The folks who run America’s biggest equity mutual funds are very smart (most of the time) and very well informed. They get the “first call” from Wall Street analysts, and speak to top corporate executives regularly. For example, no corporate management does a road show in Boston without stopping at Fidelity’s offices to tell their story. So we scanned the Websites of Fidelity, Vanguard and T. Rowe Price to find out what 16 of their actively managed domestic equity mutual funds owned. They are all large, large-cap, growth oriented funds. Only the top 10 stock holdings of each fund are disclosed, and not necessarily in order of their importance. So we can learn how many funds, for example, have ExxonMobil among their top 10 holdings. This is a decent indicator of stocks’ popularity with big, growth-oriented mutual funds.
Whether it is “bullish” or “bearish” for a stock to be heavily owned by these funds is a matter of debate. The bull case is that smart, well-informed portfolio managers like them now. The bear case is that they “already own” them, and their next likely move will be to sell them—but maybe not for a long time.
The two most popular stocks are AAPL with 12 places (no surprise) and GOOG with 9 (a bit of a surprise, because management is rather unpopular with investors, and allegedly unfocused).
QCOM is fairly popular with 4 places; it is the best semiconductor play on smartphones and far more popular than INTC (0 places), which so far has missed the mobile boat.
EBAY is also fairly popular with 4 places; PCLN has just 1.
Interestingly, MSFT is still fairly popular with 4 places—versus just 1 for IBM. To hear some of the TV pundits talk, one would think MSFT is just a step behind RIMM on the road to oblivion. But the Big Money is betting that, despite the alleged demise of the PC, MSFT’s very strong franchise in global corporations (not just PC operating systems and applications, but also servers) will continue to generate strong cash flow. Balmer’s company always seems to be a day late and a gigabyte short, but in fact it has done well in game consoles, and the Surface has received some good reviews.
XOM is by far the most popular energy stock (8 places), which is surprising because its reserve growth is weak, and it overpaid for natural gas play XTO.
The most popular retailers are HD (4 places), WMT (4) and – far more interestingly — TJX (3).
For contrarians, the most salient fact is that most large industrials and materials such as CAT, DE, UTX, DD, and DOW are not represented. The exceptions are GE (4 places), DHR (2 places) and BA (1).
The most popular healthcare names are JNJ and PFE, both with 4 places.
The Big Money likes the global credit card networks, MA (3 places) and V (4 places). Evidently PM’s are not worried about disintermediation from new technology.
In finance the Big Money is betting on two names that have become “consensus longs” — USB (4 places) and WFC (5). These “high quality” companies came out of the crisis relatively unscathed but, in the case of WFC, much bigger. Compared to Wall Street firms they have limited regulatory risk, and some major competitors (such as C, BAC, and European banks) are pulling back from key markets. Incredibly, BAC bought Countrywide to become a giant in mortgages but now is a bit player; meanwhile, WFC has grabbed a 33% share. JPM has just 2 places on the Big Money list.
Copyright Thomas Doerflinger 2012. All Rights Reserved.
