A Stock Picker’s Market

Some interesting numbers from Bloomberg:

An index maintained by Goldman Sachs Group Inc. of the 50 stocks in which mutual fund managers are the least invested has gained 5.3 percent this year, compared with a 3.1 percent decline in a gauge tracking the most popular ones. That’s near the biggest gap in three years, according to data compiled by Bloomberg.

Research from Bank of America Corp. research shows a starker picture: in the first quarter, just 19 percent of mutual funds beat the S&P 500, the fewest since at least 1998, strategists at the bank wrote in a note Monday. That happened even as one measure of variation among stock returns has increased this year.

A mathematical indicator known as dispersion, which measures how far individual equities swing relative to the market, has ticked up. According to data compiled by Bloomberg, the typical year-to-date stock return in the S&P 500 is 12 percentage points above or below the average, the most since 2012. In March, a measure of implied correlation among stocks plunged to the lowest level in a year.

Still, active managers are coming up short as their favorite trades lag behind. One strategy, chasing gains in the market’s biggest winners, backfired on mutual fund and hedge fund managers alike as the stocks in the S&P 500 that did the worst in 2015 added 8.2 percent in the first quarter of 2016, according to Bespoke Investment Group LLC.

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Managers erred in avoiding utility and consumer staples companies, according to Goldman’s index data, which pulls from 489 mutual funds with $1.6 trillion under management. There wasn’t a single utility among managers’ top 50 overweight positions in the first quarter, when the group posted the quarter’s second-best return. At the same time, financials were the second-most represented industry. That group is down 5.3 percent in 2016, the worst return in the S&P 500.

The three most-favored stocks by managers invested in big companies were Alphabet Inc., Visa Inc. and JPMorgan Chase & Co, all of which have trailed the S&P 500.

Posted by on April 5th, 2016 at 10:20 am


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