Weekly Street Sentiment: Sometimes the Trend Is Not Your Friend

For the first time in 2009, the sell-side is actually actively recommending that their buy-side clients get long in some industries. Health Care and Technology are the first two industries to have a bullish sentiment attached to them in 2009, and you’d think that would be a positive omen for the market at large….but you would be thinking wrong.

We’ve always been focused on week-over-week changes as a good predictor of where the market is likely to move over the near term, and for the fourth week in a row, the sell-side got increasingly less positive on the market this week than they did last week.

In fact, for the first time in four weeks, they exhibited a negative overall sentiment shift in their market advice to the buy-side. So, while Health Care and Technology did move mildly over to the bullish column, that shift was dwarfed by the bearish change indicated on Basic Materials, Energy, Telecommunications and Financials.

Ah, Financials… (And what’s a weekly commentary without a sentence or two on Financials?) Volatility is thy name and returns are thy game, but sustained bullishness…that seems to be the ying to your yang…at least when it comes to the advice of the sell-side to their buy-side clients.

The sentiment on Financials at the start of this March 9^th rally was 32.3. It peaked in March at 37.9 and sits today, almost completing a full round trip at 33.57. According to the sell-side, Financials are the Mexican spring breaks of our university days…here for a good time, not a long time.

To conclude, this week with spring in the air, I thought we would spend a bit of time focused on the stocks that helped move Technology and Health Care into the bullish sentiment zone. We’ve included the top three stocks by bullish sentiment in each industry, and the single stock in the top ten of each industry that had the greatest bullish sentiment shift over the last week.

A final word…even if this ‘spring’ edition of Weekly Sentiment leaves you feeling rosy, please remember that if you’re a bull, the sell-side sentiment trend is not your friend. The sell-side is getting more bearish on the market than they have been at any point since the March rally began, and the few bright pockets seem to represent opportunities rather than investments.

Comments

[winindthedust:]

Apple's fundamentals are actually BETTER then when they were at $200... this is helping to slowly build backbone into investors again...

It doesn't help when a RIM investor, RBC, writes articles and downgrades Apple to $70! Either the guy is on crack, or has ulterior motives. SEC should be investigating so called "research" like this as manipulation of the stock.

Fact:
--Clearly, Apple continues to innovate and stock pile cash.

--Jobs has built a company that will live on without him, yes, he has done something very rare, and actually "mind melded" with his company. So, when Jobs talks about Apple "DNA", he is being quite serious... he indeed has created a company culture, a "DNA" so to speak, that will be very hard to break, and is ship on course with full sails for the next decade at least. Only a literal nuclear blast would be able to shift it's course.

--Microsoft is so worried about the demise of their desktop OS, that they are comparing on price, hardware they don't even make. This is a last desperate measure, as direct comparison of their software would kill them. Ironic, that if they compared software on price, (something they actually make) they are the most expensive. Their newest commercial, has actually relegated the desktop OS as irrelevant, a huge mistake for Microsoft, unless they get other revenue streams.

--In line with the above, Apple owns the mobile platform and has created a complete ecosystem that is here to stay for the long term. Evidence? Everyone is copying their model. Apple has forever changed the mobile model. It used to be, you'd get the latest phone every 6-24 months... phones were a commodity, so manufacturers through a lot of models to appeal to a lot of users. Feature rich, with most of the features useless, not working, or impractically implemented. Not any more. The iPhone changed all of that, and mobile computing is here to stay.

--In a recession, people are apt to save for value, rather then splurge for junk. Apple has proven this, with their business model, and consistently proven the "analyst" dead wrong.

--Strategically, Apple's position on commoditized parts & unified platforms will keep their margins high in the 30% range. Owning or partnering in other key slots, such ARM, PA-Semi, and deals with NVIDIA & Intel will keep them in the incomparable lead on handheld hardware.

--Applications are almost a billion dollar business for Apple. With 3.0, peripherals will dwarf this. Whether or not Apple gets revenue from this aspect or not, specialized peripherals will drive sales of all current and future touch devices.

--Apple could standalone on the iPhone all buy itself (Rim does!) Did we forget, that they also make computers, software, an OS, cloud services, routers, an online store, and music players?

Tell me how firing on all cylinders in a down economy is a bad thing? Since Apple was "beat down" the most with the media scaremongering, it's shares have the most to gain on the upside.

Apr 01 10:45 AM

[invst2009:]

omg, so many faulty assumptions, I don't even know where to start refuting them.

Apr 01 12:45 PM

[jack dee:]

"""Fact:
--Clearly, Apple continues to innovate"""

Do you know what Fact means?

Apr 01 02:34 PM

[Larry House:]

Cetin, I don't think your ideas here are compatible with your oft-stated view that the market is making a V-bottom and is going straight up. I don't think the market can do that without the sectors you say to avoid--and with a weak dollar.

Apr 01 04:04 PM

[dcb:]

when everyone bullish sell. when everyone bearish buy. look back three weeks. it was low, therefore buy. now up therefore sell. let go back down some. buy.

Apr 01 04:59 PM