Welcome to Episode #71 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
In this episode, Tracey is joined by Kevin Cook, Zacks Senior Stock Strategist and the Editor of the TAZR trading service, to talk about how the big money managers were positioning their portfolios in the fourth quarter of 2016 for the 2017 trade and beyond.
Forty-five days after the end of the quarter, the big money managers have to file Form 13F with the SEC which details what they bought and sold from their portfolios.
A couple of times a year, Tracey and Kevin check in on the filings to see what their favorite investment managers are doing and to see if they can figure out clues to their outlook.
Interested in the Banks?
There are several money managers who only buy bank stocks. They are experts in this area, having been investing in bank stocks for decades.
One of those that Tracey likes to watch is Joseph Stilwell at Stilwell Value.
In the fourth quarter, he added several new community bank positions including Ottawa Bancorp OTTW, PB Bancorp PBBI, and Bancorp 34, Inc. BCTF. These are all banks with market caps under $100 million.
He sold all of Puerto Rican bank First Bancorp FBP but added to his other Puerto Rico holding, OFG Bancorp OFG.
OFG Bancorp is now about 11.6% of his portfolio.
Should you be buying too? Tracey and Kevin talk about the dangers of the Puerto Rican banks, and small banks, in particular.
Banks were a top sector in 2016 and continue to be on the radar in 2017. This is an area investors should be watching.
Should You Consider Healthcare Stocks?
Several big-name investors, including David Tepper, of Appaloosa Management, and David Einhorn, of Greenlight Capital, bought healthcare stocks in the fourth quarter of 2016, specifically the drug companies.
Tepper bought a new position in Pfizer PFE and added to positions in Mylan (MYL) and Allergan (AGN).
Allergan, in particular, has been beaten down in late 2016. As of the end of December 2016, it was 16% of his portfolio.
Einhorn also bought into Mylan (MYL).
What do they know that the rest of the market doesn’t regarding the drug company stocks?
Is Big Money Fleeing Retail?
The retailers are one of the most despised industries right now, especially in the department store arena.
But there were more new positions opened in Macy’s (M) in the fourth quarter than were closed out.
Additionally, big money managers weren’t exactly fleeing PVH (PVH) and G-III Apparel (GIII) either with slightly more adding it as a new position than those who closed out their entire positions. Both have been trading at new 52-week lows.
Are There Still Opportunities in Energy?
Energy rallied big in 2016 but then petered out towards the end of the year and started 2017 weak.
Apparently, some big money investors saw an opportunity.
George Soros added to his position in California Resources Corporation CRC. At the end of the fourth quarter, he had a $42.5 million position, which was about 1% of his total portfolio, up from 0.4%.
He also bought a new position in Key Energy Services (KEG), an on-shore rig-based well servicing contractor. This is an interesting pick because they will do well as more rigs are brought back online. He sank $59 million into this position. The company has a market cap of just $675 million.
What About the Restaurant Stocks?
Some of the restaurants are down on their luck but the big money investors are finding deals among those names.
Bill Ackman of Pershing Square now famously owns a 10% stake in Chipotle CMG.
And some money managers are wading into even the “hot” restaurant names. Domino’s DPZ has been hitting new highs for the last few months and now trades at a sky-high valuation of 36x forward earnings. But that didn’t stop several managers from buying shares in the fourth quarter.
Is this an area investors should be looking in for bargains?
What else should you know about the big money buys of Q4 and how that impacts the market today?
Should you be jumping into some of these names now, or is it too late?
Find out the answers to this and more on this week’s podcast.
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