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

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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 analyzed the 200 worst performing S&P500 stocks over the last year.

But which of these S&P 500 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. (Click here to access free, interactive tools to analyze these ideas.) 

List compiled by Eben Esterhuizen, CFA:

1. Alpha Natural Resources (NYS: 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 (NYS: 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 (NYS: 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 (NYS: 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 (NYS: 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 (NYS: 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 (NAS: 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 (NYS: 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 compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Kapitall's Eben Esterhuizen and Alexander Crawford do not own any of the shares mentioned above. Short data sourced from Yahoo! Finance.

At the time this article was published The Motley Fool owns shares of SUPERVALU. Motley Fool newsletter services have recommended buying shares of Charles Schwab and Vulcan Materials. Motley Fool newsletter services have recommended buying calls in SUPERVALU. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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