What Big Money’s Unusual Inflows Tell Us About Where to Invest

The silence is deafening.

That expression can’t be literally true. It’s an oxymoron.

A deafening silence says more about what’s not happening than about what is.

I spend my professional life analyzing stock data, and what I’m seeing now can be summed up in a similar oxymoron…

The data says more about what it doesn’t say.

And I’m going to explain why that’s great for investors.

What the Big Money Is Buying

Most people don’t have the tools or the experience to spot Big Money flows. But for those of us who do, it’s clear that now may be the best time to buy before prices run higher.

The data tells us that the Big Money – and its massive impact on stocks – is definitely not investing as it would if fund managers were scared to death.

In fact, it’s practically 180 degrees the other direction.

I should say …  as prices continue running higher.

The S&P 500 gained more than 6% just in January.

The Nasdaq Composite surged nearly 11%, its best January in 22 years.

That doesn’t happen by accident. And it doesn’t happen because you and I are buying stocks.

It happens because Big Money is buying stocks.

Institutional money and hedge funds comprise between 70% and 90% of trading volume each day, and we cannot overstate the importance of these open money spigots.

Just as important is what Big Money is buying. And this is where it gets fascinating.

One thing that sets my Quantum Edge system apart is that I’ve programmed it to see where this money is going – from the market overall down to the sector – and even down to the individual stock. I spent years as the middleman on these massive trades, and I learned firsthand how to spot them.

If Big Money expected a recession, we would see heavy buying in “safer” investments like dividend stocks and mega-cap stocks.

Instead, I see unusually heavy buying in small- and mid-cap stocks. The very opposite of safe.

This chart, taken directly from my Quantum Edge software, shows the unusually big buys and sells in January. The Total column at the far right shows that there were 4.5 times as many big buys (blue bar) as sells (red bar).

Now, shift your view to the left side of the chart and notice the two big blue bars that clearly show buying overwhelmingly concentrated in small and middle-sized companies. 85% of big buys were in stocks valued under $50 billion.

Drill down a step further and we see more evidence that managers of Big Money do not think a recession is imminent. The sectors with the most buying are not where they would put money to work if they wanted to hunker down.

The sectors with the most big buys in January were Discretionary (15.9%) and Technology (15.2%) – about the last place you would invest for a recession.

I’ll give you a further peek into my system and tell you one particular stock that really stood out to me. Big Money was buying a company that makes jackets that cost more than $1,000. A quick perusal of the Canada Goose (GOOS) website shows a parka for a hefty $1,850.

Most people wouldn’t buy a nearly $2,000 jacket anyway, but especially during a recession. Does Big Money investing in GOOS sound like fund managers anticipate a recession?

If you don’t believe me – and I wouldn’t blame you if you’re skeptical – just look at GOOS and its 50% surge over the last three months. Somebody is buying GOOS, and our Quantum Edge system reveals that Big Money is leading the charge.

As the headline writers and talking heads on TV keep talking about a recession, Big Money is looking ahead and investing in growth.

I’ve been encouraging my Quantum Edge Pro readers to do the same since last fall. I felt a little lonely at times saying that the market was about to get stronger and that it was time to invest in great companies with strong price action and unusually heavy Big Money buying.

We’re seeing the fruits of that now. In just the last week, we booked partial profits of 33% in a financial company and 41% in an industrial company. A technology company may be next after it popped following earnings.

You can continue to watch the Fed, inflation, interest rates, bond yields, economic data, and a slew of other metrics that the media focuses on. But in the end, stocks move higher when Big Money buys them.

Too many investors either don’t know about or ignore this critical factor. The silence is deafening.

Focus on what Big Money is doing as part of your investing strategy. It will give you a powerful advantage over most other investors – an advantage that is loud and clear.


Editor, Jason Bodner’s Power Trends