AAII WEEKLY FEATURES 2/3/2015
Posted on February 3, 2015 | Weekly Features
This week’s AAII Weekly Features has been updated.
View this week’s Top AAII Articles, Featured Stock Screen and Member Question.
Few Investors Plan to Keep Allocations Unchanged in 2015
Posted on February 3, 2015 | AAII Journal
Last month’s Asset Allocation Survey special question asked AAII members what, if any, allocation changes they expect to make this year. Slightly fewer than three out of 10 (30%) said they don’t anticipate making any changes. About 16% intend to increase their allocations to equities, while 7% plan on reducing their exposure to stocks. Close to 15% intend to boost their bond allocations and just under 10% say they will boost their cash allocations.
January AAII Asset Allocation Survey: Fixed-Income Allocations Near a 2-Year High
Posted on February 3, 2015 | AAII Survey
Individual investors’ allocations to bonds and bond funds rose to their highest level in nearly two years, according to the January AAII Asset Allocation Survey. Equity allocations stayed within their recent range, while cash allocations increased slightly.
Stock and stock fund allocations declined 1.3 percentage points to 67.2%. The decrease reverses December’s increase in equity allocations and matches November’s levels. January 2015 was the 22nd consecutive month and the 24th out of the past 25 months with stock and stock fund allocations at or above their historical average of 60%.
Bond and bond fund allocations increased by 0.7 percentage points to 17.5%. This was the largest allocation to fixed-income since May 2013 (18.1%). The increase also kept bond and bond fund allocations at or above their historical average of 16% for the eighth consecutive month.
Cash allocations were 0.5 percentage points higher in January than in December, at 15.3%. The magnitude of the increase was not large enough to keep cash allocations from staying below their historical average of 24% for the 38th consecutive month.
The increase in fixed-income exposure was due to a larger allocation to bond funds. Among surveyed AAII members, the average allocation to bond funds was 14.4% last month, a 1.1 percentage-point increase over December and a 1.9 percentage-point increase over November. The current allocation to bond funds is the largest recorded by our survey since April 2013 (15.9%).
The downward trend in yields led to a good year for longer-term bond funds and may have made them more attractive to individual investors. A down month for stocks may have also played a role in shifting investment dollars out of equities, even though short-term sentiment among individual investors largely stayed above average throughout January. Even with this month’s allocation survey results, many AAII members continue to be frustrated by low bond yields and low interest rates on money market accounts.
January AAII Asset Allocation Survey results:
- Stocks and Stock Funds: 67.2%, down 1.3 percentage points
- Bonds and Bond Funds: 17.5%, up 0.7 percentage points
- Cash: 15.3%, up 0.5% percentage points
January AAII Asset Allocation Survey details:
- Stocks: 31.0%, down 1.1 percentage points
- Stock Funds: 36.2%, down 0.1 percentage points
- Bonds: 3.1%, down 0.4 percentage points
- Bond Funds: 14.4%, up 1.1 percentage points
- Bullish: 39.0%
- Neutral: 30.5%
- Bearish: 30.5%
*The numbers are rounded and may not add up to 100%.
The AAII Asset Allocation Survey has been conducted monthly since November 1987 and asks AAII members what percentage of their portfolios are allocated to stocks, stock funds, bonds, bond funds and cash. The survey and its results are available online at: http://www.aaii.com/investor-surveys.
BUY OF THE WEEK 2/03/2015
Posted on February 3, 2015 | Podcast
AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Lam Research Corporation (LRCX) 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
How to Set and Revise Realistic Price Targets for Your Stocks
Posted on January 30, 2015 | Investing
An investor over time attaches some validity to his or her initial price objective, meaning that modifying that expectation becomes difficult for reasons totally contained only between one’s ears.
But stocks go where they want to, despite what any participants think is justified and despite what investors might wish would happen. Investors unable or unwilling to let go of original price opinions are doomed to lose, either through losses in positions that never come back, and/or from better opportunities elsewhere that have been lost.
There are two primary ways that investors get into trouble when setting price objectives:
The initial idea, including the selling-price objective, may have been wrong from the start.
If correct at first, the original idea can become outdated and, therefore, inaccurate as subsequent events transpire.
How, then, does one develop a realistic price target?
As we shall see in this article, selling-price targets should be based on logical analysis, which includes several dimensions and several elements. Hope, an emotion, is absolutely not a valid part of investment decisions (to buy, sell, or hold), and should never play any part in setting a realistic exit target. Price goals based even in part on a position’s original cost basis should be avoided, since they are based on the hopes of not losing money and of being able to feel happy or smart. That being said, however, investing is an art rather than a science, so investors should work diligently to do well, but not agonize over the impossibility of achieving perfect results.
Our New Portfolio Addition Is a Midnight Special
Posted on January 30, 2015 | Stock Superstars Report
The famous train song “Midnight Special” (recorded by Credence Clearwater Revival and many others) comes to mind as we announce our latest addition to the SSR portfolio.
Oil and Foreign Exchange Rates Impact Earnings
Posted on January 30, 2015 | Dividend Investing
It was a busy week for the DI portfolio, with 13 of our companies reporting. Due to the large inflow of earnings announcements, we want to keep the commentary short and sweet. We’ve seen recurring themes thus far not only in the DI portfolio but among several large companies that have reported quarterly earnings so far: the impact of a stronger dollar and lower oil prices.
Many Investors Hold Short-Term Outlook Steady in Face of Price Movement
Posted on January 29, 2015 | AAII Survey
This week’s Sentiment Survey special question asked AAII members what type of influence the direction of stock prices has on their six-month market outlook. More than a third (36%) said price movement does not or only minimally influences their short-term outlook. Several of these respondents described themselves as buy-and-hold investors. About 20% said other factors, including the economy and valuations, influence their outlooks. Nearly 18% said the direction of stock prices either significantly or partially influences their short-term outlook.
Here is a sampling of the responses:
- “Not very much. I’m more influenced by macro-economic factors.”
- “Not much. Buy good stocks and you’ll get good results.”
- “None. I’m a buy and hold investor.”
- “Significant. I believe prices are a relevant input.”
- “Some consideration, but not the only factor.”
AAII Sentiment Survey: Optimism Among Individual Investors Rebounds
Posted on January 29, 2015 | AAII Survey
Optimism about the short-term direction of stock prices among individual investors is back above its historical average, according to the latest AAII Sentiment Survey. Neutral sentiment rose as well, while pessimism dropped.
Bullish sentiment, expectations that stock prices will rise over the next six months, rose by 7.0 percentage points to 44.2%. The increase puts optimism above its historical average of 39.0% for the 22nd time in the past 25 weeks.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 1.4 percentage points to 33.4%. This is the second-highest reading since early October. The historical average is 30.5%.
Bearish sentiment, expectations that stock prices will fall over the next six months, plunged 8.4 percentage points to 22.4%. The drop puts pessimism back near the lower the end of its typical range. Bearish sentiment has been below its historical average of 30.5% for 14 out of the past 15 weeks.
Neutral sentiment is now above its historical average for four consecutive weeks. This is the longest such streak since neutral sentiment stayed above average for 32 consecutive weeks between January 9 and August 14, 2014.
Keeping AAII members encouraged is the overall upward momentum of stock prices, falling energy prices, earnings growth and sustained economic expansion. Causing other members to be cautious or pessimistic are geopolitical events, the impact of falling oil prices on energy stocks, a sense that prevailing valuations for stocks are too high, the pace of economic growth and worries that a large decline in stock prices could occur.
This week’s AAII Sentiment Survey results:
- Bullish: 44.2%, up 7.0 percentage points
- Neutral: 33.4%, up 1.4 percentage points
- Bearish: 22.4%, down 8.4 percentage points
- 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 1/28/2015
Posted on January 28, 2015 | Podcast
AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Intuit (INTU) 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