Out Fox The $treet

As volatility picks up and funds start flowing into equities, several financials are becoming more interesting as investment options. During 2013, money has started flowing into equity funds after years of massive outflows into fixed income funds. Some interesting stocks to follow are Interactive Brokers (NASDAQ: IBKR ) , Janus Capital Group (NYSE: JNS ) , and Virtus Investment Partners (NASDAQ: VRTS ) . After a record $38 billion flowed into equity mutual funds in January more » Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

As the financial markets rebound, asset manager Legg Mason (NYSE: LM ) would appear a strong candidate for a rebounding stock. As investors shift more funds into equity funds that collect higher fees, the general asset management category should see fee growth. The company widely benefited from the equity market rally of the 1990s as the lead mutual fund saw huge inflows from beating the market for 15 consecutive years from more » Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

For the week ending 2/15/12, the flows into long-term equity funds were $11.9B according to the Investment Company Institute. The kicker though is that the majority of the funds still went into bonds with only $35M flowing into domestic equities. Along with straight bond funds that have been averaging over $7B in the last month, hybrid funds are hot. Hybrids invest in both bond and equity funds suggesting that investors still favor a high mix of bonds. Over the last 5 weeks, equity funds have had positive flows for 3 of the weeks. Still the flow percentage for equity funds remains around 10%. Suggesting that even one of the strongest rallies ever to start a year isn't enough to draw investors back into the market. These number put into question the investment sentiment numbers. How can investors be wildly bullish on equities if the fund flows are so benign. If anything, the suggestion is that bond investors remain overly bullish. The correction should be in bonds.  See belo...

After pulling $34B from US stock funds during the first two weeks of August, the hit parade continued last week with another $3.2B pulled . Not to mention another $610M removed from foreign equity funds for the week ending Aug 24. Note how the SP500 bottomed right in the middle of the frantic selling by retail investors. Now as the market pushes higher throughout August retail investors are still skittish. They are always a great contraian indicator. Disclosure: No positions mentioned. Please review the disclaimer page:

Whew! That is a complex header. According to InvestmentNews   investors fled actively managed US equity funds at the same level as the March 2009 generational low. Naturally the market has doubled since then so the percentage of the total market isn't comparable, but it does highlight the fear factor in the market. In a way, this backs up the market selling cyclicals very hard and consumer staples rallying. What was really staggering is that Fairholme Fund (FAIRX) had outflows of $1B. After being the manager of the decade, investors were very quick to flee Bruce Berkowitz in June. What a tough industry! Maybe I should reconsider. Via InvestmentNews: U.S. investors pulled $19 billion more out of actively managed U.S. stock funds in June than they put in, while U.S. index stock funds saw $1.1 billion in net inflows.   March 2009 -  investors pulled $18.3 billion out of actively managed U.S. stock funds than they put in, and passively managed equity funds saw $2...

Typical herd mentality for investors to be piling into bond funds at record low interest rates. They did it in 2000 with tech stocks. They did it in 2006-07 with real estate on the coasts and now bonds. ICI reported that total equity funds had a $1.4B outflow last week and over $12B for the last five weeks. The positive news is that bond funds had a lot more money flow into them leaving the weekly net increase of nearly $6B. When the market turns it could be sudden and dramatic. Until then though, it'll be difficult to gain much ground with dry powder held by institutions such as mutual funds continually sucked out. 7/14/2010 7/21/2010 7/28/2010 8/4/2010 8/11/2010 Total Equity -3,192 -1,157 -4,074 -2,201 -1,427 Domestic -3,235 -1,402 -4,296 -2,122 -2,073 Foreign 43 246 222 -79 646 Hybrid 430 370 69 233 213 Total Bond 6,138 7,931 7,099 7,551 7,169 Taxable 5,200 6,944 6,112 6,350 5,788 Municipal 937 987 987 1...

According to this report from Morningstar , investors continue to pour money into fixed income funds and out of equities. Amazingly though more money has come into the market this year then was pulled out in 2008, but just about all of the gains went directly into bonds. Anybody think the retail investor is right this time? With the economy starting to recover and interest rates at record lows, it seems like an odd time to be invested in bonds. Do people realize that bond funds lose money as interest rates rise? Bonds are the worst investment in rising rate environments. Wanna bet that the media convinced everybody that the market had come too far, too fast going into September/October. That bonds offer safety in a volatile environment. That bonds did better during the crash. Poor sheep listened again. Also, most people don't understand the difference between a bond and a bond fund. A bond in theory doesn't lose value as long as your willing to hold till maturity. You collect ...