World’s most respected companies.
Tuesday, February 16, 2010. 9:15 am.
Barron’s cover story this week reveals the “World’s Most Respected Companies”. The top five are: Apple, Johnson & Johnson, Proctor & Gamble, IBM, and Berkshire Hathaway.
They are the companies “most admired by investors”. A money manager who helped Barron’s produce the list said, “Respected companies aren’t going to fall as far in the bad times, and they come back better.”
Huh?
Brokers won’t have any trouble selling those five stocks to investors today. They can just quote Barron’s that they are “the five most respected companies in the world, and are safe as they don’t fall as much in bad times”.
How many will bother to check the facts? Except for drug-maker Johnson & Johnson, the five are hardly safe havens, most falling as much or more than the average stock in both the 2000-2002 bear market and the 2007-2009 bear.
In the 2000-2002 bear market the S&P 500 fell 50.5% from its peak to its low, the Dow 54.4%.
In that bear market, Apple fell 81%; Johnson & Johnson fell 37%; Proctor & Gamble fell 55.4%; IBM fell 60%; and Berkshire Hathaway fell 53.0%.
In the recent 2007-2009 bear market the S&P 500 fell 58%, and the Dow fell 54.4%.
In that bear market Apple fell 60%; Johnson & Johnson fell 36%; Proctor & Gamble fell 40.2%; IBM fell 47%; and Berkshire Hathaway fell 53.0%.
Safe havens?
I’m not sure it’s a good thing to chose stocks from such a list. It wasn’t that long ago that the most respected companies were General Motors, General Electric, Microsoft, WalMart, and Bank of America.
Investor confidence in Germany fell – again.
The ZEW Institute Index of German investor confidence of the outlook for the next six months fell to 45.1 this month from 47.2 in January. It was the 5th straight monthly decline.
Germany is Europe’s largest economy and the several months of decline in investor confidence seemed to be an accurate barometer, given last week’s surprise report that GDP growth in the 16 Eurozone countries rose only 0.1% in the 4th quarter, raising some concerns that Europe may be sliding back into recession.
Investor sentiment in U.S. has seen a decline in bullishness.
Investor bullish sentiment rises in rallies and bull markets, usually reaching an extreme of bullishness near tops. Investor bearishness rises in market corrections and usually reaches an extreme of bearishness near correction lows.
Bullish sentiment had reached fairly high levels prior to the current correction, and bearishness has been rising over the last six weeks.
Mark Hulbert reports that his Newsletter Sentiment Index has plunged to a current 20.3% from 65.2% in early January. The index is based on the average exposure to the stock market recommended by investment newsletters. Newsletters on average were recommending 65.2% exposure to the stock market in early January, and have now cut back on average to just 20.3% exposure.
The poll of its members by the American Association of Individual Investors, which was 49.2% bullish, only 23% bearish January 1, are now only 36.8% bullish, 41.9% bearish, working its way toward 55% bearish which is usually considered to be the beginning of the extreme zone.
Asian markets closed up some last night on low volume.
Many markets in Asia were closed for holidays yesterday, including China, Hong Kong, Singapore, Malaysia, Taiwan and Vietnam. Those that were open closed up some.
Among individual countries:
Australia closed up 0.5%. Japan closed up 0.2%. India closed up 1.2%.
If you’d like to see a three-month chart of these indexes and others, click here, and then click on any of the markets in the list at the left side of the page it takes you to.
Markets this morning.
European markets are well off earlier highs, but are still up on average of about 0.6%.
Oil is up a big $1.92 at 76.05 at the moment.
Gold is soaring, up $26 an ounce, more than 2%, at $1,117 at the moment.
Markets in the U.S.
In the U.S., this holiday-shortened week will be an average week for potential market-moving economic reports, including new housing starts, the minutes of the Fed’s last FOMC meeting, and the Producer Price Index. To see the full schedule of next week’s reports click here, and look at the left side of the page it takes you to.
Our pre-open indicators are very positive, pointing to the Dow being up 90 points or so in the early going.
Stock Market Patterns.
There is no weekly pattern for this week.
But the daily pattern is for the day after the Presidents Day holiday to be a down day (down 4 out of the last 5 years), and for Friday, the day of this month’s options expirations, to be down (down 7 of the last 10 years). The pattern around the holiday began with its frequent pattern of the day before the holiday being down (down 15 of last 18 years).
Interesting Charts of the Morning.
I’m sorry but I don’t have time this morning to provide charts of the morning.
Please scroll down to see other recent ‘Interesting Charts of the Morning’ and commentary.
To read my weekend newspaper column ‘Uncertainty Brings Market Volatility!’ click here!
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