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  • Martin Sosnoff

Honchos Hang Onto Tech, Allergic to Oils, Industrials, Financials

Downdrafts in market sectors typify this chart on Internet performance mid-2000. Note collapses of 50%, 60%, even 75%. Past 12 months repeated such shrinkage in stocks, like Meta-Platforms, Amazon, Alphabet, and Tesla.

Currently money managers, like anxious circus dogs still jump through hoops of fire, fearlessly. Control words that get them jumping are “ good metrics.” Let’s retire this phrase, like Mickey Mantle's uniform and jersey number. We’re seeing bad metrics.

In Appaloosa’s portfolio I found, finally, a money manager besides Buffett, un- afraid to overweight energy. Constellation Energy is at 15% with follow-up holdings in MLP’s like Enterprise Products Partners and Energy Transfer, which I own heavily as well. Surprised to see a 9% position in Macy’s. Good management, touch setting.

I own Macy debentures which nobody cares for. Contrapuntally, 27% of assets cover highflyers like Meta-Platforms, Amazon, Alphabet, and Microsoft. I characterize Appaloosa as a fearless but thoughtful operator that could see its day in the sun. They work with $81.3 billion, I work with less but I’m fearless, too.

Berkshire Hathaway still takes the cake for bravery, undaunted with its 37% position in Apple and oil concentration in Chevron and Occidental Petroleum at 14%. Financials like American Express and Bank of America weigh in at 19% of assets. I regard them as average investments, negative on banks in a weak economic setting.

I look a touch stodgy to Buffett with just 4% in Apple. He’s 39% weighted. Buffett's 18% position in Coca-Cola still looks stodgy to me. His fling is in Apple. Mine is still airlines, but if the economy sinks, I’ll pack it in.

In money management, you are what you do, not what you say. I have 40% of my assets in 2-year Treasuries. So far it’s a losing play within a sharply positive yield curve to 10-year Treasuries. What am I missing? Such wide disparity is a rarity in financial markets.

The static ratio for BRK remains consistently high at 77.6%. Contrastingly, many major portfolios show near total turnover, their static ratio at zero. Only Pershing Square's 83% static ratio is higher on an $8.8 billion asset base. BRK is at $300 billion. Numero uno position at Pershing is Lowe’s. Right now, high mortgage rates are a negative for home building and construction suppliers like Lowe’s and Home Depot

Contrastingly, Soros Fund Management at $5.7 billion shows more diversification. There’s some Alphabet, Amazon, and Salesforce, but number 2 position is in Rivian, the emerging electric car maker with its share of growing pains. Far down from a year ago high, over $90.

I want to like Elliott Investment Management for their energy plays like Marathon Petroleum and Peabody Energy at 22% of portfolio assets. No tech houses here-in or other highl priced paper.

Top 4 stocks by size in Paulson's portfolio comprise nearly 60% of assets. How many of us know what’s what in Brightsphere, Horizon Therapeutics, Bausch Health and NovaGold? Gold stocks, healthcare stocks, but no growth stocks, industrials or financials. This is a resource-based portfolio, counter cyclical and designed to weather a weak economy. In a quickening cycle, they’d be left at the post. Too extreme for me, but a very gutsy platform.

My question is what portfolio and sector changes would Paulson's managers make if the country’s vital signs waxed stronger?

I’m non-plussed by Citadel’s approach to money management. This is an $84 billion fund sporting a zero static ratio or full portfolio turnover latest quarter. There’s a growth construct here with Meta-Platforms, Tesla, and Apple, it’s 3 largest holdings, but just 3% of assets. Is this portfolio management or is it a math-based tech house seeking to clip eighths and quarters in daily trades?

A contrary approach is Coatue Management, a big house with $8.9 billion in assets. Top 10 positions comprise over half its asset base, in tech houses, but number one is Moderna, a 12.8% position. Are they trying too hard to go to the moon? The static ratio rests low at 16.7%. You could substitute a NASDAQ Index fund for comparable results and a much reduced management fee.

The Duquesne Family Office is a horse of a different color. Here you find familiar names like Eli Lilly and Chevron comprising 22% of assets. Finally, some good acting industrials like Deere. Even telecommunications plays like AT&T and T-Mobile. Meta-Platforms is a 5% position. I don’t quite get the portfolio's theme. Is it pure stock picking? Over-all, I’d call it a diversified list not afraid of oils, industrials and drug houses. Minimal tech plays.

Excepting Buffett, I’m not seeing anyone so keen on oils, industrials and financials. Nearly half the market’s weighting. Buffett’s the exception. I don’t get the rationale of huge funds with high turnover and positions of one percent. Boeing, a major holding for me, here is just 0.42%. Same for Salesforce and Meta-Platforms.

Finally, I see Microsoft, a good acting stock of late, pops up in Lone Pine Capital's asset base. The fund’s static ratio is low, which suggests restiveness. Biggest position is Bath and Body Works, 8.3% of assets. Portfolio construct is mainly in stocks I’ve barely heard of like Workday,Transdigm Group and RH.

Carl Icahn’s portfolio stays solid and understandable money management. It’s concentrated in an oil theme, a major weighting in Exxon Mobil and in Occidental Petroleum and Enterprise Products Partners. This is a good acting group with plenty of cash flow for dividend payouts way above the current base.

T Rowe Price Associates has been around nearly forever, now over $620 billion. This is traditionally a growth house. Only when you get down to 1% positions do the names escape me. Microsoft and Apple comprise 4% of assets, I am much higher. Amazon and UnitedHealth comprise 6%, but too pricey for me. Conspicuously absent are bank stocks, industrials, even oil plays. An alternate to T Rowe Price is the NASDAQ Index

Third Point is refreshingly different with half the portfolio in Colgate, Daneker, and Bath and Body Works, all counter-cyclical. Hardly anyone else uses such a mild construct. Microsoft comprises 5% but no other tech plays. Turnover is refreshingly low.

Let’s contrast Third Point with Renaissance Technologies, a $73 billion asset house with total portfolio turnover in the 4th quarter. Are these a bunch of mathematicians who trade minute to minute looking for slight price anomalies? Apple is a 1.2% position but there’s no portfolio theme. Room for all kinds in the financial world. Renaissance runs a ton of money with value added, but can they hold their edge over the years?

To sum up, my hero is still Warren Buffett, who makes money the old fashioned way, employing solid security analysis with Street smarts and iron pants these past 60 years. Nobody holds a monopoly on brains and execution. We’re all prisoners during market upheavals . Fail to react when markets are overvalued on historical comparisons, you’ll drop serious money.

Great money managers think big, stand alone, and fearlessly implement their picks. Go see The Wizard of Oz.

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