Contrarian Ideas: U.S. Funds Have Second-Worst Year in 2011

U.S. stock mutual funds had their second-worst year in 2011 as investors fled the market's volatility and into the perceived safety of bond funds.

Bloomberg reports an estimated $132 billion was pulled from mutual funds that invest in U.S. stocks. This marked the "the fifth straight year of withdrawals for domestic funds, according to preliminary data from the Investment Company Institute."

The worst year on record was 2008, when investors pulled $147 billion from U.S. mutual funds.

As for inflows, ICI data shows municipal bond funds had withdrawals of about $12 billion. In 2010 they had $11 billion in deposits. Funds that invest in international stocks attracted about $6 billion last year, down from $58 billion in 2010. Taxable bond funds had approximately $141 billion in deposits, below the $230 billion from the previous year.

Volatility
Indeed, concerns about the U.S. slowdown, government debates, and the S&P downgrade added to those about the euro-debt crisis and rumors of China's hard landing, among others. The headlines in 2011 were not positive, and the market and investors reacted accordingly.

Highlighting the extent of the market volatility, Bloomberg notes the Dow Jones Industrial Average alternated between gains and losses exceeding 400 points on four straight days in August, the longest such streak ever.

"Investors just can't bear the pain, which sets the stages for an unwillingness to take risk," said Christopher Blum, chief investment officer for behavioral finance at JPMorgan Asset Management in an interview with Bloomberg.

Business section: Investing ideas
If you're a contrarian investor, this excessive pessimism should raise a flag.

With that in mind, we wanted to evaluate the beaten-up stocks that could be ready for a rebound.

All of the stocks mentioned below are trading below their long-term moving averages, but have recently rebounded to trade above their short-term moving averages (specifically the 20-day and 50-day moving averages).

In addition, all of these stocks have seen a sharp decrease in the number of shares shorted over the last month. In other words, short-sellers have decreased bearish bets on the companies.

Short-sellers seem to think there's more fuel to these rebounds -- do you agree?

List sorted alphabetically. (Click here to access free, interactive tools to analyze these ideas.)

1. Cninsure: Provides insurance brokerage and agency services, and insurance claims adjusting services in the People's Republic of China. The stock is currently trading 4.32% above its 20-day SMA, 0.83% above the 50-day SMA, and 35.80% below the SMA200 Shares shorted have decreased from 4.58M to 3.87M over the last month, a decrease which represents about 2.71% of the company's float of 26.20M shares.

2. Comstock Resources: Engages in the acquisition, development, production, and exploration of oil and natural gas properties in the United States. The stock is currently trading 4.15% above its 20-day SMA, 1.32% above the 50-day SMA, and 26.46% below the SMA200 Shares shorted have decreased from 11.45M to 9.31M over the last month, a decrease which represents about 5.11% of the company's float of 41.84M shares.

3. China Yuchai International (NYSE: CYD  ) : China Yuchai International Limited, through its subsidiaries, manufactures and sells diesel and natural gas engines in China and internationally. The stock is currently trading 5.68% above its 20-day SMA, 3.80% above the 50-day SMA, and 21.89% below the SMA200 Shares shorted have decreased from 905.83K to 711.83K over the last month, a decrease which represents about 1.26% of the company's float of 15.44M shares.

4. Foster Wheeler: Provides construction and engineering services to oil and gas, oil refining, chemical/petrochemical, pharmaceutical, environmental, power generation, and power plant operation and maintenance industries worldwide. The stock is currently trading 5.18% above its 20-day SMA, 2% above the 50-day SMA, and 23.87% below the SMA200 Shares shorted have decreased from 4.37M to 2.10M over the last month, a decrease which represents about 1.95% of the company's float of 116.66M shares.

5. Leap Wireless International: Provides digital wireless services under the 'Cricket' brand name in the United States. The stock is currently trading 7.37% above its 20-day SMA, 9.08% above the 50-day SMA, and 21.18% below the SMA200 Shares shorted have decreased from 13.73M to 12.60M over the last month, a decrease which represents about 2.32% of the company's float of 48.80M shares.

6. Netflix (Nasdaq: NFLX  ) : Provides subscription based Internet services for TV shows and movies in the United States and internationally. The stock is currently trading 18.33% above its 20-day SMA, 12.21% above the 50-day SMA, and 54.54% below the SMA200 Shares shorted have decreased from 10.87M to 9.88M over the last month, a decrease which represents about 1.94% of the company's float of 51.16M shares.

7. STR Holding: Engages in the manufacture and sale of encapsulants to the solar module industry. The stock is currently trading 4.15% above its 20-day SMA, 1.63% above the 50-day SMA, and 28.32% below the SMA200 Shares shorted have decreased from 6.50M to 5.88M over the last month, a decrease which represents about 1.81% of the company's float of 34.22M shares.

8. VanceInfo Technologies (NYSE: VIT  ) : Engages in the provision of information technology (IT) services. The stock is currently trading 15.82% above its 20-day SMA, 7.83% above the 50-day SMA, and 38.24% below the SMA200 Shares shorted have decreased from 11.45M to 8.89M over the last month, a decrease which represents about 10.17% of the company's float of 25.18M shares.

9. United States Steel (NYSE: X  ) : Produces and sells steel mill products in North America and Central Europe. The stock is currently trading 4.54% above its 20-day SMA, 5.89% above the 50-day SMA, and 22.47% below the SMA200 Shares shorted have decreased from 35.97M to 33.95M over the last month, a decrease which represents about 1.41% of the company's float of 143.22M shares.

10. Yingli Green Energy Holding (NYSE: YGE  ) : Engages in the design, development, manufacture, marketing, sale, and installation of photovoltaic (PV) products in the People's Republic of China and internationally. The stock is currently trading 1.16% above its 20-day SMA, 2.58% above the 50-day SMA, and 41.16% below the SMA200 Shares shorted have decreased from 20.21M to 16.48M over the last month, a decrease which represents about 4.08% of the company's float of 91.46M shares.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


 

List compiled by Eben Esterhuizen, CFA. Kapitall's Eben Esterhuizen and Rebecca Lipman do not own any of the shares mentioned above.

Motley Fool newsletter services have recommended buying shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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