Every investor inspires to be a “contrarian” yet most fall victim to groupthink. The paid to play crowd are often more interested in saving their career than with absolute performance. Subsequently, money managers often have near identical portfolios.
One of the great contrarian indicators is the Barrons Big Money poll. This survey gives you insight into what America’s portfolio managers see ahead. At the bottom of this post I have the Barrons Big Money Poll from 2008 where almost every manager missed the financial crisis that was brewing.
A few observations from your esteemed editor:
First of all, money managers detest bonds, particularly U.S. Treasuries. Only 2% of money managers are bullish. This is quite remarkable when you consider that bonds were the place to be in 2011 and that bonds have been in a secular bull market since 1982! The stock market and the bond market have risen in unison in 2012. This is a rare occurrence and it usually means that one segment of the market (usually equity investors) is wrong.
The second most hated segment of the market is cash. Only 5% of money managers are bullish on cash. I would presume that this means that mutual funds have low cash levels and hedge funds are margined to the hilt. The consequences of this bearishness no cash is that there may be no cash available to propel the markets higher. Cash has been a good investment over the last decade yet investors hate it.
The last are of the market that is hated right now is gold. 39% of money managers are bearish on gold. This is remarkable given that gold has been in a secular bull market for 11 years. Gold is still positive for the year. Gold stocks on the other hand have been a disaster.
The takeaway from the Barrons poll is that money managers are straying from secular bull markets in order to chase momentum favorites. Perhaps a portfolio of utilities (XLU), bonds (IEF), gold (GLD) and cash is the right strategy for the summer ahead.
If we are looking for short candidates, Asian stocks and LatAm stocks appear to be the best place to start. Only 8% of money managers are bearish on LatAm stocks. Who is left to buy more shares of EWZ and GXG?
Here is the Barron’s Big Money Poll from 2008 only 6 months before the worst financial crisis since the Great Depression.
It’s incredible that most money managers think that they deserve 2/20. Only 12% were bearish. The list of their favorite stocks reads like a list of the walking dead with AIG and RIMM. The favorite sector was the financial sector where stocks lost about 75% in the ensuing 18 months.
This is why the Barrons Big Money Poll is a wonderful contrarian indicator.