Apple, Inc. (NASDAQ/AAPL) is maintaining its position as the top seller of smartphones in the U.S., but in the more important global market, Apple is trailing behind its competitors. Unless Apple gains traction in China and the emerging markets, the stock is going nowhere—and that is exactly what institutional money is saying. In the last six months, institutions sold a net 29.14 million shares of Apple, cutting institutional ownership by 5.5%, according to Thomson Financial. The takeaway point in this scenario? When institutions sell, you need to take note and follow the pro money.
Simply put, by looking at where the institutional money is flowing, you can get a better sense of the market. Institutional investors are the money guys who have better access to important information and know when it’s time to jump ship. When a top-ranked analyst says jump, it’s usually wise to jump.
Take a look at the high momentum Internet services stocks. Institutional ownership is declining here, and I’m not surprised, given the massive run-up in prices this year.
Netflix, Inc. (NASDAQ/NFLX) has been the current target of heavy selling by institutions, as the share price surged above $300.00 and the valuation got out of whack at 86 times (X) its estimated 2014 earnings per share (EPS) and a massive price-to-earnings growth ratio at 8.62. Talk about overvalued! Institutions realize this, and over the past six months, 16.13 million shares were dumped, representing a decline of 4.5% in institutional ownership, according to data from Thomson Financial.
Even insiders at Netflix are selling, with 1.06 million shares sold via 26 transactions. On November 4, Neil Hunt, Netflix’s … Read More
The low trading volume in the stock market implies that many investors and institutional money may be sitting on the sidelines.
Yet for the professional money, such as hedge funds and private wealth, you cannot just sit on cash, since you’re usually paid a lofty amount to manage money and achieve above-average returns relative to the stock market.
As such, I constantly look at where the institutional money is going to get a sense of what investments may be interesting in the stock market.
The premise for this strategy is that the big-money guys have more clout with the companies, and as such, they may be able to get easier access to information on the company. Of course, insider trading and the release of material information to the stock market ahead of the general public are illegal. But then something small that you may deem to be immaterial could be a big clue for institutional investors.
If you follow the more successful funds or money in the stock market, you can get a good understanding of what stocks could be ready to make a move.
Just because the overall direction of the stock market is down at this juncture doesn’t mean you should be resting on your laurels, waiting for the next trade to surface.
There are always opportunities to make money. You just need to be tuned in.
Social media company Facebook, Inc. (NASDAQ/FB) has had a great rally back up to above its initial public offering (IPO) price. Just consider the institutions that bought 4.98 million shares quarter to quarter. Could there be more to come? I’m not … Read More
With the S&P 500 close to its all-time highs, a common question is: will we see a pullback or a continuation in the bull market? This is obviously a very complicated question to answer, as investor sentiment in the S&P 500 can shift extremely quickly.
In addition, there is obviously no quantifiable method to predicting the future. However, we can look at various indicators that might give us information about what is probable.
While the S&P 500 has continued moving higher, with investor sentiment in America cautiously bullish, over the past month there has been a huge increase in volatility and pullback in emerging market nations globally. Both the stock and bond markets in the emerging nations have been hit significantly.
With increased speculation that the Federal Reserve will begin reducing stimulus, part of the global link is beginning to break down. Over the past two months, emerging market bonds have fallen approximately 6.3%, as investors begin exiting riskier assets.
Why does it matter what happens to investor sentiment in the emerging markets for Americans whose primary focus is on the S&P 500? There are several reasons.
The S&P 500 comprises some of the strongest companies in the world. Because of this, investor sentiment in the S&P 500 is usually the last to get hit. The first indications of trouble usually stem from the peripheral, smaller emerging market countries that are thin and illiquid.
When we see signs that investors are beginning to panic and sell positions in those sectors, and if things then don’t stabilize, the trouble can easily hit our shores. Don’t forget, a huge amount of earnings … Read More
As everyone knows, gold bullion has had a significant sell-off over the past few months. Institutional investor sentiment has shifted dramatically, as funds have booked profits on their gold bullion investments.
However, it appears that there is still some life in gold bullion, because continued strong investor sentiment in the retail sector, especially the physical market, has helped to increase demand and support the price.
Part of the reason for the sell-off in gold bullion was the better-than-expected economic data and comments by the Federal Reserve that it’s beginning to look at possibly reducing its quantitative easing program if the economy improves.
However, recent data are showing signs that the economy is not accelerating. As an example, the U.S. Department of Commerce just released the second estimate of first-quarter gross domestic product (GDP), coming in at 2.4%, slightly below previous estimates of 2.5%. (Source: U.S. Bureau of Economic Analysis web site, accessed May 30, 2013.)
While this number is not bad, it is not very strong either, and it will give investor sentiment a pause regarding the probability that the Federal Reserve will begin reducing its asset purchase program anytime soon.
All eyes will be focused on this Friday, when the all-important jobs data will be released. The Federal Reserve has two mandates: price stability, which remains in check, and employment. Investor sentiment will shift and affect assets, such as gold bullion, based on how the underlying economy is functioning.
Take a look at the chart for the prices of spot gold featured below:
Chart courtesy of www.StockCharts.com
Technically, gold bullion appears to be attracting buyers. While investor sentiment dramatically … Read More
Last week, the new governor for the Bank of Japan (BOJ), Haruhiko Kuroda, announced a game changer for that nation’s quantitative easing policies. The BOJ now plans to initiate monthly bond purchases in the amount of 7.5 trillion yen (US$77.8 billion) per month in an attempt to increase inflation to two percent within the next two years.
When it comes to creating an investment strategy based on this quantitative easing policy, there are two initial takeaways. The first is that this will put pressure on the Japanese yen to weaken its value; the second is that stocks will rise within that nation, since many firms are exporters and will benefit from this quantitative easing plan.
This investment strategy has already begun, as large institutional investors have started front-running this announcement, starting with the election of the new Prime Minister of Japan last fall. However, the country is just about to embark on this new aggressive quantitative easing plan that will last approximately two years—if not longer. There is still plenty of time to profit from an investment strategy using this quantitative easing announcement as a catalyst.
The Japanese yen has already weakened, but it’s poised for additional decline with such an aggressive quantitative easing policy. One investment strategy is to consider the possibility of shorting the yen. Recently, George Soros and Bill Gross stated that this quantitative easing policy could significantly push the yen down further than most people believe.
Soros commented, “If the yen starts to fall, which it has done, and people in Japan realize that it’s liable to continue and want to put their money abroad, then … Read More