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There Still Are Some Retail Investors Left: This Is What They Are Buying

Tyler Durden's picture




 

Via ConvergEx's Nicholas Colas,

What do retail investors do on volatile days like Friday’s 1.1% move lower on the S&P 500?  Today we look at information from one very large online broker’s publicly available order flow to explore that topic.

The simple answer: they buy, and the predominant security type is single stocks rather than exchange traded funds.

The top three names from Friday’s action: Apple (2.6x better to buy, based on the number of orders), Netflix (1.1x), and Facebook (2.4x). The SPDR S&P 500 ETF is just off the podium in 4th place, with a 1.5x buy/sell ratio.

In the top 30 names traded, only Microsoft and Schlumberger saw net single-stock sell imbalances. Will retail always be there to catch the falling knife, or at least soften its fall?  Hard to say, but for now this segment of investors seems to keeping the faith.
 
For many individual investors in the U.S., the Financial Crisis still casts its long shadow over their confidence in equity markets. Even though the S&P 500 has recovered all its losses from the 2007-2009 drop, barely half of Gallup respondents in their regular surveys on the topic report that they have “Any money invested in the stock market right now – either in an individual stock, a stock mutual fund, or in a self-directed 401(k) or IRA”.  The exact numbers: 54% reported such ownership in April 2014 (last results) versus 65% in 2007 and 67% in 2002 (all time high).
 
While it’s tempting to chalk this shift up to the aging demographics of the baby boomer generation, that’s not a very satisfying explanation. Four quick points here:

First, any long term look at the return data for different asset classes shows equities have some role in a portfolio for anyone under the age of 68 (positive 10 year returns and an average life expectancy of 78 in the U.S.).

 

Second, the stair-step declines in Gallup’s self-reported ownership numbers correlate to post-bubble periods, with drops after the 2000 dot com bust and the 2007-2009 Financial Crisis.

 

Lastly, the response to Gallup’s regular “Do you think investing in the stock market would be a good idea or bad idea?” query shows a real lack of faith in equities. Since 2000, there have only been 2 times when the “Good idea” response registered over 50%: 2004 and 2006.

 

The bottom line is that most Americans are still quite cautious about investing in equities, and its not just their age giving them pause. They seem to see the volatility of the last 15 years as a fundamental impediment to lasting confidence in U.S. stock markets. For an asset class that requires patience to reap any substantial rewards, that’s a tough hurdle. Too tough for many, it would seem.

But what about those investors who are still invested in U.S. stocks – that slim 54% majority with money still in the market? For them, the story seems quite different than for those who’ve turned their backs on stocks. Either they have a different psychological makeup from their peers, or perhaps their experience with stocks is more rooted in the gains of the past five years than the churn of the last fifteen.
 
Take as a mini case study the action from Friday’s sell off.  I regularly look at the daily trading trends available on one large online broker’s website – Fidelity’s retail portal. The data posts every day in real time, so by the end of trading hours you have a snapshot of what this particular brokerage has seen in terms of order flow through the day. The top 10 names traded are visible to anyone with or without a brokerage account at the company – the remaining 20 names require an account ($2,500 minimum).
 
A few key takeaways from the data:

Retail investors still trade a lot of single stocks, rather than exchange traded funds. Of the top 30 names in terms of the number of orders, only 5 are ETFs.  The rest are all individual company equities.

 

The top three names in terms of order flow on Friday were Apple, Netflix and Facebook. To give a sense of scale, Apple had 72% buy orders and 28% sell orders on Friday. Netflix was paired more closely, at 53% buy orders and 47% sells. Facebook orders skewed more to the buyside as well: 71% to 29% sells.

 

The ETF with the most retail interest based on this data was SPY, with 61% buy versus 39% sell orders. The only other ETF name in the top 10 is UVXY – the ProShares Ultra VIX Short Term Futures – with 30% of the order flow as buys and the rest as sells.

 

Taken as a whole, retail investors were net buyers of the top 30 names on this list during Friday’s volatile session. In terms of single stocks, retail was a small net seller of just two names – Microsoft and Schlumberger – and hardly in enough size to be meaningful.

 

Rounding out the Top 10 list (those available on public access to the Fidelity website): GE, Alibaba, American Express, AT&T, and Bank of America.

I know we can’t take one day – even a volatile one – and put too much weight on the data to extrapolate larger trends. At the same time, the long term is just a bunch of short terms strung together. Friday’s volatile action should have been exactly the kind of churn that spooks retail investors. There were, for example, very few satisfying explanations for the +1.5% drop in the S&P 500 through 2pm, or the 50 basis point snapback into the close. And yet, the data is clear: retail bought this dip.
 
It could well be that the last 15 years of U.S. equity market volatility has left only the “True believers” to buy and own stocks. They are fewer in number (or at least percentages) than during much of the last 2 decades, but they are still there. And they still believe in buying individual stocks. Now, we really haven’t had a large bout of market volatility in several years, so we don’t know if they will step in when the CBOE VIX Index reaches 20, or 30, or higher. But for now, they still believe.

 

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Tue, 04/21/2015 - 11:14 | 6014568 kliguy38
kliguy38's picture

I just put NFLX back on my list of favorite shorts............

Tue, 04/21/2015 - 11:48 | 6014683 CrazyCooter
CrazyCooter's picture

I will likely never ever put money (willingly) into markets again. Period. I have come to the conclusion the best thing I can own as I get older and closer to "retirement" is a business with positive cash flow. Doesn't have to be glamourous. No debt is first on the list though. I also attempt to diversify my skills and build unique value so I might have a shot at working part time at a good rate as I get older.

I do have some retirement benefits at work; they stay 100% money market.

Regards,

Cooter

Tue, 04/21/2015 - 12:17 | 6014790 TrumpXVI
TrumpXVI's picture

Yup, same here, Cooter.  I have no regrets about bailing out of the stock market years ago.  It was the correct decision for me.

Tue, 04/21/2015 - 12:32 | 6014848 blindfaith
blindfaith's picture

 

 

Laundramat...never seen one close, never seen one empty.

Tue, 04/21/2015 - 15:11 | 6015505 malek
malek's picture

Never seen one make much money either.

Tue, 04/21/2015 - 12:51 | 6014926 JoeTurner
JoeTurner's picture

Cooter:

100% agreed. I've shifted my lifestyle to the smallest debt footprint possible and am building side businesses that are cash flow positive. It just does not make sense anymore to put money into a rigged casino...

I've also come to grips with the fact that I'll probably never get to retire like previous generations (i.e. work for 40 years, retire for 20)

Tue, 04/21/2015 - 16:01 | 6015699 drendebe10
drendebe10's picture

POS fudgepacker will get to continue to live its celebrity grand imperial golf lifestyle at tax paying US citizen serf and peasant expense when it retires in 2016 - that's assuming the turd doesn't declare martial law to void the elections so it cancontinue as azzhoe tyrant dictator in chief

Tue, 04/21/2015 - 13:44 | 6015150 asteroids
asteroids's picture

I somewhat agree with Cooter. But, I will be like a spider awaiting the next crash, then I'll go in.

Tue, 04/21/2015 - 11:14 | 6014573 ebworthen
ebworthen's picture

Apple, Netflix, and Facebook?

Retail investors - providing blood and flesh for the sharks since 1973!

Tue, 04/21/2015 - 11:47 | 6014677 KnuckleDragger-X
KnuckleDragger-X's picture

Vampires gotta eat too...

Tue, 04/21/2015 - 12:06 | 6014741 Colonel Klink
Colonel Klink's picture

The Vampire Squid SUCKS!

Tue, 04/21/2015 - 12:41 | 6014883 Leopold B. Scotch
Leopold B. Scotch's picture

Vampire Squid, especially.

Tue, 04/21/2015 - 13:11 | 6014992 Squid Viscous
Squid Viscous's picture

You rang?

Personally I think NFLX is a great "safe haven" on days like this past Friday, valuation is now being justified based on 2025 EBITDA... what could possibly go wrong?

Tue, 04/21/2015 - 13:52 | 6015192 FreeMoney
FreeMoney's picture

Hahahahaha....

 

Thanks Squid.

Tue, 04/21/2015 - 11:16 | 6014577 heisenberg991
heisenberg991's picture

NFLX at 575 was a great short.

Tue, 04/21/2015 - 11:20 | 6014586 Dr. Engali
Dr. Engali's picture

Retail will be there for as long as TPTB keep the casino open. Most people can't shake the gambling addiction until they've lost everything, which is pretty much the idea.

Tue, 04/21/2015 - 13:46 | 6015164 asteroids
asteroids's picture

Generation X, Y, and Z haven't been burned, yet. They will enter the casino and get fleeced. Every generation does, unfortunately.

Tue, 04/21/2015 - 11:19 | 6014587 Dexter Morgan
Dexter Morgan's picture

I don't trade stawks anymore because I don't trust The Morgue to hold my stack. 

Tue, 04/21/2015 - 11:20 | 6014589 Not_FieldingMellish
Not_FieldingMellish's picture

AAPL can do no wrong. I swear if they packaged up dog turds and sold it as the iTurd (they probably do already in some product or other) they would make a killing. People will buy anything with borrowed or other people's money.

Tue, 04/21/2015 - 11:49 | 6014688 KnuckleDragger-X
KnuckleDragger-X's picture

iTurd? I WANT ONE!!! And a shit sandwich for lunch, free range and organic of course.....

Tue, 04/21/2015 - 12:07 | 6014751 Colonel Klink
Colonel Klink's picture

They already sell an iTurd, but they call it the iWatch.

Tue, 04/21/2015 - 12:58 | 6014949 Doña K
Doña K's picture

You mean Macburger

Tue, 04/21/2015 - 12:40 | 6014866 blindfaith
blindfaith's picture

 

 

That is what 'they' said about RCA. Dynagroove killed the RCA goose.  Is the Iwatch (you) their Dynagroove?  RCA was also selling debt and buying their srock back...things don't change, just the names.

 GE is the only company still in the running, the rest...gone.

Apple is now a commodity....the best they can do is what, make up a new color.  They have their eyes on becomming a Paypal, phones and computers ...so yesterday.  Digital 1 & 0 is where the money is, that and data to sell to the highest bidder.

Tue, 04/21/2015 - 11:21 | 6014591 Callz d Ballz
Callz d Ballz's picture

Hold still little sheep, this will only take a second.

Tue, 04/21/2015 - 12:07 | 6014752 Colonel Klink
Colonel Klink's picture

Um, nano-seconds!

Tue, 04/21/2015 - 11:22 | 6014594 entendance
entendance's picture

Adding  IMSC MUX EXK and some Cannabis Stocks, trading Forex and ETFs with trailing stops.

Trading without trailing stops is the ego wanting to never be held accountable (to admit that a position was a mistake) if a certain level is breached or if a certain set of circumstances play out in an unexpected manner.
Anybody who doesn't use trailing stops is going to be out of business at some point. It's not if, it's when. -Entendance
 

Read more: http://3.boards.net/thread/9/investing-trading-inquiring-minds#ixzz3XxQyGM4x

Tue, 04/21/2015 - 12:36 | 6014862 DeadFred
DeadFred's picture

Stops are the reason the hedge funds do so poorly. The machine know where they are and constantly calculate the payoff available for hunting them. It's like playing poker and letting your opponent know how high to bluff before you'll fold.

Tue, 04/21/2015 - 11:24 | 6014600 usednabused
usednabused's picture

And who are these retail investors? The Hillary clitones of the world? You know, those who their brokers make trades for at the expense of others? Or maybe they are mostly fictional character accounts set up by the PPT? It really wouldn't take much for pricks with access to the worlds largest computers and best programmers to set up a few million accounts just to make sure the market didn't fall on its ass, would it? Just who is a genuine retail investor anymore?

Tue, 04/21/2015 - 11:24 | 6014602 madbraz
madbraz's picture

yeah right, those 1000 or so "retail" accounts brought the market back...

 

only if one Bill Dudley is amongst those "retail" accounts.

Tue, 04/21/2015 - 11:29 | 6014625 SheepDog-One
SheepDog-One's picture

Just about what I was going to write too....a few retail accounts BTFD and saved the Sacred and Precious 500.....yea sure gimme a break.

Tue, 04/21/2015 - 12:38 | 6014873 DeadFred
DeadFred's picture

Bill and Kevin don't use Fidelity so you'll never see the real flow in SPY shares.

Tue, 04/21/2015 - 12:44 | 6014891 blindfaith
blindfaith's picture

 

 

Chinese housewives control the market and the dishes pile up.

Tue, 04/21/2015 - 11:25 | 6014606 Kaiser Sousa
Kaiser Sousa's picture

bullshit...

"Why Are Average Americans Not Purchasing U.S. Stocks?

We hear continuously from financial advisors the average American has not returned to buying U.S. stocks, which is a bullish sign because there is "money on the sidelines." A recent poll by the Wall Street Journal found it is indeed true that most Americans are not purchasing U.S. stocks, but the most common reason cited is not because they are afraid of the market.

"Nearly seven years after the Panic of 2008, and six years after a massive rally started, more Americans are out of the stock market than in it, according to a new survey from Bankrate finds, and for younger investors the numbers are even more lopsided. About 52% of Americans are not investing in the stock market, the survey found, and it’s not necessarily that they still don’t trust the market. It’s because they simply don’t have the money. Fully 53% of people who aren’t in the market now said they weren’t investing in the market because they didn’t have the funds to do so. A study from the National Institute on Retirement Security found that 45% of working-age households had no retirement savings at all; among the 55-64 age group, the average was only $12,000."

So if individuals are not pushing this market higher who is? As we have discussed in depth over the past few years it is institutional funds, central banks, banks, hedge funds and corporations themselves. Yes, companies are buying back their own shares (many using debt to make the purchases). Sounds like a ponzi scheme? Well, let's just say that it will not end well.

More from the Wall Street Journal:

The value of new share repurchase programs authorized by companies stood at $257 billion in the first quarter, the strongest start to the year for buyback programs on record, according to a report by Birinyi Associates Inc. At the current pace, stock buyback authorizations are set to total $1 trillion this year, blowing past 2007’s record of $863 billion, according to Birinyi. And that count doesn’t include General Electric Co.’s $50 billion buyback program announced last week, which ties with Apple Inc.’s as the largest share repurchase program ever announced." http://www.ftense.com/2015/04/why-are-average-americans-not.html
Tue, 04/21/2015 - 11:32 | 6014633 drstrangelove73
drstrangelove73's picture

As I've said before: I've made quite a bit of money in the stock market over the past 30 years but as of last fall I am essentially all in cash,and will be until this sucker corrects at least 30%...

Tue, 04/21/2015 - 11:43 | 6014663 Kaiser Sousa
Kaiser Sousa's picture

what u may have made aint money...

“Cash is not a very convenient store of value.” – Janet Yellen

she meant "REAL store of VALUE..."

Tue, 04/21/2015 - 11:33 | 6014638 Not_FieldingMellish
Not_FieldingMellish's picture

Exactly. "Retail Investors" means pension fund (likely public) managers. Other peoples money.

Tue, 04/21/2015 - 12:56 | 6014943 bahaar
bahaar's picture

Well the hedge funds, institutional funds etc are all waiting for the retail to get in so that they can get out, not realising that retail cannot (no money)/ will not (too disilllusioned) get in.  

Tue, 04/21/2015 - 11:25 | 6014610 BeaverCream
BeaverCream's picture

Summary: People are buying the dip.

Tue, 04/21/2015 - 12:55 | 6014942 Arthur Schopenhauer
Arthur Schopenhauer's picture

Correction: Algos bought the dip - and there were still a few people left who still trust in those damn things who also bought the dip.

Tue, 04/21/2015 - 11:27 | 6014617 buzzsaw99
buzzsaw99's picture

nobody gives a damn about "most americans", least of all the piker imbeciles in the CONgreff.

Tue, 04/21/2015 - 11:34 | 6014624 gcjohns1971
gcjohns1971's picture

Well... When you have a 'flexible' (read as 'inflatable') currency, such as we've had for the last 102 accursed years, what are your options?

If you 'save your pennies' you'll have pennies on the dollar.  The value of your 'pennies' will be inflated away.

That's the real reason why FDR established Social Security!!!   It is to keep people from understanding that the monetary inflation was pervasive, larger than advertised, and CONSISTENT ACROSS DECADES.   He had to keep them from abandoning paper for physical assets.  To do that he needed them to focus on their government paycheck, not on the reduced value of their savings.

Except...everyone knows the money is shrinking faster than the payments are growing.  We're getting poorer, and have been for decades!

And the old standby of borrowing your way to wealth, by borrowing money at net negative rates to invest in productive assets isn't working... Firstly because retail loans have dried up.   And secondly, because the level of regulation in the economy cuts too deep into productivity for anything to be net productive...hence all the enterprises fleeing the US.

So... what do they do?

They have to put their money somewhere that will beat inflation.

You can't do that across decades in a fund.

So everyone has to gamble on their ability to pick stawks.  If they lose it...well, they were going to lose it to inflation anyway.

Everything is falling in place for the eventual realization that they can preserve their savings' purchasing power by trading cash for PHYSICAL ASSETS.    When that happens... Dollars go on sale, and everyone would prefer to have ANYTHING PHYSICAL instead of Federal Reserve Digits.

 

Tue, 04/21/2015 - 11:29 | 6014626 youngman
youngman's picture

With Netflix going ballistic...makes you wonder what HBO is doing or thinking....are they that dumb....

Tue, 04/21/2015 - 11:32 | 6014630 joego1
joego1's picture

NFLX or Gold? Hmmm....

Tue, 04/21/2015 - 11:32 | 6014632 pragmatic hobo
pragmatic hobo's picture

... any chance those "buys" were actually short-coverings?

Tue, 04/21/2015 - 11:34 | 6014642 SillySalesmanQu...
SillySalesmanQuestion's picture

I thought that The FED, BOJ and Super Mario were the only retail investors left in this market...

/S

Tue, 04/21/2015 - 11:35 | 6014646 Fun Facts
Fun Facts's picture

The retail investors [marks] are buying central bank open market operations.

Tue, 04/21/2015 - 11:37 | 6014651 Fed-up with bei...
Fed-up with being Sick and Tired's picture

To present data, even with schoolboy knowledge, with a limited and focused time frame and draw conclusions on it, is simply representative of a limited knowledge of stats.   Even the author adds that note at the of this quite useless effort.  BACK TO THE DRAWING BOARD.

Tue, 04/21/2015 - 11:41 | 6014658 Dre4dwolf
Dre4dwolf's picture

Everything is telling you to stay away from bonds.

 

I say, dump everything into bonds and maybe stocks with dividends.

 

The dollars they will pay you back with will appreciate in value, and as such over the long term with deflation you will win out.

The world is backwards, so you have to think backwards.

 

Tue, 04/21/2015 - 12:03 | 6014732 Thisson
Thisson's picture

The only way out of this mess is for a huge number of bonds to default, which will remove credit from the system and deflate things back to reasonable prices.

Tue, 04/21/2015 - 11:57 | 6014707 appocean
appocean's picture

goldman and co. will keep juicing the market up so that it is just too tempting for the individual investor to pass it up... you know the rest of the story.

Tue, 04/21/2015 - 12:22 | 6014815 dcau1
dcau1's picture

So basically they're buying all the crap that CNBS is pumping.

Tue, 04/21/2015 - 12:27 | 6014835 I Write Code
I Write Code's picture

Bernanke announced in 2008 that we should all buy stocks, and those who did then are happy now and playing with house money.  It may still be the safest place to have most of your funds.  With at least a little PM insurance.  Also canned goods and ammunition.

Tue, 04/21/2015 - 14:16 | 6015286 zvzzt
zvzzt's picture

problem is, those who wanted to buy stocks we're probaby the ones wiped out in the inital crises. good buying stocks if you're out of cash, job and a house. Of course, with no alternatives left for any form of yield, those same buggers are now trying to get into the market again... Almost funny

Tue, 04/21/2015 - 13:33 | 6015097 Baby Eating Dingo22
Baby Eating Dingo22's picture

The takaway is TPTB still have a LOT of work ahead of them

And if it requires extrication from their cold, dead hands; so it shall be

Tue, 04/21/2015 - 15:05 | 6015480 Ironplates
Ironplates's picture

Take as a mini case study the action from Friday’s sell off.  I regularly look at the daily trading trends available on one large online broker’s website – Fidelity’s retail portal. The data posts every day in real time, so by the end of trading hours you have a snapshot of what this particular brokerage has seen in terms of order flow through the day. The top 10 names traded are visible to anyone with or without a brokerage account at the company – the remaining 20 names require an account ($2,500 minimum).

Anyone able to find the web link on the Fidelity site this references to? 

 

 

 

Do NOT follow this link or you will be banned from the site!