Leading authority on institutional money flow speaks, (but caveat is the interview was on CNBC.)
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This is an edited transcript of Charles Biderman's appearance on CNBC on Wednesday 19th at 11:45 AM PDT.
Maria Bartiromo: Despite the economic repercussions of Tuesday's tragedy our next guest believes there are several signs that indicate a bullish market is just around the corner. Joining us now is Charles Biderman, chief executive officer of TrimTabs.Com. Live from Corte Madera, California. Nice to see you again.
CB: Same here.
Maria: There’s so much uncertainty out there, why are you turning bullish now?
CB: The best leading indicator of what the market going to do has always been the action of the corporate investors. And what I mean is if companies are shrinking the total number of the shares out because they are buying back their shares or they are buying other companies for cash; that's always been an early warning indication that the market is going to go up soon.
Since the end of 1999, November to be specific, through August of this year the trading float of shares on the market has been increasing. Which means that companies have been net sellers.
Maria: You have said that there has been over 24 billion dollars in company stock buy backs in the last week, correct?
CB: Yes, and another two billion yesterday, so $26 billion since last Tuesday. There also was a $4.6 billion cash take over of American Water Works. The bottom line, companies are buying their shares back. On the other hand we had some significant outflows yesterday.
We just got yesterdays equity fund flow data and our estimate is that equity funds had an outflow of $6. 2 billion Tuesday. While that's a lot it is not
anywhere near a record and does not indicate the public is walking away from the equity markets.
Maria: Is there a chance that given the fact that there's so much uncertainty in the world right now on the political front that if this war worsens over near term don't you think that will take precedence over these other signals?
CB: Well it depends upon corporate America. Will corporate America keep on buying back their own shares if the market continues to sell off? If they do then eventually the selling will stop and market will turn. If they don't keep buying then the market will weaken further.
Right now corporate America is saying that United States is not going out of business. And they are willing to buy back their own shares at reasonable prices. If they do decide to stop buying then I would start to worry.
Maria: Would you recommend investors then buy shares in those companies that have announced buybacks?
CB: I would recommend people buying stock in those companies that are growing free cash flow and that have strong balance sheets. I would not recommend buying companies that have been beaten down significantly, because there's going to be year end selling by mutual funds whose fiscal year ends in October.
Historically, at year end losers get dumped. So actually over the next month I would recommend investors scale in. I would not invest everything right now. Rather I would dollar cost average, buying maybe a 1/6 of the total position every couple of weeks going forward over the next three months.
Maria: Interesting. Certainly the value indicators have become more attractive this week.
CB: Well, the question is if the United States is not going out of business? And I say that the US is not going out of business.
Maria: All right. Charles we will leave it there. Good to have you. Very valuable insights. Our thanks to Charles Biderman, chief executive officer of TrimTabs.com joining us from Santa Rosa, California. |
