Individual investors are profiting from the recent rally; The folly of trying to time the market; Four characteristics of companies with winning stocks; Data on China's economy is disappearing
1) With yesterday's big surge, the S&P 500 Index is almost back to being flat year to date. And guess who has been profiting massively from the recent rebound?
Individual investors are – not the professionals. Take a look at this chart the Kobeissi Letter shared in a post on social platform X last week – I love it!
As the Kobeissi Letter wrote in the post, data from Bank of America ("BofA") showed individual investors have been net buyers of equities for 21 consecutive weeks – the longest streak on record and more than double the previous records from 2021 and 2022.
Meanwhile, as the post also notes:
Over the last 4 weeks, BofA's private clients have purchased a record $2 BILLION of equities.
On the other hand, hedge funds have sold a record ~$1.5 billion.
At the same time, BofA's institutional clients have dumped ~$2.7 billion, the second-largest amount in history.
The Kobeissi Letter says this is a bigger divergence between individual and institutional investors than during the 2022 bear market.
I love it when regular folks are benefiting from the market like this!
2) Along these lines, I've previously shared many of these 30 Visual Investing Lessons from Invest In Assets on X. For example, the chart below shows how much your long-term returns decline if you miss even a handful of the market's best days over an extended period of time (in this case, up to 60 days out of 20 years):
But yesterday, I came across a related statistic I've never seen before: According to this post from Fat Tail Capital on X, if you were out of the market for the best 60 minutes in the past month, you'd have missed the entire 17% recovery!
It would be hard to find a better example of the folly of trying to time the market.
3) Revisiting the 30 Visual Investing Lessons, I was particularly intrigued by four charts that show the stock outperformance of companies with the following characteristics...
a) A high return on invested capital ("ROIC"):
b) Are among Fortune's 100 Best Companies to Work For:
c) Are founder led:
d) Are family owned:
These are all good things to keep in mind when evaluating which companies you should hold in your portfolio.
4) I've always avoided investing in China because I believe its market is rigged, especially against outsider investors. And as this story from the front page of the Wall Street Journal last week shows, turns out China's data is probably rigged as well: How Bad Is China's Economy? The Data Needed to Answer Is Vanishing. Excerpt:
China has stopped publishing hundreds of data points, including land sales, foreign investment, and unemployment figures.
The missing data makes it harder to understand China's economy amid issues like debt and a troubled real-estate market.
Alternative data sources are being used to assess China's growth, as the accuracy of official GDP figures is questioned.
If the tentative trade deal with China has you thinking about investing there, think again.
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.