Data Brief - November 17, 2011

Posted 11/17/11 3:30 PM ET by Jason Goepfert                Archive

 

 

Stock And Industry Sentiment

 

A few weeks ago, we looked at stock and industry sentiment within the S&P 1500 based on a Sentiment Score.

 

That Score is derived by averaging five measures of sentiment for each stock:

  • Short interest as a % of a stock's average trading volume

  • Short interest as a % of a stock's total float

  • Wall Street analyst consensus buy/sell/hold recommendations

  • Put/Call open interest

  • Put/Call volume over the past week

We have added two additional measures:

  • The net number of corporate insiders buying their stock over the trailing six months

  • The net amount of insider stock that was purchased / sold

Because corporate insiders are a non-contrary indicator, the Sentiment Score uses the inverse of those numbers.  So if there is very HIGH insider selling pressure (negative for the stock), it will actually push the Sentiment Score HIGHER (meaning that the stock is "overbought" or "over-owned").

 

From a contrary point of view, theoretically the stocks most likely to bounce would be the ones with low scores across all the various measures.  Again, if the Insider columns are giving a low number, then that means insiders are buying a lot of stock relative to other companies in the S&P 1500.  So in those cases you would have a lot of pessimism from the general public, pessimism from Wall Street, but optimism from corporate insiders.

 

Take a look at First Financial Bankshares (FFIN) as an example, the most under-owned stock in the S&P 1500:

  • Short interest is extraordinarily high, both in terms of volume and the number of shares outstanding (heavier than at least 95% of other stocks in the S&P 1500)

  • Out of 10 Wall Street analysts covering the stock, there are 0 buys, 9 holds and 1 sell recommendation (worse than 96% of all the other stocks)

  • Traders are holding 16 times more put options than call options on the stock (the heaviest in the S&P 1500)

  • While corporate insiders haven't been going crazy, the number of insiders (and the amount of stock they've bought) is better than at least 90% of other companies in the S&P 1500.

Then compare that to Aeropostale (ARO), the most over-owned:

  • There are few shares sold short, about 1.1% of the float (lighter than 94% of other stocks)

  • Out of 29 Wall Street analysts covering the stock, there are 7 buys, 20 holds and 2 sell recommendations (giving a better overall analyst rating than 90% of all other stocks)

  • Traders are holding only 22 put options for every 100 call options on the stock (only 9% of stocks have lighter put interest)

  • Corporate insiders have been net sellers, worse than 92% of all other stocks in terms of number of buyers versus sellers.

This is by no means a recommendation to buy or short either stock, but it is a jumping-off point for further research.  As we get more history with the data, we will be more able to refine the probabilities for out- and under-performance.

 

 

 

 

 

 

 

 

 

 

 

 

 


 

Member Comments

 

Please observe a proper level of civility when posting comments.  The point here is to foster intelligent discussions to help everyone learn.  Abusive posts will be deleted, at our sole discretion.

 

Comments powered by Disqus

 

 

 

Subscriber home page

 

NOTICE:  Forwarding or other distribution of this report is prohibited without the express permission of Sundial Capital Research, Inc.  If you do not possess a firm-wide license, then forwarding this message will violate your subscription agreement.

 

Privacy Policy  |  Disclaimer

 

2001-2011 Sundial Capital Research, Inc.  All rights reserved.

sentimenTrader.com is a trademark of Sundial Capital Research, Inc.

Sundial Capital Research, Inc.  12527 Central Avenue NE, Suite 165  Blaine, MN  55434