Last week, stocks posted their best week since November, shaking off some of the prior week volatility. The S&P was up 4.7%, the Dow increased 3.9%, the Nasdaq rallied 6.7%, while the Small-cap Russell was the best performer of the group, rallying 7.7%. Liquidity in markets continues to trump fundamentals and there have been few signs investors are interested in leaving the market. The overall macro narrative (vaccine rollout, stimulus, corporate earnings) remain unaltered.
Financial Advisors will continue to monitor the situation. FAs will digest another busy week of earnings, highlighted by Dow component Disney (DIS) and Coca-Cola (KO). Progress on the latest COVID-19 relief bill will garner headlines. With the rise in the 10-year yield, investors will show an increased interest when the latest reading of the consumer price index is released on Wednesday.
The Advisors in Focus newsletter will continue to follow these developments and keep readers up to date on the latest search patterns. Today, we want to pass along our findings from your peer responses to our AIF survey. If you haven’t taken it, please do so here. The survey responses were from the period of January 26 through February 5. This would encompass the period of the ‘Reddit Rebellion’ and the subsequent fallout after short squeezes forced some liquidation at hedge funds leaning heavily in certain short trades.
The responses will help provide direction to Advisors in Focus content. We were encouraged to see that readers found value in the TrackStar data and anticipate that we will parlay the data into a useful source of information. The results emphasized the search for longer-term buy and holds which we will use as the basis for holding period discussions. Brokerage notes were a primary area for investment ideas and we will provide additional analyst commentary to correspond with TrackStar data and our own insight. Stocks and ETFs remain paramount for FAs and will be a focal point of the newsletter. Healthcare was the top theme and we anticipate no shortage of ideas as numerous pharma and biotech plays show up manifest on our research lists. We will prioritize content on Infrastructure, Robotics/AI, ESG, Energy and 5G given the responses and search history.
We will continue to run surveys looking for feedback so we can grow the Advisors in Focus newsletter into a valuable resource for FA investment generation. The objective is to help FAs grow their assets under management. Below, we have provided a recap of the FA survey so you can view your peer responses.
1. What is your primary reason for reading an advisor-based newsletter?
– News on the industry 78.7%
– Talking points with clients 52.0%
– Investment idea generation 50.7%
– Practice Management 38.7%
2. What asset classes interest you the most for the next 12 months?
– Stocks 78.7%
– ETFs 65.3%
– Fixed Income 42.7%
– Alternative 22.7%
– Options 13.3%
– Commodities 12.0%
– Other 9.3%
– Currencies 6.7%
Perhaps this is another example of how monetary policy has impacted the bond market, but the majority of FAs -78.7%- are interested in stock commentary. ETFs were the next asset of interest with 65% of FAs looking for commentary. Coming in a distant third was Fixed Income at 42.7%. We will be cognizant of these responses and continue to sift through data for strong dividend stocks that could replace some of the lost yield from Fixed Income. Alternative Assets was fourth at 22.7%.
3. What types of investments interest you the most for the next 12 months?
– Mid/Large Cap 70.7%
– Small Cap/Growth 65.3%
– Value/Income 65.3%
– Inverse/Hedge 14.7%
– Other 3.9%
Financial Advisors are simply looking for ideas and the size is not a deterrent. This is not a surprise as the most recent Bank of America Fund Managers survey showed money managers are expecting small-cap to outperform large-cap in 2021. We will continue to focus on names that present interesting opportunities and present stories that explain why names are capturing market attention. We will not discriminate against market cap. The 14.7% response to hedging and inverse plays is reflective of the level of risk in markets. We will continue to pass along inverse names garnering attention so FAs are armed with ideas that can help provide protection when the need arises.
4. What research themes interest you the most for the next 12 months?
– Healthcare 74.3%
– Infrastructure 62.2%
– Robotics/AI 45.9%
– ESG 43.2%
– Energy 43.2%
– 5G 37.8%
– Cryptocurrency 25.7%
– Regional 10.8%
Healthcare is the top research theme. We see this reflected in search patterns as pharma and biotech names cross our screens on a regular basis. The majority of searches are in reaction to stocks seeing volatility in response to trial test results. Healthcare is expected to be a primary focus of the Biden Administration according to the BofA Fund Managers Survey. We will continue to highlight these plays. Infrastructure came in second at 62% as fiscal stimulus is expected to drive money into this area. Robotics, ESG, and Energy were other areas of interest. Surprisingly, 5G was only checked by 37.8% of respondents. Given the current 5G supercycle, we were surprised to see the lack of interest compared to other areas. 25% of respondents would like to see more commentary on cryptocurrency as it continues to see a nascent interest. 10% of respondents were looking for Regional commentary, which was lower than we expected as Emerging Markets have been a top pick as a 2021 outperformer.
5. What is the general length you hold an asset?
– 3+ years 52.0%
– 1-3 years 36.0%
– 4-12 months 10.7%
– 1-3 months 1.3%
6. What information is most valuable when you see a stock/ETF on the search list?
– Perceived Opportunity 72%
– Reason for move 57.3%
– Price Action 29.3%
– Volume 2.6%
Financial Advisors would like to know what is the perceived opportunity in names most widely researched. We will provide additional analysis and brokerage commentary to provide context on why people are searching names. 57% of FAs are curious to know what was the catalyst behind a stock reaction. Only 29% of FAs are interested in the price action, which suggests FAs longer term outlook is more important than short term volatility.
7. Where do you currently get investment ideas?
– Brokerage/Analyst Research 85.1%
– Newsletters 54.1%
– Websites 51.4%
– Stock Screeners 33.8%
– Other 14.0%
– TV 2.7%
– Chat Rooms 1.4%
This was interesting as the vast majority of Financial Advisors -85%- are using brokerage research as a key idea generator. The AIF will provide analyst commentary and ratings on names we discuss when applicable. Newsletters were second at 54% and the AIF will strive to continue to provide investment ideas. Websites were third on the list at 51%. Stock Screeners were the fourth most used source for investment ideas. Distant alternatives included TV, Books, magazines, and Peer Group.
8. I find stats on searches by my colleagues to be important.
– Somewhat Agree 44.0%
– Neither Agree Nor Disagree 29.3%
– Strongly Agree 14.7%
– Strongly Disagree 8%
– Somewhat Disagree 4%
9. I find stats on searches by individual investors to be important.
– Neither Agree Nor Disagree 37.3%
– Somewhat Agree 37.3%
– Strongly Agree 10.7%
– Somewhat Disagree 10.7%
– Strongly Disagree 4%
We would like to thank all our readers for their responses. We will use this data to make sure we provide pertinent information in the Advisors in Focus newsletter that helps you drive engagement with your customers and increase your assets under management. That is the goal of this newsletter and we will strive to improve content so you can meet your own goals.
If you have not taken the survey and would like to provide your input, please do so here.
Tomorrow, we will take a look back at some of the names we have highlighted and discuss how they have progressed the past few weeks.