DID FIDELITY SPARK THE OIL SERVICES SELLOFF?
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FIDELITY WATCHER David O'Leary has another possible cause for the recent steep decline in energy services: the fund giant is selling them, he says.
Before Fidelity started selling, Fidelity owned as much as "14% of the float" of many of these companies, says O'Leary, who blames much of the decline on Fidelity.
O'Leary says Fidelity started to sell the stocks for three reasons: the firm was overweighted in the sector, Fidelity analysts had come to believe that earnings growth had peaked, and because everyone else who owned the stocks was positive on them.
Fidelity's energy services weighting was about triple that of the S&P's, and O'Leary thinks they will end up cutting back two-thirds from their original position to get in line with the market.
"When Fidelity starts selling, it usually takes three months," O'Leary says. "They go to one end of the market...wait for Wall Street to start recommending the stocks, pounding the table...then move back in the other direction."
O'Leary's Alpha Equity Research, which alerts other investors to Fidelity's moves, reports that as of Friday Fidelity owned this much of the float of the following companies: 13% of McDermott International (MDR), 11% of Atwood Oceanics (ATW), 10% of Dresser Industries (DI), and 10% of Western Atlas (WAI).
Fidelity declined comment.
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