thumbBespoke has just published its Q2 2016 quarterly outlook piece.  Our outlook pieces (both annually and quarterly) cover the ins and outs of everything going on in financial markets, with invaluable insights on valuations, technicals, sentiment measures, seasonality, and more.  The report is in-depth, but it’s presented in a way that’s extremely easy for investors to digest.  That’s what Bespoke is best known for: analyzing complicated market data with unique charts and graphics that are quick and easy to interpret.

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Below is a chart from an analysis we did in our Q2 2016 Bespoke Report outlook piece.  The average stock in the S&P 500 gained roughly 2.6% in the first quarter.  But which stocks outperformed the market and which ones underperformed?  One of the simplest triggers for outperformance in Q1 was how a stock performed in 2015.  Basically, the stocks that did well last year saw in-line to sub-par returns in Q1 2016.  On the other hand, stocks that fell the most in 2015 ended up rallying the most in Q1.

We highlight this trend in the chart below using our decile analysis.  To run the analysis, we break the S&P 500 into deciles (10 groups of 50 stocks each) based on 2015 stock performance.  So decile 1 contains the 50 S&P 500 stocks that did the best in 2015, decile 2 contains the next best 50, and so on and so forth until you get to decile 10, which contains the 50 stocks in the S&P that did the worst in 2015.  We then find the Q1 2016 return for each stock in each decile, and then we calculate the average Q1 change for all stocks in each decile.  The chart below shows these average Q1 returns for stocks by decile.

As shown, the 50 stocks that did the best in 2015 (decile 1 all the way to the left) gained an average of just 0.30% in Q1 2016.  Decile 2 saw an average gain of just 0.8%, and then deciles 3 and 4 actually averaged declines.  Conversely, the 50 stocks in the S&P that did the worst in 2015 (decile 10 all the way to the right) gained an average of 8.2% in Q1.  That’s by far the best average return of any decile.  In fact, deciles 5 through 10 all saw better-than-average returns.

With 2015’s biggest losers proving to be the biggest winners in Q1, it’s no surprise that so many fund managers and individual investors underperformed the market.

decileq1

In our full decile analysis featured in our Q2 2016 outlook piece, we look at the impact that other stock characteristics like valuations, dividend yields, market cap, short interest, analyst ratings, institutional ownership, and international revenue exposure had on performance in the first quarter.  We present the analysis in an easy-to-read one-page matrix.  To see the analysis, sign up for one of our monthly or annual membership options at this page.

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