Revisiting the Best and Worst of the S&P 500 in 2010

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A few weeks ago I examined the top and bottom twenty stocks in the S&P 500 for 2010. Periodically over the course of 2011 I will be updating the performance

The Best and Worst of the S&P 500 in 2010

As an investor with contrarian tendencies I am always scanning sectors and stocks that may have underperformed in the past looking for solid values. With this in mind I present the best and worst of the S&P 500 from 2010.

QE2 Creates Oppurtunities for Contrarian Value Investing

As always, John Hussman’s weekly market comment is a must read. In it he discusses what he sees as the driver of returns since QE2 was announced (essentially a transient psychological effect), the asset classes that have benefited and current valuation levels. All three areas are worthy of reading and further introspection but I will focus on the second.

NAAIM Survey of Manager Sentiment: Follow the Smart Money?

As a follow up to last week’s look at the AAII Investor Sentiment survey this week we take a look at the NAAIM (National Association of Active Investment Managers) Survey of Manager Sentiment. Last week we confirmed the consensus opinion of the AAII survery as a contrary indicator. On average, when individual investors are most bullish the average 1-year return to the S&P 500 is 1.9% compared to 13.6% when investors are most bearish. The question is; are professional money managers any better than individuals at predicting subsequent returns? Is the “smart money” truely smart?

According to the NAAIM, the survey polls:

“member firms who are active money managers are asked each week to provide a number which represents their overall equity exposure at the market close on a specific day of the week, currently Wednesdays. Responses can vary widely as indicated below.”

Range of Responses:
-200%  Leveraged Short
-100%  Fully Short
0%       Cash or Hedged to Market Neutral
100%   Fully Invested
200%   Leveraged Long

Investor Sentiment and Subsequent Returns

A recent post by The Pragmatic Capitalist on the topic of investor sentiment has me curious regarding the correlation between sentiment and subsequent returns of the S&P 500 index. Last weeks’ survey has bullish sentiment at 45%.

This analysis will consist of data from the AAII Investor Sentiment Survey and be divided into four sections. The first section will look at the entire data series, which started in 1987.  The second will look at instances of “extreme” bullishness where bullish sentiment was 50% or higher, one standard deviation above the average bullish sentiment of 39%. The third section will look at instance of “extreme” bearish sentiment where bullish sentiment was 28% or lower; one standard deviation below the average. Finally, the last section will look at periods where the eight week moving average of bullish sentiment was above 50%.