | Share | 1 reply
Edward Croft 3rd Jul '17 55 of 56

In reply to post #197191

I couldn't agree more. I used to be one of those know-it-alls on a few stocks on advfn back in 2004-2008. It turned out pretty badly for me too at the time. It led to a complete re-assessment of everything I thought I knew about investing, and ultimately led to the development of the tools at Stockopedia. We're only a fraction of the way there though.

This experience really drives my approach to markets and investing now... I'm fascinated by behavioural investing and how to put processes in place to avoid being afflicted by over-confidence, over-optimism, authority bias, herding etc etc.

| Link | Share
AlanJenkins2 3rd Jul '17 56 of 56

Nice article,Ed.Re these frauds,you tend to find that they are always a bit cheaper than one would expect if they were genuine,except for the occasional price spike.I'm guessing that this is because insiders sell into strength.

| Link | Share

Please subscribe to submit a comment

About Edward Croft

Edward Croft


Stock Picking Tutorial Centre

Related Content

Let’s get you setup so you get the most out of our service
Done, Let's add some stocks
Brilliant - You've created a folio! Now let's add some stocks to it.

  • Apple (AAPL)

  • Shell (RDSA)

  • Twitter (TWTR)

  • Volkswagon AG (VOK)

  • McDonalds (MCD)

  • Vodafone (VOD)

  • Barratt Homes (BDEV)

  • Microsoft (MSFT)

  • Tesco (TSCO)
Save and show me my analysis