Reuters Survey: Investors Expect a Big Stock Market Rally in 2012

(Written by Alexander Crawford, list compiled by Eben Esterhuizen, CFA. Short data sourced from Yahoo! Finance.)

It seems that fears of a double-dip recession and a potentially contagious crisis in the Eurozone have yet to tarnish the perennial bullishness of analysts, who largely expect 2012 to see “big gains” in world stocks, according to a recent survey by Reuters. This follows a loss of around $3.7 trillion in world stock markets for 2011 to date.

Also from the poll: the Dow Jones Industrial Average and South Korea’s KOSPI are the only two indexes expected to finish 2011 in the green. And by midway through 2012, analysts only expect 7 of 18 major stock indexes to top their 2010 closing levels.

Given the recent bearishness and uncertainty saturating the market, the poll’s optimism may seem odd, but there are a few explanations.

Many investors believe stocks are undervalued now relative to historical averages. Investors are also holding a lot of cash today, which can support a stock rally if investors felt a renewed desire for risky assets.

Still, investors should remember that significant uncertainties are weighing down markets today.

To help you explore rebound ideas, we analysed the 200 worst performing S&P500 stocks over the last year.

But which of these S&P500 losers are expected to see the biggest rebounds over the coming months?

That’s a tough question to answer, but for clues we collected short interest data and identified a list of S&P500 losers that have seen a significant decrease in shares shorted over the last month.

Short sellers seem to think there’s more upside than downside to these names—is this a bullish signal for 2012?

Use this list as a starting point for your own analysis.

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1. Alpha Natural Resources, Inc. (ANR): Engages in the production, processing, and sale of coal in the United States. Over the last year the stock has lost 54.53%. Shares shorted have decreased from 12.98M to 9.93M over the last month, a decrease which represents about 1.36% of the company’s float of 225.08M shares.

2. PulteGroup, Inc. (PHM): Engages in homebuilding and financial services businesses primarily in the United States. Over the last year the stock has lost 52.74%. Shares shorted have decreased from 37.31M to 32.87M over the last month, a decrease which represents about 1.32% of the company’s float of 336.11M shares.

3. Monster Worldwide, Inc. (MWW): Provides online employment solutions worldwide. Over the last year the stock has lost 40.05%. Shares shorted have decreased from 14.01M to 12.47M over the last month, a decrease which represents about 1.29% of the company’s float of 119.35M shares.

4. SUPERVALU Inc. (SVU): Operates retail food stores in the United States. Over the last year the stock has lost 37.13%. Shares shorted have decreased from 53.12M to 49.52M over the last month, a decrease which represents about 1.71% of the company’s float of 210.26M shares.

5. Hospira Inc. (HSP): Develops, manufactures, and markets pharmaceuticals and medication delivery systems in the United States and internationally. Over the last year the stock has lost 33.92%. Shares shorted have decreased from 7.47M to 4.03M over the last month, a decrease which represents about 2.09% of the company’s float of 164.22M shares.

6. Vulcan Materials Company (VMC): Engages in the production and sale of construction aggregates for the infrastructure industry primarily in the United States. Over the last year the stock has lost 19.45%. Shares shorted have decreased from 25.76M to 24.45M over the last month, a decrease which represents about 1.02% of the company’s float of 128.63M shares.

7. Charles Schwab Corp. (SCHW): Provides securities brokerage, banking, and related financial services to individuals and institutional clients. Over the last year the stock has lost 15.05%. Shares shorted have decreased from 42.31M to 30.31M over the last month, a decrease which represents about 1.23% of the company’s float of 977.41M shares.

8. R.R. Donnelley & Sons Company (RRD): Provides pre-media, printing, logistics, and business process outsourcing products and services to private and public sectors worldwide. Over the last year the stock has lost 8.61%. Shares shorted have decreased from 22.55M to 18.94M over the last month, a decrease which represents about 1.94% of the company’s float of 186.42M shares.

Interactive Chart: Press Play to see how analyst ratings have changed for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


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