Small investors are taking advantage of the current market carnage and slump. Which stocks are they buying the most?

Retail is becoming a bigger and bigger part of the market, which is confirmed by the latest report of the analytical company Vanda, which comes with interesting data.

Small market investors have started buying stocks during the recent sell-off, despite the market volatility. According to VandaTrack, they have been buying shares of technology, healthcare and energy companies in particular . Vanda also reports that small investors were active in buying shares of companies that were on the verge of bankruptcy or in bankruptcy, such as GameStop and AMC. Small investor purchases were significant and in some cases even outpaced those of institutional investors.

A complete turnaround

Let's start with what was happening before the banking sector problems in early March - After retail buying activity reached an all-time high in February, net buying activity fell below $1 billion per day in early March. Such a decline weakens an important pillar of support for the stock market, according to Vanda, and it makes the market more susceptible to volatile swings.

As the stock market has adjusted to declining demand from retail investors, institutional players could have a greater influence on stock prices, and not in a good way. Indeed, options flow data suggested that institutional investors were becoming increasingly cautious about stocks ahead of the February employment report and inflation data.

But that was early March and now comes the complete turnaround. Retail is taking the reins.

Despite the buying by small investors, however, some analysts fear that the market may be overheated and that there could be further sell-offs in the future.

That's according to a weekly report released Friday by Vanda Research, which found that retail investors bought up $1.43 billion in underperforming financial and energy stocks as well as some large consumer technology stocks last Wednesday after two weeks of downturn .

Amid concerns about the health of smaller lenders, they bought an "unprecedented amount" of too-big-to-fail banks, bringing the total to nearly $1 billion from retail investors in financial companies in the past five days.

Marco Iachini, senior vice president, Giancomo Pierantoni, head of data, and Lucas Mantle, a data science analyst at Vanda, said Charles Schwab saw the second-largest inflows in the past week after Bank of America.

Some adventurers were buying First Republic Bank $FRC (which I also noticed here on Bulios 😁) then PacWest Bancorp and Truist Financials, which they called "riskier bets that could potentially offer massive upside" if they can keep systemic risk at bay.

Shares rose Thursday after federal authorities joined forces with big banks to inject $30 billion into First Republic Bank and avert a fourth banking collapse following the failures of Silicon Valley Bank, Signature Bank and Silvergate Bank last week . Shares in Credit Suisse, meanwhile, plunged 25% last week and at times rattled global markets amid fears for the survival of the Swiss banking giant itself.

Analysis of Credit Suisse's current situation. Can it survive?

Still, the roller-coaster ride returned on Friday as financials came under pressure and First Republic shares fell again after the bank suspended its dividend and disclosed higher borrowing costs. Some of the big banks that participated in the lender's deposit plan, such as JPMorgan, also fell.

Schwab shares lost 3.9% last week, during which at one point management assured shareholders it remained "well positioned." CEO Walter Bettinger and other executives bought back nearly $7 million worth of stock during last week's market turmoil.

The banking sector is reeling. Despite this, insiders are buying shares of these 3 banks.

Analysts at Vanda said some of this rotation in the stock sector was likely due to profit-taking on the bond exchange-traded fund (ETF) side, with inflows into some of the largest of them down $250 million in the past two weeks. However, it is currently a delicate balance, with these investors likely to continue buying equities only if a "systemic crisis" can be avoided, said analysts at Vanda.

Investors last week pulled $8.8 billion in flows from Schwab's prime money market funds and put them into the broker's government and sovereign wealth funds amid continued jitters. Vanda said the energy sector also saw a surge in inflows after Tuesday's market plunge, although analysts said these are not stocks that tend to attract trader loyalty, and therefore if the surge in buying on the downturn doesn't change that dynamic, more traders could dump these stocks.

What is Vanda Research?

Vanda Research is an American company that provides investment research and advice. The company focuses on securities market research and provides its clients with information and analysis on current trends in the financial markets. Vanda Research is known for its unusual investment strategies that rely on market data analysis and social media. The company came to prominence in 2021 when its strategies became the subject of controversy in connection with the trading of GameStop shares.

Disclaimer: This is in no way an investment recommendation. This is purely my summary and analysis based on data from the internet and other sources. Investing in the financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.