The following is a direct quote from a feature article by Michael Santoli in the 11/6/00 issue of Barron’s on page F4.
"The dream of finding a system to trade the peppiest funds clearly holds some appeal. If it didn’t, a self-published book that promises just such a foolproof method wouldn’t be in its second printing. Written by Al Thomas of Williamsburg Investment Company of Merritt Island, Florida, this sometimes slapdash and often abrasive how-to paperback, entitled "If It Doesn’t Go Up, Don’t Buy It", claims that using Thomas’ approach for an hour a month can help you squeeze 30%-50% a year out of no-load mutual funds, without risking down periods.
Essentially, Thomas’ strategy relies on use of two market newsletters. One, a market-timing letter, tells you whether and when to get into the market. The other helps you pick the best-performing stock funds. Mix, shake well and imbibe once a month, and this investment adviser insists you’ll beat the clueless pros. As evidence he submits a letter from a Cocoa, Florida accountant stating the Thomas’ Charles Schwab account appreciated by 39.4% in 1998 – a year in which the S&P500 itself rose 28.5%
The book itself has won nothing but enthusiastic customer reviews on Amazon.com and, according to Thomas, was at some point in the top 4% of all books in sales for the online retailer. Judging by its popularity, it would seem that trading mutual funds now is a mainstream pursuit.
A layering of momentum makes the method work – on the upside, at least. Investors chase the funds with the greatest upward momentum, which in turn derive their strength from investing in the hottest sectors. These sectors encompass companies with the greatest earnings momentum, which are benefiting from accelerating economic growth in their industries. Thus a lot of interlocking parts need to move in sync. After all, it takes only one husky to fall for the others to trip up and take a dogsled out of the race.
Still, they don’t hand out forbearance awards for sticking with laggard funds. So a well-honed method for staying abreast of the ascendant funds is worth exploring."