Business: Small Investor’s Boswell

GARFIELD ALBEE DREW

THE Boswell of the small investor is Garfield Albee Drew, a controversial Boston chartist. He tries to call turns in the stock market by keeping careful tab on the odd-lotter—generally the small investor who buys and sells in lots of less than 100 shares. Mustachioed “Jeff” Drew (5 ft. 6 in. and 57), has an unusual attitude toward his subjects: he thinks that they are usually wrong. Small investors, says Drew, are most wrong just when the stock market is making important changes in trends; they sell when the market is getting ready to advance and buy when it is headed downward.

This unflattering estimate is the basis of Drew’s weekly Drew Odd Lot Studies, which analyze the small investor’s “mistakes” as a key to market trends. Drew’s report is bought—at $95 a year—by some 4,500 professional investors, including Swiss banks, the executives of top U.S. banks and corporations (General Motors, CBS, Alcoa), and investment funds.

Drew signaled the current bull market last December (though his figures showed it as early as October) whereas the new bull was not christened until last week by the Dow Theory (see Wall Street). In December, odd-lot sales topped purchases by the biggest margin since 1941, and in recent weeks selling has consistently exceeded buying. “A bearish market psychology,” says Drew, “is always true in the initial phase of a market up-pull. In the early stages of a bull market, such as now, the public is disbelieving.” The rationale of Drew’s theory is that the public simply cannot compete with the trusts and other professional investors who operate with more knowledge and less emotion. If the odd-lotter is selling, reasons Drew, somebody must be buying. The buyers are the professionals. Drew’s conclusion: selling by the odd-lotters, since it simultaneously reflects a heavy flow of “smart money” into the market, signals a market advance.

WALL Street and Drew often disagree about the nature of the little man. But there is no doubt that he is important: in 1960 odd-lotters accounted for 21.3% of the market’s total volume. Many brokers believe that Drew does not do the odd-lotter justice. Even Drew himself admits that while the odd-lotter may be slow to recognize short-term trends, he has done well over the long run, if he held onto his stocks. In ten of the past eleven years, the odd-lotter has bought more than he has sold—while the market has risen. Says Drew: “It should not be supposed that the public is always wrong and the professional always right.” Drew’s own record at calling the market’s turns (he does not predict trends, only charts them) has been mixed. He claims that his odd-lot index called the exact bottom of the market in the 1948-49 and 1953-54 recessions. But his critics charge that on at least one occasion, in the summer of 1958, when odd-lot purchases were high, Drew’s theory indicated that it was time to sell. Those who did were sorry: the market started to rise. Wall Street also charges that Drew places too much reliance on the odd-lot figures, though even Drew recognizes their limitations by supplementing them with several other bases. Drew gives few stock tips in his reports, largely because he feels that many stocks are overpriced. “I’m trying to avoid saying to subscribers,” he says, “that the fortune-building era lies ahead in the market. It doesn’t.”

DREW has little love for Wall Street. Son of an old New England family, he went to the Street after graduation from Harvard (’26), sat out the 1929 crash and the early years of the Depression as a bond statistician. Says Drew: “I became so disgusted with the dishonesty around me that I wanted to get out.” He landed a job with Roger and Paul Babson’s United Business Service in Boston, noticed in the course of his work that odd-lot transactions did not seem to match general market trends. After he published a treatise on his odd-lot research in 1940, he got so many letters from investors who were interested in his theory that he later expanded it into a book. Its reception was so good that Drew decided he had a readymade list of customers, set up his own investment company with his new theory as a base.

Though he keeps an office in Boston, most of the operations of Drew’s eleven-man outfit are carried out in the basement of his stucco, five-bedroom house in Newton Center, Mass. “What’s the point of being in Wall Street?” he asks. “Out here you’re aloof from the scuttlebutt, the emotions and social entanglements of life in a financial district.” Drew spends most of his time in sports clothes, frequently needs a haircut.

His subscription service brings him and a partner about $350,000 a year, and Drew spends more than $150,000 in a good year for advertising to lure new subscribers. He once got separate letters from two partners in the same Wall Street firm requesting his service. Each asked that Drew’s report be sent to his home rather than to the office. Neither wanted his partner to know that he was succumbing to Drew.