Corbin Releases 3Q15 Edition of Inside The Buy-side®

July 8, 2015
Corbin Advisors Research Sees Investor Sentiment Neutral to More Positive on Corporate Fundamentals despite High Equity Valuations
  • 70% of surveyed investors expect second quarter results to be in line or better than expectations, up from just 55% in the prior quarter 
  • Channel checks on key performance metrics reveal increased investor confidence in improving organic sales, EPS and free cash flow growth 
  • Management tone is largely described as cautiously optimistic, while those reporting a more negative outlook declined by more than half 
  • 60% assert current market valuations are sustainable with a significant upsurge in investors pointing to corporate profits as the main driver of the U.S. equity markets 
  • Regional investor sentiment disparity is pronounced; at the ends of the spectrum, European investors are most bullish while those based in Asia Pacific and Latin America are decidedly downbeat

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HARTFORD, Conn. - (BUSINESS WIRE) - July 8, 2015 - Corbin Advisors, a leading investor research and investor relations (IR) advisory firm,  released today its quarterly research report Inside The Buy-side®, which captures changes and trends in institutional investor sentiment heading into the earnings season.  The survey, based on responses from 78 institutional investors whose firms manage over $4.4 trillion in total assets, remained open from June 9 - 26, 2015. 

Despite a volatile quarter, equities finished relatively flat while investor sentiment shifted to a modestly more positive stance.  Over half of the study group, or 52%, maintain they are cautiously optimistic or bullish pointing to confidence in second quarter organic sales, EPS and free cash flow growth improvement.  John Lee, Portfolio Manager at PGB Trust & Investments notes, “Earnings should come in better than expected.  The U.S. consumer is out of hibernation due to another nationwide horrible winter, jobs are solid, housing is improving, inflation remains low and confidence is up.” 

“After two consecutive quarters of increasingly bearish sentiment, our most recent investor pulse reflects an uptick in optimism despite the market gyrations of the last week and a half,” commented Rebecca Corbin, Founder and CEO of Corbin Advisors.  “While there will be some negative second quarter surprises, our data implies market valuations could go higher on stronger-than-expected corporate results.  The divergence in global sentiment is noteworthy, as the crisis in Greece has done little to thwart European optimism in general; meanwhile Asian investors are increasingly wary of China and are evocatively more bearish,” continued Corbin.  

While management tone is largely categorized as cautiously optimistic, the number of respondents indicating executive tone is more negative declined after having risen the prior three quarters while those reporting tone is more bullish rose albeit modestly. 

Continuing, corporate profits are now viewed as the main driver of the U.S. bull market, followed closely by Fed policy decisions.  “U.S. stocks are one of the best options for investment; they should continue to see inflows due to a lack of good alternatives,” notes Susan Schmidt, Portfolio Manager at Mesirow Financial. 

Of note, while a majority believe the Fed rate hike will occur in the second half of 2015, 35% of those surveyed now predict the initial increase will come sometime next year. 

“While expectations were materially lowered in the first half, investors remain decidedly split on whether 2015 guidance has been appropriately reset as some companies inevitably wait until the third quarter to make revisions.  Regardless, participants suggest this trend is largely priced into the market; therefore, organic growth and quality of earnings will be rewarded as investors put a premium on companies that can differentiate on fundamentals and execution,” concluded Corbin. 

Finally, for the fifth quarter in a row, participants rank reinvestment as their preferred use for deploying excess free cash, underscoring the importance of organic growth, followed by dividend growth and M&A.  

Since 2006, Corbin Advisors has tracked investor sentiment on a quarterly basis.  Inside The Buy-side® and other research on real-time investor sentiment, IR best practices and case studies are available at CorbinAdvisors.com