Not such a contrary indicator? Good calls from Private Investors
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.
Disclaimer
This is not financial advice. Our content is intended to be used and must be used for information and education purposes only. Please read our disclaimer and terms and conditions to understand our obligations.
3 comments
What is somewhat frustrating is that what makes the buys often makes the sells. Also, it seems that this whole year has been dominated by banks and commodities. It would be nice to see a much greater diversity of sectors represented.
One thing to bear in mind is that banks might not necessarily be great contrarian plays at the moment. Lloyds, RBS and Barclays are both in the top 10 buys and sells of TD Waterhouse for w/c 21 June. For a future experiment, I might be tempted to consider a whole month to get a little more diversity.
I haven't looked at the top 10s for awhile now, but scanning through the list just now makes some interesting reading. Last week's list was just banks and commodities, but if you go back a couple more weeks, you'll see Vodafone and National Grid represented.
Interesting.
This week's top ten from Barclays Stockbrokers (ignoring those on both the Buy and Sell lists) are:
Buy:
Sell
It will still be generalising from the particular but let's see how they do over the next few months.
(I don't hold any of them nor do I fancy any of them)
Certainly very interesting & gives food for thought. I, would however like to see more than one month's data to be convinced. In many ways this is a rerun of Jim Slater back in the 60's & 70's.