“Sell when Business Week says buy” is a reflection of the so-called “Business Week cover curse” (or “Business Week cover jinx”). A magazine’s reporting usually involves past trends. When something reaches the cover of a magazine, the trend is often over. The “cover curse” or “cover jinx” has also been said to afflict Fortune and Forbes, but the Business Week example is the one that’s most used.
 
The “cover jinx” began with Time magazine in the 1930s. The cover jinx then afflicted Time‘s sister publication, Sports Illustrated. If an athlete made the cover of Sports Illustrated, a career-damaging injury or poor performance was (allegedly) almost sure to follow.
   
The Business Week  cover curse was mentioned on several blogs in April 2005, after Business Week had put blogs on its cover. Business Week‘s own blog, on July 20, 2007, published “The cover curse: explained.”

 
magazines.things-and-other-stuff.com
Origins of the SI Cover Jinx
Did Time Magazine transfer an old thorn in their side to its kid sister?
I’ve long been aware of the SI cover jinx, the fun little legend where an athlete appearing on the cover of Sports Illustrated is bound to run into some sort of misfortune soon after their faces smile at us from the newsstand. What I wasn’t aware of, but apparently isn’t a secret, was that there was also a Time Magazine cover jinx. I found reference to it when I was listing for sale the August 15, 1955 issue of Time and my eyes more or less accidentally caught hold of the Publisher’s Letter page towards the front of that issue. James A. Linen mentions an article that Dick Young wrote for the New York Daily News and makes reference to the “TIME sports-cover jinx” which he also says “first started back in the 30’s.” More details on that issue will come further down.
   
Time magazine
5 January 1942, Time magazine, pg. 3, col. 1:
Cover Jinx
Sirs:
TIME cover jinx still seems to be working. Latest casualties: Husband Kimmel, Fedor von Bock.
J. F. R.
Washington, D. C.
—TIME’s “cover jinx” has sometimes appeared to work on sports figures but not on others. Franklin Roosevelt, who has appeared on TIME’s cover six times (including this week) since 1923 has, apparently, never felt it. No jinx operated on Admiral Kimmel or General von Bock; the Admiral was placed on the cover after the news of Pearl Harbor arrived; of the General TIME said in its cover story, “When a list is made of the generals who have done most to whittle down Germany’s chances of victory the name of Bock may lead all the rest.” TIME hopes Admiral Yamamoto may rank as a sports figure.—ED.
   
27 October 1985, Los Angeles (CA) Times, “Ewing Makes Debut” by Randy Harvey, Sports, section 3, pg. 2:
It must be the Business Week cover jinx.
     
26 December 1992, Dallas (TX) Morning News, “Before you buy, run through these computer caveats” by Tom Steinert-Threlkeld:
Business Week cover jinx.
 
Barrons.com (September 13, 1999)
Maytag became the latest victim of the Business Week cover jinx.
 
Los Angeles (CA) Times
Newsmagazines’ Cover Stories Bear Watching
By Josh Friedman
March 21, 2001
Stop the presses: The bear market might be over.
(...)
Analysts say the covers are encouraging as a “contrary” signal—but far from conclusive. Contrary indicators, which look at such things as investor sentiment surveys and mutual fund redemptions, can predict market turnarounds on the theory that when the bad news is already out there among the masses, it can’t get much worse.

“We’re finally starting to see the gloom,” said James Stack, president of Whitefish, Mont.-based InvesTech Research. “But the press is still posing the question about a recession without reaching the conclusion.”
 
U.S. News Managing Editor Brian Kelly said he has never heard of the magazine-cover indicator.
 
“It makes sense,” he said with a chuckle. “Like the notion that when your barber is buying stocks it’s time to sell. I’m perfectly willing to believe that when a bunch of magazine editors in a room all agree on something, it must be so obvious that it’s months old.”
   
Fortune
There’s no place like home David Wittig went from Wall Street wunderkind to titan in Topeka. Is the Big House next?
By Andy Serwer
December 30, 2002
(FORTUNE Magazine) – Is there such a thing as a FORTUNE cover curse? Despite a few CEOs who inevitably toppled after we showed their mugs, the anecdotal evidence suggests not. Bill Gates, for instance, has been on the cover more than anyone, and he’s still the richest man in the world. Ah, but then there’s the intriguing case of David Wittig—FORTUNE cover boy, Nov. 24, 1986.
   
GigaOM
Business Week, Blogs, and Business
Om alik | Monday, April 25, 2005 | 6:41 AM PT
Now that blogs are in the cover of Business Week, you can safely say two things - blogs have gone mainstream, and blogs are over. Yup folks given the history of magazine covers, I think this one is gone. Henry Copeland sums it up when he writes, “Yesterday a friend who runs a hedge fund reminded me of the Wall Street maxim — ’sell when Business Week’s cover says buy.’”
 
Go to Paul Kedrosky’s site and check out the 1979 Business Week cover ‘The Death of Equities.’ Henry has more, examples. My colleague Damon Darlin, a man wise in the ways of the magazine covers, writes, “I based these predictions on the theory that magazine covers are some of the best indicators of a trend that is ending, because magazine journalists tend to nab trends at the top.” I attest to that. Qwest - September 2000 - lets take over the world, on the cover of Red Herring. I wrote that piece, and you know what happened.
   
Blogads Weblog
Business Week’s cover: the kiss of death
by henrycopeland
Monday, April 25th, 2005
Yesterday a friend who runs a hedge fund reminded me of the Wall Street maxim — “sell when Business Week’s cover says buy.”
 
I’m pretty sure Business Week is right about blogging but wrong about its own role in the game. More thoughts in the blog post below.
 
But first, its kinda fun to look at the tortured history of Business Week covers. The most famous example of this, of course, is the 1979 Business Week cover “The Death of Equities.” Paul Kedrosky has that cover and a great graph of the next 20 years bull market. Some facts from the article: Baby boomers won’t save. Gold is a safe long term bet.
   
How could Business Week be so wrong? Precisely because the publication’s staff does a wonderful job. Each cover is a finely tuned encapsulation of conventional wisdom.
   
Inc.
August 12, 2005
Today’s news
Does the Bell Toll for Dell?
Posted by Mike Hofman at 5:00 PM
(...)
Posted by: Daryl Kulak at August 23, 2005 5:01 PM
It used to be that there was a “Fortune magazine cover curse?” Remember? If you got featured on the cover of Fortune magazine, your business was headed for a downturn.
 
Are we saying that now there’s an “Inc. magazine cover curse?” Poor Mike.
     
Trader’s Narrative
Magazine Cover Curse: Goldman Sachs
Published April 30th, 2006 in Sentiment
Did you know that the magazine cover is a stealth sentiment measure?
 
It may strike you as a bit strange but it has an uncanny prescience. Well, in the sense that it can foretell the opposite of what is most likely to happen. The most famous one that is usually cited is the Business Week cover which screamed to the world: “Death of Equities” (August 13th 1979).
 
Probably for this most egregious gaffe, Business Week is singled out for the dubious distinction of having a cover ‘curse’. But other magazines have equal billing. The only condition is that the magazine must have a wide audience (think Time or Newsweek, not the Spokane Structural Engineer’s Quarterly). The reason is quite simple and it goes to the heart of contrarian thinking.
   
NeoGAF - Gaming Discussion
HyperionX
(05-31-2007, 06:47 AM)
Too bad it’s not Businessweek, and their infamous cover curse.
   
Grayman
(05-31-2007, 06:48 AM)
Fortune magazine sounds like a junior member
     
The Peridot Capitalist
Business Week Magazine Cover Jinx
Posted on June 13th, 2007 in investment strategies
Barry Ritholtz beat me to the punch pointing this out, but the Sports Illustrated Cover Jinx isn’t just a sports phenomenon, it works in the business media too. This was the cover of Business Week three months ago, when the ten-year bond yield was hovering near 4.5% in March. This morning the yield rose above 5.3% and the speed at which rates have risen has spooked the equity market in recent days.

Keep in the mind that magazine cover stories often serve as contrarian indicators, and not just in sports or Madden football video games. I still remember a timely Barron’s cover highlighting a glowing article on Dennis Kozlowski that essentially crowned him the next Jack Welch. We know what happened shortly after that.
 
Business Week
The cover curse: explained
Posted by: Stephen Baker on July 20, 2007
We’ve taken grief for decades about the cover curse at BW. When you see a glowing cover story on a company, the common wisdom says, sell. Now a trio of financial analysts has carried out a study of this cover curse at BW, Forbes and Fortune. (ex Andreesen). And they conclude, I’m sorry to see, that there’s something to the curse. Basically, a positive or negative cover story marks the end of a company’s “extreme” behavior, either good or bad. After the cover story, they tend to regress, in their corporate way, toward the mean.
 
What does this say about us? We don’t run positive or negative cover stories until the writer can come up with quite a bit of evidence: a soaring stock, a hot product, some new manager who’s figured out how to slash costs or conquer global markets. We need, after all, to make a case that the company is hot or cold. But by the time we’ve marshalled our evidence and put together our product, the actors in the drama—from investors to competitors (inside the company and out), are already responding to the conditions we’ve been busy documenting. Their responses bring the period of “extreme” behavior to an end.
 
Interesting stats in the study. Turns out that between 1983 and 2002, BW wrote more “negative” company covers than the other mags. Some 26% of our covers were deemed negative, while it was 8% at Fortune and 14% at Forbes. 77% of Fortune’s company covers were “positive,” followed by 69% at Forbes and 59% at our place.
   
The Big Picture
Breaking the Business Week Cover Curse?
Wednesday, November 21, 2007 | 11:30 AM
(...)
You may be noticing about now that this lies in stark contrast to our prior discussion of Rates and the Magazine Cover Indicator (for more on the magazine cover indicator, see this).
   
Gawker - ValleyWag
Facebook Gets the Fortune Cover Curse
By Owen Thomas, 12:02 PM on Tue Feb 17 2009, 7,154 views
A breathless Fortune story — “How Facebook Is Taking Over Our Lives” — reports that more people use Facebook than watched this year’s Super Bowl. Facebook’s board of directors must be thrilled, right?
 
We doubt it. Facebook board member Marc Andreessen once cited a paper on business magazine covers as contrarian indicators:
 
Headlines from featured stories in Business Week, Fortune, and Forbes were collected for a 20-year period to determine whether positive stories are associated with superior future performance and negative stories are associated with inferior future performance for the featured company. “Superior” and “inferior” were determined in comparison with an index or another company in the same industry and of the same size. Statistical testing implied that positive stories generally indicate the end of superior performance and negative news generally indicates the end of poor performance.