One stock index to ignore

Email to a Friend

A new stock index has appeared on our radar, though at low altitude. The Rosenberg Center Franchise 50 Index experienced a 5.5 percent drop in the fourth quarter of 2007 as a result of 43 of its 50 companies taking a loss. Although heavily weighted in the business sectors with restaurants and lodging, the index closely reflects the broader economy.

Despite its current woes, the index is up 81.5 percent, compared with 5.3 percent for the S&P 500, since its inception in 2000. Nonetheless, before loading up on these stocks, consider that “poor media coverage from individual franchisees can have a dramatic and immediate effect on a company’s share price,” warns financial planner Robert Schmansky, president of Sound Capital.

Financial adviser Richard S. Farkas of Raymond James Financial Services sees this index as a marketing tool for Rosenberg International Center of Franchising at University of New Hampshire.

“These types of indices are not intended necessarily to be the basis of an investment product,” agrees financial planner and attorney Steven Blair Wilson, head of Capital Advisers, though they have affected the exchange traded funds (ETFs) industry.

Don’t despair. According to financial planner Scott Hipp, owner of Lifetime Financial Solutions, “most well-managed growth mutual funds are going to hold ownership in the best companies in the RCF 50 index,” he says.