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10/21 11:00P (WJ) WSJ(10/22) Abreast Of The Mkt:
Small Investors Are StalwartsStory 0831 (AVP, CA, DJDAY, ENE, G, GTW, HSY,
KLAC, KO, NOK, Y.NOK...) By E.S. Browning Staff Reporter of
The Wall Street Journal The sell orders came cascading down, in
record numbers. On the first day that the stock market reopened after
last month's terrorist attacks, trading was dominated by huge blocks
changing hands between professionals. The average trade in General
Electric shares, for instance, was more than 14,000 shares, valued at about
$500,000, while the average trade in insurance giant American International
Group was more than 21,000 shares, or about $1 million, as the major indexes
plummeted. But despite this wave of selling driven by large
investors, one group stood surprisingly firm: small investors, who
have emerged as the market's stalwarts throughout the past five jittery
weeks. According to new data detailing stock-trading
patterns since Sept. 17, small investors have behaved much as they did in
1998, when they rode out a Russian debt default that panicked the pros in
the stock and bond markets. In both cases, it was the pros, desperate to
protect quarterly performance numbers, who fled, and ordinary investors who
stood fast, supporting the market. On Sept. 17, the day stocks began
trading again after the terrorist attacks, the number of shares traded in
blocks of at least 10,000 more than doubled on the New York Stock Exchange
compared with the day before the attacks. The volume traded in huge blocks
leapt to 1.6 billion from 578 million on Sept. 10, according to data from
market research group Birinyi Associates in Westport, Conn. Such large
trades almost always are made by pros, and the surging volume during that
first week reflected their race to unload stocks in companies such as
airlines and hotels that they thought would be hurt by the events.
But as the volume of large trades was more than doubling on
Sept. 17, the volume of small trades, of 100 shares or less, actually
declined by one-third on that day, falling to 11 million shares from 15.7
million, as small investors moved to the sidelines. That day's
activity wasn't a fluke -- the disparity between volume of large and small
trades continued for most of the month. The volume of larger trades didn't
fall back to preattack levels until Oct. 1, while the volume of small trades
didn't climb up to preattack levels until the last trading day of September.
It is something that Charles Smith saw first-hand, when he
showed up on Oct. 3 for his regular monthly meeting with other stock-market
investors in Dallas. Even though it was the group's first meeting
since the September attacks, nobody was talking about selling. In fact, the
big debate at his meeting was about how soon people should start buying.
"The confidence level on stocks was up quite a bit," says Mr. Smith,
a retired computer salesman who is the moderator of the group and who says
he is thinking of buying some more stocks himself. Some members of the
group, in fact, said they were planning to buy right away, and the data
suggest that purchases by small investors may have been among the first
bullish moves in a trend that accelerated in late September and into this
month. Analysis of the trades suggests, in fact, smaller investors
turned bullish a lot sooner than the pros. On Wednesday, Sept. 19, the third
day of resumed trading, big investors were continuing to put stock up for
sale, according to data compiled by The Wall Street Journal's Market Data
Group. But that day, smaller investors appeared to begin showing net buying
demand. How can anyone know whether trades are being driven by
buyers or by sellers? That is determined by tracking "upticks," or increases
in a stock's price, and "downticks," or decreases. Trades on upticks
generally are thought to be driven by buying demand; trades on downticks
generally are thought to be driven by sellers. Block trades
of 10,000 shares or more didn't start to be dominated by upticks until Sept.
24, the start of the second week of trading, while smaller trades were
showing more trades on upticks than on downticks as early as Sept. 19. And
since Sept. 19, as big trades sometimes have reflected buying pressure and
sometimes selling pressure, smaller trades have uniformly shown more demand
to buy than to sell. Measuring large trades and small trades isn't an
exact science, of course. While individuals rarely conduct huge trades, pros
do often make smaller trades. Alternatively, mutual funds or brokerage firms
acting on behalf of individual clients sometimes group their trades into big
blocks, meaning that what appears to be a big chunk of stock may actually be
made up of many individuals' shares. But analysts at Birinyi
Associates say the data do strongly suggest it was big traders, rather than
small ones, who led the selling charge. Rather than sparking the decline,
small investors have been a stabilizing force, holding on to their stocks
during the initial panic and, in some cases, actually buying once stocks
fell. Many analysts on Wall Street expected much worse. The fear this
time was that because so many individual investors were new to the market,
and had yet to see a real, prolonged bear market, they wouldn't know how to
react to this crisis, and would bail out. As it happens, most not
only refused to sell, but they appear to have been the first to step in and
buy as the market cratered in the first week of resumed trading. "The
biggest impression that I have from my clients is that for the most part
they are taking this decline and rebound in stride," says money manager Bob
Streed, who oversees $1 billion in client assets and mutual funds for
Northern Funds, the money-management arm of Northern Trust in Chicago. "Most
people just said they are going to get through this. Some even have given me
more money to invest." After rebounding for three weeks, stocks
pulled back last week, with the Dow Jones Industrial Average falling 1.5%,
or 140.05 points, for the week, to 9204.11. That included a gain of 0.45%,
or 40.89 points, on Friday. The Nasdaq Composite Index, dominated by
technology stocks, fell 1.88% last week to 1671.31, including a rise of
1.12% on Friday. The Standard & Poor's 500-stock index fell 1.66% for
the week to 1073.48, after rising 0.46% on Friday. Nothing
guarantees, of course, that small investors won't pull back from stocks in
months to come. That would be consistent with past experience, which
suggests that while professional investors react quickly, individuals
sometimes have a delayed reaction. After the 1987 crash, for
example, some small investors hesitated initially, and then bit by bit
withdrew money from stocks, selling as their shares returned to prior levels
and they got "even" again. Some analysts predict the same move could
be under way this time around, provoked not only by the terrorist attacks
but also by lingering concerns about the tech-stock collapse. Mr.
Streed of Northern Trust says that since this past summer, he has been
getting occasional calls from clients who feel they may have too much money
in the stock market. One client worked out an investment plan earlier this
year, then called back recently to say, " `I am so much older since we
talked, maybe someone my age shouldn't have that much in stocks,' " Mr.
Streed recalls. "He just didn't like the volatility in the marketplace."
Some clients of PNC Advisors, the investment-advisory business of PNC
Bank in Pittsburgh, are telling their investment advisers that they just
want to get back to even on some of their stock holdings, and then "retreat
into something perceived as safer, like real estate," says Jeffrey Kleintop,
chief investment strategist at PNC Advisors. This desire to "get even and
get out" could hold down overall stock-market gains for some years, Mr.
Kleintop says. It also could skew the market toward the best-known
stocks. Eighteen months ago, people cheerfully pumped money into Internet
businesses they didn't understand. Today, "our investment
advisers say they can't even talk to clients about stocks whose businesses
the clients don't understand," Mr. Kleintop says. That makes Mr. Kleintop
focus investments on stocks such as Dell Computer and Intel, rather than
Micron Technology. James Gregg, an entrepreneur in Leesburg, Fla.,
says he is thinking of shifting some money to bonds from stocks. Like Mr.
Smith in Dallas, Mr. Gregg didn't sell after the attacks, feeling that the
economy would weather the storm. But the experience, coming on top of the
earlier tech-stock debacle, has made him think twice about his heavy stock
exposure. He says he still has 5% or less of his savings in bonds.
"I think maybe I will be more conservative in the future, get some
more bonds," Mr. Gregg says. "I think it was kind of a mistake not to have
bonds. They may be more secure." --- Friday's Market
Activity Coca-Cola improved $2.47, or 5.4%, to $48.59,
reflecting increasing confidence in the beverage company's earnings outlook.
UBS Warburg boosted its rating on the stock, as well as on Hershey Foods,
which improved 2.49, or 4%, to 64.55. Gillette rose 1.58, or
5.3%, to 31.30, after the personal-care products maker posted third-quarter
results that lived up to Wall Street's forecasts. Shares of some other
consumer-products makers, such as Avon Products, which rose 1.33, or 2.9%,
to 47.33, also moved higher on the day. Enron dropped 2.95, or 10%,
to 26.05. A limited partnership organized by the Houston energy company's
chief financial officer realized millions of dollars in profit in
transactions it did with Enron, according to an article in Friday's edition
of The Wall Street Journal. (END) DOW JONES NEWS
10-21-01 11:00 PMAdditional Codes ( FI0009000681, I/BVG, I/CMT,
I/COS, I/CPM, I/CPR, I/FOD,I/GAS, I/OFP, I/SEM, I/SFT, I/SOF, I/TEL, I/XDJI,
I/XGTI, I/XISL, I/XNQ1,I/XST5, I/XSTX, P/4069, P/53030, N/DJN, N/DJWI,
N/JNL, N/ADR, N/CMD, N/CNW,N/COC, N/DDY, N/DJPF, N/DJWB, N/FRT, N/NDQ,
N/NDX, N/NWS, N/NYS, N/SGR,N/SMC, N/STK, N/WEI, N/WLS, M/NCY, M/NND, M/TEC,
M/TPX, M/UTI, P/DCO, P/DCP,P/DCS, P/DEE, P/DFT, P/DGA, P/DJCS, P/DSE, P/DTE,
P/DUT, P/PIC, R/CA, R/EC,R/EU, R/FI, R/GA, R/MA, R/NME, R/NY, R/PA, R/PRM,
R/SCA, R/SD, R/TX, R/US,R/USC, R/USE, R/USS, R/USW, S/STT, J/ABS, J/MIM,
J/TFR)
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