Active managers’ holdings update

Active managers’ holdings update
What are your neighbors
doing?
􀂄 Managers remain overweight select cyclicals
Discretionary remains the most overweight sector vs the S&P 500 index, as large cap
managers’ overall relative sector exposure heavily favors cyclical sectors over
defensives - among other o/w sectors are Industrials, Health Care, Tech and Materials.
Energy - the contrarian call of 2013
Similar to how Financials began 2012, Energy maintains the lowest exposure of
0.8, the biggest underweight in the history of our data. Tech, another globally
exposed, GDP sensitive sector, similarly sports the lowest relative weight,
although the sector remains a consensus overweight among money managers.
New Darling: Health Care overweight by 70% of managers
Health Care saw the largest increase in the percentage of funds that are
overweight the sector vs. the S&P 500, from 55% in 3Q to 70% now, dethroning
Tech which is currently o/w by 69% of managers. Pharmaceuticals industry is
underweight within Health Care. In general, active managers have been moving
closer to the benchmark, perhaps influenced by the outperformance of the funds
with lower active stances in the last two years (see 17 July 2012 Active managers’
holdings update, 8 January 2013 Why they did what they did.)
Growth remains in focus
In general, investors appear to be willing to pay up for strong growth. Fund
managers continue to be overweight stocks with the highest long-term growth rates
(Chart 4 inside). Valuation also still appears to be less of a focus, as fund managers’
holdings are generally more expensive than their respective benchmarks on both
earnings and book value (Charts 10 and 11 inside). Managers are still underweight
foreign exposure, which was the worst performing strategy last year.
Red flag screen: stocks with concentrated ownership
Stocks with concentrated ownership may be a potential red flag, signaling a
greater risk of a sell-off (see Table 3 inside).