With Gun Slinging Dead, Money Managers Fiddle Softly

In our herky-jerky market setting, money managers are mostly sitting put. That’s my reading of their yearend portfolios. The Magnificent 7 keep fading along with most growth stocks. In the few buoyant groups like the financials, money managers kept hands in pockets! Even Amazon disappointed and traded hundreds of million shares, overnight. 

I remember when the Big Board traded 4 million shares daily, in the 1950’s a normal day. I bought a seat on the exchange more so I could dine in their country club setting. It was like experiencing the Gilded Age. 

When the Cuban Missile Crisis arrived, early sixties, my thoughts of a new Gilded Age evaporated. The broad tape ran 5 hours late. I bet against a brewing disaster. Then, I walked home, alone, across the Brooklyn Bridge, my pockets about to bulge. The Russian freighter loaded with missiles heaved too. Those of us who stood alone got rich or richer. 

So far, the 13F quarterly reports from money managers to the SEC don’t show me much. There are no meaningful changes in stock selection or weightings.  No glaring eliminations. Big asset funds stand as overly diversified as usual. There are several where I have trouble recognizing many of their holdings. Still funds whose turnover ratio is above 100 percent. Nobody seems to mind. 

Several trillion dollar funds show alarmingly high turnovers in stocks. Nobody cares that Warren Buffett’s Berkshire Hathaway runs its sizable fund in a low turnover mode. I don’t understand his love for Occidental Petroleum, but then, I sold out American Express while Warren holds on for decades longer. Warren has more money than I, so don’t ignore a buy-and-hold management style. 

Didn’t see any significant changes in portfolio constructs during the fourth quarter.  No glaring eliminations or major positions added. Nobody seems worried about Tesla’s daily jitterbugging. Am I the fuddy-dud? There are funds where I failed to recognize any of their holdings. This from a guy who specialized in below $10 stock plays. Lehman Brothers was my strike-out but I went to the moon with Nextel and Syntex. 

Today, I see trillion-dollar asset based funds that are overly diversified like T. Rowe Price which has been around forever. My portfolio picks today are based on a below average GDP. Interest rates don’t escalate from here. Same goes for inflation. The country coasts along in a 3 to 4% GDP setting. I own gobs of Treasury notes, both 2-year and 10-year maturities. Also, some BB high yield corporates.

The financials get plenty of my money. They are absent from all the fund reports I’ve looked at. I’m heavy in Goldman Sachs, Citigroup and Morgan Stanley with good results. These are still contrapuntal stocks with very light holdings by money managers. 

Yield stocks get sporadic play. MLP’s like Enterprise Products Partners yielding over 6% are passed by. Is speculation dead? Everyone’s portfolio should carry 1 or 2 outrageous specs. 

Think of yourself running a trillion dollar fund like T. Rowe Price which has been around for nearly a century. Do you allow yourself to overdiversify or concentrate on a couple of sectors? Why should an investor care to be in over diversified funds? Actually, this management shows some bravery. 

Microsoft, its largest position at 6.5% was a flattish performer while Apple, also a 6% holding, was a big winner. Eli Lilly was a strike-out. You can like this fund for its full focus on growth.  It's overdiversified but subject to huge market risk when growth is out of favor. 

Consider Renaissance Technologies, a $67 trillion fund that is so diversified an operation that Apple is just a 1% position. There are a bunch of unrecognized names here. Am I outdated? What is Palantir Technology, its largest position at 2.5% of portfolio assets? Never heard of it. T. Rowe Price’s numero uno holding is Microsoft at 6.5% assets followed by Nvidia and Apple. Together over 19% of the asset base. 

Turnover rate looks like 100% at both funds. Tesla just 1.3% at Renaissance. Why not just buy the NASDAQ 100 Fund’s 

top 10 holdings? High turnover of assets like Renaissance turns me off unless I was getting their brokerage  commissions. 

Doesn’t anyone believe in the Heartland? No starched white collar operators held like General Motors, U.S. Steel or General Electric. What about Deere, Caterpillar Tractor and Du Pont?

Great merchants like Costco and Walmart are absent. Everyone thinks airlines are trash along with most energy plays. Net, net, nobody’s over speculating or thinks you can make serious money in a world so tense with geopolitical contention. Yet, now is the time to be probing in sectors considered too iffy for serious capital. 

Occidental Petroleum, which I don’t own, is down 40% from its high. It didn’t stop Buffett from buying more. Anyone underinvested like me should think about being a buyer. Not a time for cream puffs. Meanwhile, too many multibillion dollar funds act like odd-lotters, churning their assets unprofitably.