Investors Largely Comfortable With Current Valuations

Posted on December 18, 2014 | AAII Survey

This week’s Sentiment Survey special question asked AAII members how comfortable they are with the current valuations of the stocks they hold in their portfolios. Slightly less than one-third (31%) said they are comfortable with current valuations. A few clarified their responses by saying they are comfortable exclusive of oil stocks. Nearly 14% described themselves as being very comfortable. At the other end of the spectrum, 17% said they are not comfortable and an additional 7% said they are somewhat uncomfortable.

Here is a sampling of the responses:

  • “Not counting the energy sector, I am very comfortable.”
  • “Just fine; the dividend flow is more important than the daily price of the stocks.”
  • “Great. I am buying stocks on the dips.”
  • “Most of the stocks I hold are fairly valued. None are overvalued, but by my estimates, only one is undervalued.”
  • “They’re high, except for oil, so I’m worried.”

 



Neutral Sentiment Rises to Highest Level Since September

Posted on December 18, 2014 | AAII Survey

Expectations among individual investors for a flat market rose to its highest level since September in the latest AAII Sentiment Survey. Pessimism also rose, reaching a nine-week high, while optimism fell below its historical average.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell by 6.3 percentage points to 38.7%. Optimism was last lower on October 2, 2014 (35.4%). The drop ends a streak of 10 consecutive weeks with bullish sentiment above its historical average of 39.0%. This had been the longest such streak in nearly three years.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 1.7 percentage points to 34.4%. Neutral sentiment was last higher on September 18, 2014 (34.8%). This is the third consecutive week with neutral sentiment above its historical average of 30.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, jumped by 4.5 percentage points to 26.9%. This is the highest level of pessimism since October 16, 2014 (33.7%). The increase was not large enough to keep bearish sentiment below its historical average of 30.5% for the ninth consecutive week and the 42nd week this year, however.

Neutral sentiment has risen by a cumulative 7.3 percentage points over the past three weeks. At the same time, bullish sentiment has declined by a cumulative 13.5 percentage points. The shift in expectations occurred as the S&P 500 underwent what was essentially a pullback. The large-cap index fell 4.9% between December 5 and December 16, 2014.

Keeping individual investors optimistic is falling energy prices, the overall upward momentum in stock prices, earnings growth, the Federal Reserve’s ending of its bond purchasing program and sustained economic expansion. Keeping other AAII members cautious are geopolitical events, weakness in energy stocks, a sense that prevailing valuations for other stocks are too high, the pace of economic growth and worries that a larger drop in stock prices is forthcoming.

This week’s AAII Sentiment Survey results:

  • Bullish: 38.7%, down 6.3 percentage points
  • Neutral: 34.4%, up 1.7 percentage points
  • Bearish: 26.9%, up 4.5 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 30.5%
  • Bearish: 30.5%

The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.). The survey and its results are available online at: http://www.aaii.com/sentimentsurvey.



Sell OF THE WEEK 12/17/2014

Posted on December 17, 2014 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Colgate-Palmolive Company (CL) is his “Sell of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.

Audio url: Sell of the week





BUY OF THE WEEK 12/16/2014

Posted on December 16, 2014 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why GulfMark Offshore (GLF) is his “Buy of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.

Audio url: Buy of the week




THE December 2014 PASSING COMPANY LISTS AND PERFORMANCE DATA IS NOW AVAILABLE ON-LINE

Posted on December 15, 2014 | Stock Screens

YTD Return of Top Performers: Rule #1 Investing 50.3% — O’Neil’s CAN SLIM 46.4%

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December 2014 AAII MODEL PORTFOLIOS UPDATED: Large Cap Gains Leave Small Caps Lagging

Posted on December 15, 2014 | Model Portfolios

The S&P index climbed 2.5% in November. Energy prices and strengthening economic data in the US continued to be the themes for the market. With gasoline $3 a gallon (and under) now a reality for consumers, analysts expect that that money will return to the market in the form of consumer spending This would be a welcome change, given the rather poor Black Friday retail sales numbers that came out. Additionally, a weakening China also cast a pall over the market as its economy struggled with a bursting housing bubble and slowing demand across the globe for everything except iPhones. The Model Fund Portfolio climbed 1.3% during November, while the Model Shadow Stock Portfolio, which specifically invests in small-company stocks, fell 2.4%.

The Model Shadow Stock Portfolio’s 2.4% decline for the month trailed its comparison benchmarks: The Vanguard Small Cap Index (NAESX) was up 1.0% and the DFA US Micro Cap Index fund (DFSCX) was down 0.7%. Year-to-date, the Model Shadow Stock Portfolio has declined 9.6%, trailing the Vanguard Small Cap Index fund (up 6.0%) and the DFA US Micro Cap Index fund (down 0.4%). The Model Shadow Stock Portfolio has a compound annual return of 16.8% since its inception in 1993, while the Vanguard Total Stock Market Index fund (VTSMX) has gained 9.4% annually over the same period.

The Model Fund Portfolio’s 1.3% gain in November compares to a gain of 2.4% for the Vanguard Total Stock Market Index fund. Year-to-date, the Model Fund Portfolio is up 9.7%, while the Vanguard Total Stock Market Index fund is up 12.4%. The Model Fund Portfolio has a compound annual return of 9.4% since inception in June of 2003 beating the performance of the Vanguard Total Stock Market Index fund over the same time period, which returned only 9.6%.

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Santa’s Gone AWOL

Posted on December 12, 2014 | Stock Superstars Report

While the year-end period is historically a strong period for stocks, this week Santa apparently forgot to do his part. Perhaps someone has been very naughty. The markets traded lower much of the week, with the iShares Dow Jones ETF (IYY) trading down 3.4% by the close on Friday while the SSR portfolio declined 3.9% for the week. There appeared to be some flight to safety as precious metals were the top sector this week, according to Marketwatch.com. The ongoing slump in all prices continued to buoy airlines, including Delta Air Lines (DAL), which was the SSR top performer for the week, up 0.8%.

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December Monthly Report, and Where Is the Santa Claus Rally?

Posted on December 12, 2014 | Dividend Investing

The December monthly report is now online. No transactions were made this month, following the changes we made in October and November. A few energy stocks crossed our radar screen, but none that we were ready to add to the DI portfolio this month.

In the December report, we discuss whether stock buybacks are good or bad for shareholders. There has been a debate within the media about the pros and cons of share repurchase programs. Since buybacks compete with dividends for corporate cash, we wanted to share the points made by both sides with you.

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Members Show Mixed Feelings on Oil and Energy Stocks

Posted on December 11, 2014 | AAII Survey

This week’s AAII Sentiment Survey special question asked AAII members for their opinion about how attractive oil and natural gas stocks are right now. Respondents largely fell into one of three groups. Slightly more than one third (34%) think the recent drop presents a buying opportunity. Many of these respondents said energy stocks are attractively valued right now, especially from a long-term perspective. Nearly 29% of respondents are pessimistic, with many thinking that prices could fall even further. About 16% are waiting for oil prices to stabilize or fall further.

Here is a sampling of the responses:

  • “Valuations are inexpensive and downside risk, though still a factor, has been somewhat reduced.”
  • “I think the price will continue to decline for the next few months.”
  • “Attractive for the long term; not so sure about the near term.”
  • “Good, but I’m waiting to invest. Prices may go lower…”
  • “Never catch a falling knife! I think we have a way to go to hit bottom.”
  • “If there were years left to my investing future, I would be a buyer.”


AAII Sentiment Survey: Bullish Sentiment Continues to Stay Above 40%

Posted on December 11, 2014 | AAII Survey

Optimism rebounded among individual investors in the latest AAII Sentiment Survey, extending the current streak of above-average bullish sentiment readings. Neutral sentiment also rose, while bearish sentiment declined.

Bullish sentiment, expectations that stock prices will rise over the next six months, rebounded by 2.3 percentage points to 45.0%. The rise puts bullish sentiment above 40% for the ninth consecutive week and above its historical average of 39.0% for the 17th out of the past 18 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, edged up 1.3 percentage points to 32.6%. The rise keeps neutral sentiment above its historical average of 30.5% for the second consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 3.6 percentage points to 22.3%. The decline keeps pessimism below its historical average of 30.5% for the eight consecutive week and the 41st week this year.

The current streak of 10 consecutive weeks with bullish sentiment above its historical average is the longest such streak since early 2012. Optimism stayed above its historical average for a 14-week period running from December 29, 2011 through March 29, 2012.

Keeping individual investors optimistic is the overall upward momentum in stock prices, earnings growth, the Federal Reserve’s ending of its bond purchasing program, falling energy prices and sustained economic expansion. Keeping other AAII members cautious are geopolitical events, a sense that prevailing valuations are too high, the pace of economic growth and worries that a larger drop in stock prices is forthcoming.

This week’s AAII Sentiment Survey results:

  • Bullish: 45.0%, up 2.3 percentage points
  • Neutral: 32.6%, up 1.3 percentage points
  • Bearish: 22.3%, down 3.6 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 30.5%
  • Bearish: 30.5%

The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.). The survey and its results are available online at: http://www.aaii.com/sentimentsurvey.



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