In a previous piece, on 18 January, I noted down the top ten buys and sells by private investors, as reported by TD Waterhouse. A cynic might say think that the activities of a private investors like me would be good contrary indicators. In fact, there seems to be collective wisdom. Here's what I did. I looked at the top ten buys, and top ten sells, and ignored any shares that were on both lists. I then calculated the average return of the remaining shares. Three shares appeared on each list. During that time, the FTSE ALLSHARE index went from 3120 to 2985, a return of -4%.
Here's what I found:
Buy list:
- Arm (LON:ARM) 12%
- Aviva (LON:AV.) 3%
- Amur Minerals (LON:AMC) -12%
- Average 1%
Sell list:
- Gulf Keystone Petroleum (LON:GKP) -17%
- Bowleven (LON:BLVN) -19%
- Max Petroleum (LON:MXP) -26%
- Average -24%
In other words, shares that investors thought were buys went on to outperform the market by 5%, whilst the shares that investors thought were sells went on to underperform the market by a massive 20%. Interesting, no? I am tempted to repeat the experiment at the end of the month.
