Barron’s does a regular "Big Money poll" with domestic portfolio managers. Their most recent survey is the cover story for this week’s mag.
What’s the state of the professional fund manager’s psyche? Bullish!
Consider these numbers:
50% consider themselves "Bullish (43%) or Very Bullish (7%)"
12% consider themselves "Bearish (12%) or Very Bearish (0%)"
38% consider themselves "Neutral"
Most pros are "looking over the valley" to an economic recovery: 74% believe the US is in a recession, but only 32% believe this will lead to a world wide recession.
As to the state of the stock market, according to the managers, it is cheap: 55% believe it is undervalued, while only 10% think it is overvalued (35% chose fairly valued).
The greatest risks to equities was surprising: It was not, according to the managers, disappointing earnings (10%) or higher interest rates (9%) or a recession (6%) or even hedge funds (6%) — rather, it was continued credit market dysfunction (56%).
Lastly, 87% plan on being buyers of equities over the next 3 – 6 months; Only 13% said they expect to be sellers. Most are exposed to large cap (64%) versus midcaps (19%) and small caps (15%).
Here’s a quick excerpt:
"JUST AS MOST MANAGERS are sanguine about stocks, they’re optimistic about the U.S. economy’s growth potential later this year.
Like legendary investor Warren Buffett, nearly three-fourths of our respondents think that we’re already in a recession, even if the official numbers won’t provide confirmation for months. Asked to predict the change in gross domestic product this year and next, the managers offered growth forecasts of 1.16% in 2008 and 2.11% in ’09.
Nearly 68% of poll participants are quick to dismiss the notion that a U.S. recession would drag down the rest of the world. "Slowdown from a torrid pace? Yes. Recession? No," quipped one investment pro, while another noted that "the infrastructure build-out around the world should maintain a certain non-recessionary level of growth."
Others don’t buy the notion of a neat "decoupling." "The U.S. economy is 27% of global GDP," wrote one manager. "It would be next to impossible for developing economies, which represent another 29% of global GDP, to overcome a slowdown in the U.S. and Europe."
The one thing that would make the survey much more valuable would be the history of the survey results. Plot that against the SPX for a few decades, and you might have a very useful tool for sentiment analysis.
One small caveat — most survey respondents are liars: 74% claim
to be beating the S&P500. An alternative explanation is that
primarily the outperformers responded to the survey.
click for larger graphic
Table courtesy of Barron’s
Back in the Pool
BARRON’S, APRIL 28, 2008