(long)Interesting article in today's NY Times investing column
("Why the Sidelines Are Looking Good to Managers") about how "Some of the most successful value stock fund managers" have moved a large portion of their assets to cash.
Robert Rodriquez: 39% cash
Mason Hawkins: 29% cash
James Gipson: 27.5% cash
Wallace Weitz: 30%
a couple others: 20%, 15%
(aside: Warren Buffett's cash hoard wasn't mentioned)
I looked cursorily at the funds of these four managers. (aside: These guys apparently manage several funds each: I only looked at the one's the article's author, Carla Fried, mentioned.)
There were only four stocks that were duplicated among each manager's top 25 holdings. Longleaf and Weitz both own Telephone and Data Systems, and Weitz and Clipper both have Freddie Mac and Fannie Mae. Weitz and Hawkins have Hilton Hotels.
We here and others have talked about style investing - (the importance of having a style(!)) - Many studies or many pundits believe that being consistent within one's style generally has produced better returns over the longer period than changing investment styles to try to capture what's in while avoiding what's out. So I will concede that the four people above have a defined style and they're apparently sticking to it. One could assume no or little overlap among styles, and therefore, little or no overlap among stocks they selected as values.
Still, it seems odd to me. Perhaps these guys are just making a bet that the market's going down, there'll be better bargains ahead, therefore hold cash.
OTOH, within each of their portfolios there are stocks that are near annual lows. I would guess that even for fund managers that might be constrained by their bylaws (e.g. if one of these guys must have only large caps), among the roughly 73 other issues that each manager might see if he looked at the other three guys' holdings, he might find SOMETHING that would pique his interest and would be trading near its lows or away from its highs - and maybe low enough to buy now.
For example, Longleaf has AON and a Japanese traded insurance company. So they're at least willing to consider the insurance biz. How about they look at Marsh & McLennan, a Clipper holding, near its lows of the past few years? As a small buy perhaps, a commitment of cash anyway. Rodriguez has made a bet on three oil drillers/suppliers. Gibson a commitment to three large pharma's (PFE, WYE, and apparently JNJ most recently). Neither of these areas appeal to the other guys though.
I am concerned that the market might decline further, so I understand the need for cash. But with all the investing resources these fund managers have, it seems to me their circle of competence would encompass at least a couple more stocks the others have.
In any case, several stocks of these top value players are available to others at near annual lows now. Some, if not most, have been mentioned here before. On a continuum, they can't all be in that "hold" space for these managers; some of the stocks ought to have slipped back to "buy" for them and for us.
finance.yahoo.com
In any case, I already have at least a couple of the stocks held by each manager, and I'm willing to consider adding to positions as well as starting new positions in others that they have: I've been looking at PTEN, and I might re-look at MMC.
Just my observations and opinions.
Paul Senior |
