Pfizer is no longer the most popular security among investment newsletters.

This is noteworthy because this pharmaceutical company has been, far and away, the most recommended by the investment newsletters tracked by the Hulbert Financial Digest for more than just a few years. Through thick and thin, the newsletters have stuck with the stock.

There have been two developments in recent weeks whose net effect has been to eclipse Pfizer’s status at the head of the newsletters’ hit parade.
The first is the continuation of a gradual reduction in newsletters’ attraction to Pfizer (PFE). To be sure, this process has not been dramatic. In contrast to 22 newsletters recommending the stock (out of 189 that the HFD monitors) when PFE was at the apex of its popularity, 15 still recommend it today.

The second development has been more dramatic: A big upsurge in the number of newsletters recommending Japanese stocks and, in particular, the iShares exchange traded fund that focuses on that country’s equities -- the iShares: Japan Fund (EWJ). In fact, no fewer than five newsletters have added EWJ to their model portfolios within the last 30 days.

As a result, a total of 16 newsletters now recommend this exchange traded fund, one more than the total of those recommending PFE.

Why the sudden increase in EWJ’s popularity? Each of the five newsletters recommending it over the last month are trend-following services, so, in essence, they like the fund because it has been performing so well.

How should you react to EWJ’s new-found popularity? You might wonder if it’s a bearish omen, on the contrarian grounds that the markets rarely accommodate the majority.

You would find support for this contrarian-based skepticism in PFE’s disappointing performance over the years when it was most popular among newsletters. For example, PFE’s stock is down some 50 percent over the last five years, during which the S&P 500 has more or less held its own.

PFE’s experience notwithstanding, I would not be too quick to apply a contrarian-based skepticism to EWJ or to any of the stocks heavily recommended by investment newsletters.

Popularity Study
Consider the results of a Hulbert Financial Digest study on popularity among newsletters. It was a huge study, covering 25 years.

For each month’s end over this 25-year period, the study focused on the five stocks that were most recommended by HFD-monitored newsletters as of that date. If there was a tie for fifth place, the HFD included in this database all the stocks that were tied for fifth. All in all, a total of more than 2,000 stocks were examined.

For each of these stocks, the HFD compared its performance over the subsequent one-month and 12-month period to that of the Dow Jones Wilshire 5000 index.

Here’s what the HFD found: Over the subsequent month, the average stock in this database of most popular stocks outperformed the DJ Wilshire by 12 basis points. Over the subsequent 12 months, the margin of out-performance was 101 basis points.

So, PFE was definitely the exception rather than the rule.

And, EWJ does not deserve the sell signal that knee-jerk contrarians will issue in reaction to its new-found popularity.

Mark can be contacted via email at mhulbert@marketwatch.com.