| Dear Trader, We've come a long way here at Schaeffer's Investment Research since I founded the company back in 1981. At the time, it was a bit of an uphill battle to gain traction for my unique methodology -- Expectational Analysis® -- which features an emphasis on sentiment analysis, and a contrarian approach to what "the investing crowd" is doing with their money. Now, of course, contrarianism has become a cottage industry of its own. Every pundit and analyst has their own "edge" or "contra tell," which means... we're all contrarians now? Or none of us are contrarians? It's hard to keep track. All kidding aside, the landscape of contrarian investing has changed significantly, and I'm not talking about the roughly four decades I've been in the options business. I'm talking about just the last decade, and in particular the post-financial crisis era. And the way we look at data and analyze it has to change to keep up. At Schaeffer's, we've done just that. We've been making trades based on our own proprietary contrarian sentiment indicators for years now, and our trading team -- a group with over 110 years of combined experience! -- has relentlessly honed and refined this unique set of tools in response to changing market conditions, based on real-world trading results. But here -- I'll stop telling you what I mean, and just show you instead. Fading Analysts: From "Sure Thing" to "Hold Up..." Let's take a look at one set of sentiment data, courtesy of Schaeffer's Senior Quantitative Analyst Rocky White, as measured over two different time periods. In both studies, White looked at the returns for all optionable stocks for the first half and second half of each year. The percentage of analyst "buy" ratings -- a widely cited indicator of Wall Street sentiment -- at the beginning of the six-month period was used to group the returns by: - Loved Stocks: 80% or more "buy" ratings
- Other Stocks: Between 20% - 80% "buy" ratings
- Hated Stocks: 20% or fewer "buy" ratings
To smooth out the returns, stocks had to meet a minimum share-price threshold of $7, with at least 10 analysts in coverage. Looking at the returns since 2001, there's a dramatic performance gulf between the Loved Stocks and Hated Stocks. The average return for Loved Stocks is only 3.94%, with 57% positive returns, while the Hated Stocks boast a 7.13% average return, and 61% positive returns. The Other Stocks are right in the middle, with an average return of 5.35% and 59.5% positive returns. This suggests that, since 2001, it would have been a fruitful contrarian approach to bet bullishly on stocks with 20% or fewer "buy" ratings from analysts. 
But when we narrow the focus to look at these exact same returns since 2010 -- that is, in the post-financial crisis era -- a distinctly different picture emerges. The Loved Stocks now have an average return of 6.34%, with 60.9% positive, which is almost precisely on par with Other Stocks... and with an average return of 7.28% and 62.1%, the outperformance gap for Hated Stocks has narrowed considerably over the last decade. Rather than topping the Loved Stocks by 3.19 percentage points, there's now less than 1 percentage point difference in the performance between analysts' most and least favorite stocks. That's a considerable contrarian "edge" lost. 
Don't retreat... Adapt! Now, the takeaway is not that analysts had a mass awakening around 2010 and are no longer useful as a contrarian indicator at all. (In fact, in a few days, we'll share with you one of our winning trades that caught a major boost from a sea change in analyst sentiment.) Instead, the point is that there's more to being contrarian than being contrary. And while one data point does not a contrarian argument make, it can certainly be part of a wider picture that ultimately forms a cohesive, compelling trade rationale. In other words, adopting an intelligent, informed contrarian stance in today's market requires a set of indicators that's thoroughly tested, regularly updated to reflect the changing market environment, and as broad as it is deep. Here at Schaeffer's, we've got that covered. 
Looking for your edge? You've found it. Yes, we know -- everybody's looking for that "hot tip" or "secret formula" to take their trading to the next level. Well, would you settle for 41 years of industry-leading research and trade recommendations, with proven results? And what if we deliver those trades on a schedule that's tailored to your busy lifestyle? Schaeffer's Weekend Trader Alert combines the depth of our decades of experience with the urgency and immediacy of today's fast-moving market. You'll receive one new options buying recommendation each week, along with a commentary explaining why we think the trade is poised to deliver big gains in a matter of mere weeks. With Weekend Trader Alert, we'll never tell you to blindly place a trade. You'll get to look behind the curtain to see which technical indicators we're watching, and what kind of sentiment data can signal a big move on the horizon. We explain our trade drivers in detail, so you'll learn exactly what kind of thought process goes into a winning options play. Plus, each week, you'll get an update on any changes to the portfolio! And the best part is, you don't need to fret over picking the right strategy yourself. All of our Weekend Trader Alert recommendations are straight call and put purchases, selected specifically for their ability to deliver +100% profits in just a few weeks or a couple of months. This beginner-friendly methodology makes it easy to trade like a seasoned options pro -- and every single one of our featured stocks is hand-picked because it's a great match for this strategy. There's no guesswork on your part - just our 41 years of experience working to your advantage. So if you're ready to get started trading options, don't go it alone -- use our proven "edge" to your advantage! Weekend Trader Alert is the perfect portfolio booster for traders at every level, and this is your chance to try it for a full year at a seriously reduced price! Every Sunday night at 7 p.m. ET, you'll receive our latest hot options recommendation. Each pick will be accompanied by a well-researched commentary where you'll learn the what, why, and how of our latest trade idea. And you'll never have to worry about the when, because we provide all of the details you need to manage the trade, including a target profit and time-stop date! You're never left wondering what to do -- we'll guide you every step of the way. As a special "thank you" for choosing to continue your options journey with Schaeffer's, we're offering a special deal on Weekend Trader Alert right now. You can take advantage of our powerful, full-service recommendations at a major, limited-time-only discount off our usual price! While a year of Weekend Trader Alert recommendations typically retails for $1,495 - a fair price, considering the volume of trades and the ambitious target profits - as a new Schaeffer's member, you can claim a full year of trades for just $995! I'm positive that once you see the power of options, you'll be hooked. This offer is only open to select Schaeffer's members, and for a very limited time. Click here to claim your spot before it's too late! 
All my best, Bernie Schaeffer
Chairman & CEO
Schaeffer's Investment Research
service@sir-inc.com
http://www.schaeffersresearch.com
1-800-448-2080
1-513-589-3800 International P.S. Caught the contrarian bug? Catch a new crowd-fading trade every Sunday with this limited offer! | 
No comments:
Post a Comment