Clients of TD Ameritrade Holding Corp. similarly gravitated toward companies poised to benefit most from an economic reopening in May, according to a release of the brokerage’s Investor Movement Index, which has tracked clients’ positioning since 2010. Some of the most popular buys included Norwegian and Southwest Airlines Co., up near 70% since mid-May.
“Although a lot of people may say that it’s crazy, it has turned out pretty well,” said JJ Kinahan, the chief market strategist at TD Ameritrade, who added their purchases have mostly come down to a few areas -- airlines, cruise lines, and energy stocks. “Retail investors for the last few months have been a little bit ahead of the curve. There’s been a lot more perhaps optimism among retail traders around the turnaround than there has been from professionals. This continues to show that.”
While many of the retail crowd’s favorite stocks show up on the rally leader board, though, they’re also those that fell most during the sell-off. To put it into context, the same group of 10 stocks that have seen increased interest on Robinhood and are up more than 90% in a month fell an average of 70% from Feb. 19 through March 23, double the S&P 500’s decline.
“There’s a very well documented tendency for investors to buy ‘lottery tickets’,” said Jason Thomas, chief economist at AssetMark. “If you’re looking for a huge return in the near-term, a huge bump, you’re not going to go buy a consumer staples company.
You’re going to buy something that is either a biotech where it’s basically an option, a binary kind of a thing, or just pick whatever has been hit the hardest.”
--With assistance from Vildana Hajric and Claire Ballentine.
This article was provided by Bloomberg News.