Earlier in the year, in two reports for Bespoke Premium subscribers we highlighted how the worst performing stocks during the opening days of the year were the stocks which had the highest ownership among large hedge funds and institutional investors. As shown in the chart below, since the start of the third quarter, the stocks with the highest ownership levels among hedge funds have steadily underperformed the market.
However, as noted in the lower chart, over the last two weeks, the gap between each group's performance has narrowed, indicating that the selling pressure that was evident in names widely held by hedge funds has, at least temporarily abated. We'll be watching this over the near future, but if this trend continues it will be a good signal for the overall market.
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Coincides with the turn in my performance, but I'm a long only value guy.
Posted by: David Merkel | January 31, 2008 at 04:18 PM