Stock Performance Based on Market Cap and Institutional Ownership

In a recent report for Bespoke Premium subscribers, we analyzed the performance of stocks since the 7/19 top based on numerous fundamental and technical categories.  Below we highlight the performance of stocks based on market cap and institutional ownership.  We broke the Russell 1,000 into deciles (100 stocks per decile) and calculated the average percent change of the stocks in each decile from 7/19 to 8/10.  The first chart below highlights deciles based on market cap.  As shown, the decile of the largest stocks in the index (100 largest) averaged a decline of 6.8% and the second largest decile was down 5.9%.  As the deciles get smaller, the declines get worse, indicating that larger cap names have held up the best throughout the correction.

The second chart below highlights the performance of stocks since 7/19 based on institutional ownership.  It shows that the larger the institutional ownership, the worse the performance.  The 100 stocks in the Russell 1,000 with the largest institutional ownership averaged a decline of 11.1% from 7/19 to 8/10.  This highlights the recent struggles of institutions like hedge funds.  The declines in stocks with large institutional ownership were exacerbated by forced liquidations and the deleveraging of portfolios and not necessarily because their underlying fundamentals broke down.  Because of this, we're looking through the list for ones that were unduly hit. 

 

Change in Credit Spreads by Sector

Earlier in the year, the consensus among investors, economists, and strategists was that subprime problems would generally stay confined to subprime markets and the financial companies that dealt in the paper. For a time they were right, but not anymore.

The top chart below shows the S&P 500 since October 2006, and the lower chart shows the date that credit spreads began widening and how much they have widened by for various sectors of the market. As shown, spreads on mortgage bonds were the first to get hit, followed by companies in the financial sector, including brokers, banks, and insurance companies. This coincided with the S&P 500’s peak in late February.

Following February’s sharp declines, the market stabilized and rallied, and at the time, it appeared as though the trouble in subprime would be confined. However, the sense of relief was short lived, as one by one, debt in different sectors of the market began succumbing to the downward pressure.

Commodities Returns and Expectations (Plus a List of Commodities ETFs)

Below we highlight the year to date performance of 20 commodities.  As shown, Lead has been the best performer this year with a gain of 84%.  The worst performer has been Zinc at -19%.  Interestingly, Oil is up 9% while Natural Gas is down 8%.  In the second chart, we provide the median expected percentage change (based on analysts surveyed by Bloomberg) of the same commodities from now to the end of the year.  Nickel and Natural Gas are expected to gain the most, while Uranium, Tin and Lead (the ones currently up the most) are expected to give back their gains.  Analysts are looking for Oil to fall 12% and Gold to rise by 3%.

Below we provide a list of commodities ETFs from our daily ETF Trends report over at Bespoke Premium.

   

Most Volatile Stocks

For traders with a more short term time horizon, we have compiled our list of the S&P 1500 stocks which have the largest intraday ranges (based on the average percent spread between the intraday high and low for the last fifty days).  We then grouped the stocks based on whether they have a rising or falling 50-day moving average. Tickers highlighted in gray indicate that the stock is new to the list this week.  Illustrating the recent weakness in the market, only eleven of the stocks highlighted have rising 50-day moving averages while 39 stocks have declining moving averages.

Good Money After Bad?

Brokerage stocks are doing well this morning in part due to Goldman Sachs' (GS) announcement that it and a group of investors were investing $3 billion in its Global Equity Opportunities Fund, which as of Friday was down 30% in the last week!  Besides the obvious question which is how can there be a lack of liquidity in the market if a fund down 30% in the last week can get $3 bln in new capital, one has to wonder if the current investment by Goldman Sachs is a case of good money going after bad.

In June, Bear Stearns (BSC) pledged an additional investment of up to $3.2 bln in its distressed hedge funds, and judging by its stock price, the market was not too thrilled with the investment.  Since the cash infusion was announced, BSC is down over 23%, which is the second worst performance among the five major brokerages.

Bulls to Bears Almost 50/50

Bullish sentiment dropped among Bespoke readers last week, as the percentage of people currently positive on the S&P 500 moved from 60% a week earlier down to 51%.  Worries on Wall Street definitely had an impact on investor sentiment, even though the S&P 500 was up 1.44% on the week.  Please let us know your current view on the S&P 500 by voting in our poll below.

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Most Overbought and Oversold Stocks in the Russell 1,000

From our bi-weekly Sector Snapshot report over at Bespoke Premium, we see that just 20% of S&P 500 stocks are currently trading above their 50-day moving averages.  There are less than 10% of stocks trading above their 50-days in the Financial, Consumer Discretionary, Energy and Telecom sectors.  Below we highlight the stocks in the Russell 1,000 that are currently trading furthest above and below their 50-days.  Radian Group (RDN), a provider of financial guarantee insurance, is by far the furthest below its 50-day at -60%.  Although there are plenty of stocks that have taken it on the chin in recent weeks, there are also a number that have done well.  Growth companies dominate the list of stocks trading furthest above their 50-days, with GPS maker GRMN ranking at the top at +27.05%.  Other notables on the positive list are NVT, LVS, ISRG, SNDK, BRCM, WYNN, CSCO, EBAY, and one of Warren Buffett's holdings, IRM.

   

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ETF Performance Report for the Weekend

Although it was a hectic week, the S&P 500 closed higher on four out of five days.  Below we highlight the 1-day, 5-day and 1-month percentage change of a number of domestic and global ETFs.  The report concisely shows recent trends across asset classes to help you quickly identify which areas have been doing the best and the worst.

Remember, if you're looking for more information on ETFs, Bespoke Premium offers a Model ETF Portfolio as well as a daily ETF Trends report.  Sign up today at www.BespokePremium.com.

Mr. People and Mrs. Person; Key Sources?

Over the last twenty-four hours, there have been no shortage of rumors and stories regarding actions by the Fed and which hedge funds are in trouble or being liquidated.  As just one example, two headlines came across the newswires today highlighting two Wall Street stories currently garnering much attention.  What caught our eyes, however, were the key sources for the headlines: the first was attributed to 'people', while the second was attributed to 'person'.  Those two must really know their stuff.

Global Equity Market Snapshot

Below we highlight the price and trailing 12-month p/e ratios of ten major global equity markets.  We also include each index's trading area which represents two standard deviations above and below its 50-day moving average.  Moves above or below this green shading are considered extreme overbought or oversold readings.  Given recent market action, it's not surprising that Italy, Japan, Germany, France, the UK and the US are all trading into oversold territory.  Europe got hit especially hard over the past two days, and it closed on a down note before the S&P 500 had its late Friday rally.  Brazil, India and Hong Kong haven't gotten hit quite as hard, and China's Shanghai Composite still hasn't skipped a beat.  Another standout from these charts is the recent drop in p/e ratios of some of the European indices.  The UK's FTSE 100, for example, has seen its trailing 12-month multiple drop from 17+ in May to its current level of 12.18.

    

Stocks with Low Debt and Low Price to Books

A reader earlier asked for us to filter our list of stocks with low price to book ratios by stocks with low debt as well.  Below we highlight the S&P 500 stocks with less than 25% debt to equity that have the lowest price to book ratios.

Warren Buffett's Stock Holdings Hanging in There; IRM, PG, KO, COST, WPO Gain

Below we highlight the stocks owned by Warren Buffett's Berkshire Hathaway as of March 31, 2007.  We also include their performance since the 7/19 S&P 500 top to see how his positions have fared throughout the current correction.  As shown, a non-weighted average of each stock's performance is right inline with the S&P 500's decline of -7.69%.  His financial and industrial holdings have been hurt the most, while his consumer stocks such as COST, PG, KO, WPO have actually seen slight gains.  IRM has performed the best since 7/19 with a gain of 12.5%.

Stocks with High Short Interest

An interesting article in the WSJ this morning highlighted that even short sellers took it on the chin yesterday.  Due to what may have been forced liquidations by long/short or market neutral funds, some of the most heavily shorted stocks rose sharply yesterday because of covering.  As shown below, the 30 stocks in the Russell 3,000 with the highest short interest as a percentage of float were up an average of 31 bps yesterday, while the overall markets were down nearly 3%.

Talk About All Or Nothing

Yesterday we commented on how lately this market seems to be all or nothing.  When we're up, we're up big, and when we're down, we're down a lot.  Now, after today's drubbing, the S&P 500 has had one day this week where it was up over 2% (Monday) and another day where it was down 2% (Thursday).  This is the first time we have had a week with two opposite direction two percent days since March 2003.  How times have changed.  It only seems like yesterday when we were talking about the market's long stretch without any 2% days, and this week we get two.

An Uptick in 1% Days

Many have noted the increase in volatility lately, and one measure that highlights this is the number of 1% days (up or down) over the past 50 days.  Currently, the S&P 500 has been up or down 1% 19 times out of the last 50 trading days.  While this is the highest level seen since May 2003, it's not nearly at the levels seen in the late 1990s and early 2000s.  So while volatility has been picking up lately, its presence has been exaggerated by the fact that things had been so dull for the past four years.