The Riskalyze Report: Sellers Lack Conviction

My friends at Riskalyze have offered me the opportunity to see which stocks and funds advisors all over the country are adding to their clients’ accounts and which ones they’ve been selling. Each week I’ll present you with the top three buys and sells and we’ll track how this progresses while trying to figure out what it says about the professional mindset.

This data has been aggregated from across the client accounts of the thousands of advisors who use the software. Most of it comes directly through the third-party custodians where advisors’ assets are held. I hope we can uncover interesting trends for you each week…


Week of November 2nd – November 8th 2014:

Winners = top investments purchased by advisors for client portfolios that week
Losers = investments that advisors sold out of in client portfolios that week

Winners (advisor flows TO these investments increased substantially):

Passive Equity Funds (DFLVX, DFQTX, VTI, SPY, IVE)
First Eagle Global (SGENX)
Permanent Portfolio (PRPFX)

Losers (advisor flows FROM these investments increased ):

Short Term Bonds (VFSTX, SHY)
Putnam Capital Spectrum (PVSYX)
Berkshire Hathaway (BRKB)

Josh here – passive allocators were back in force last week as the entirety of the September/October correction had been retraced over the course of less than 20 days. The speed and magnitude of the S&P 500’s loss retracement is something I don’t think any of us has ever seen before, it’s just blinding. Advisors aren’t going to let another year turn into a double-digit win without their (close to) full participation.

Riskalyze’s Mike McDaniel told me something interestingI relay to you here: “Still not seeing the ‘conviction’ in the loser statistics like we are seeing in the winners. In other words, the % and $ moves into winners trumps the % and $ from the losers.”

I think this is the key to v-shaped bottoms. The sellers seem to be forced – hedge funds with bets that were too big on too much leverage. It doesn’t seem to be investors selling, just specs, during each of these corrections.

The investors (and advisors) aren’t taking profits with any conviction. They want to be long, not out.


A word about Riskalyze:

In my practice, we use Riskalyze software tools to help assess clients’ true risk tolerance and to test portfolio configurations that match up accordingly. It’s changed our practice for the better, as I explain here.

Check it out today!

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