Good calls from Private Investors

In a previous post, on 18 January, I noted down the top ten buys and sells by private investors, as reported by TD Waterhouse. A cynic might say think that the activities of a private investors like me would be good contrary indicators. In fact, there seems to be collective wisdom.

Here's what I did: I looked at the top ten buys, and top ten sells, and ignored any shares that were on both lists. I then calculated the average return of the remaining shares. Three shares appeared on each list. Here's what I found:

Buy list:

ARM           +12%

Aviva          +3%

Amur Minerals -12%

Average        +1%

Sell list:

Gulf Keystone -17%

Bowleven      -19%

Max Petroleum -26%

Average       -24%

During that time, the FT-ALLSHARE index went from 3120 to 2985, a return of -4%.

In other words, shares that investors thought were buys went on to outperform the market by 5%, whilst the shares that investors thought were sells went on to underperform the market by a massive 20%. Interesting, no? I am tempted to repeat the experiment at the end of the month.