Big problem for fund managers: liking Apple too much
by admin | Posted on Monday, March 16th, 2015
Apple CEO Tim Cook speaks during an Apple event in San Francisco, California March 9, 2015. CREDIT: REUTERS/ROBERT GALBRAITH
(Reuters) – At more than 15 percent of his fund’s assets, John Burnham, manager of the $136 million Burnham Fund, has a larger stake in Apple Inc than any other diversified fund.
“I think they are doing everything right and it’s still a cheap stock based on earnings and revenue,” he says.
Yet that devotion for Apple is a problem for Burnham and some other managers of so-called diversified funds like his – they want more Apple than they can buy under self-imposed risk-reducing guidelines that typically have them holding no more than 5 percent of their assets in any one company.
Burnham and the 174 fund managers like him who hold large stakes of their diversified portfolios in Apple are pulled in two directions: hoping to prevent an unforeseen drop in Apple shares from upending their portfolios, while also benefiting from a company whose shares are up 12 percent this year so far.
“Your positioning in Apple may hold a big sway in how your fund does overall, particularly in categories like large blend where every basis point counts,” said Laura Lutton, who oversees equity fund research at fund tracker Morningstar.
In 2014, for instance, funds that underweighed Apple compared to broad market indexes were the most likely to underperform their peers, she said.
Holding a concentrated position in one company is one way for stockpickers to stand out as investors move money to passive index funds. Yet it is unusual for diversified funds like Burnham’s to hold more than 10 percent of their portfolios in one company, said Todd Rosenbluth, director of mutual fund research at S&P Capital IQ.
“Investors may not realize that their fund manager is taking on a higher amount of risk,” he said.
Most fund managers are inclined to take profits when a stock hits 7 percent of a portfolio, yet there are few set mandates set down by fund firms, Rosenbluth said. He said that he can’t think of any fund families that have to sell if holdings exceed guidelines as a result of appreciation.
Diversified mutual funds are allowed by law to add shares of a company as long as its total weight is below 24.9 percent of their portfolios overall, but do not have to sell shares if they appreciate above that level, said Jay Baris, an attorney at Morrison & Foerster in New York.
Burham didn’t set out to have such a big stake in Apple, he said. He began buying shares in 2005 when they traded at a split-adjusted level of less than $7 each. Those shares have now appreciated over 2,000 percent.
“It’s the world’s greatest company. I just don’t see any reason to sell it,” Burnham said, adding that he thinks that the stock should trade above $200 a share. Shares of the company closed at $123.59 on Friday.
His big weighting in the company is also helping his performance, which may in turn bring in more investor dollars. Burnham’s fund, which also has significant positions in Chipotle Mexican Grill and Williams Companies Inc, is up 4.8 percent for the year to date, according to Lipper, a return about 4 percentage points better than the S&P 500.
Over the last 5 years, the fund has returned an average of 14.3 percent a year, a performance slightly better than average large cap fund. The fund costs $1.36 per $100 invested, a rate slightly above average.
Other fund managers with large stakes in Apple who aren’t selling say that they didn’t set out to have an oversized position in the company.
David Chiueh, the manager of the Upright Growth fund, has 13.4 percent in Apple, the second-largest among diversified funds tracked by Lipper, mostly because shares he bought in 2008 have appreciated, he said. The BlackRock Science and Technology Opportunities Portfolio, the third-largest Apple holder, has an underweight position according to the fund’s chosen benchmark, the MSCI World Information Technology index, a company spokeswoman said.
Other large holders of Apple have started to trim their positions. Mark Mulholland, whose Matthew 25 fund is classified as a non-diversified fund, has 15.3 percent of his portfolio’s assets in Apple.
He expects to trim the position down to 10 percent of his portfolio, in part because the company’s shares do not look as attractive on a valuation basis, he said.
“It’s not a company under duress by any means, but it’s not trading at as big as a discount as it was before,” Mulholland said.
(Reporting by David Randall; editing by Linda Stern and John Pickering)
by Robie de Guzman | Posted on Tuesday, June 18th, 2019
Twelve people died and another 125 were injured as of 08:30 Tuesday after two earthquakes hit southwest China’s Sichuan Province on Monday night, according to China’s Ministry of Emergency Management.
A 6.0-magnitude earthquake hit Changning County of Sichuan’s Yibin City at 22:55 Monday and another 5.1-magnitude earthquake occurred in Yibin’s Gong County at 23:36 Monday, according to local authorities. Ten villages and towns have been severely affected by the earthquakes.
“The earthquakes also damaged some houses, roads, power and communication facilities,” said Secretary General of the Yibin government Li Tinggen at a Tuesday press conference.
Li said Yibin has started an emergency response and 2,016 rescuers have been dispatched to alleviate the disaster.
“The city and counties quickly allocated all kinds of relief supplies from their disaster relief material repositories to affected villages and towns. At the initial stage, 450 tents, 5,300 quilts and 1,500 folding beds have been sent to affected areas,” Li said.
Yibin has started evacuation and relocation of local people and carried out medical aid for injured ones, Li said.
“After the earthquakes, the city and counties quickly dispatched 15 vehicles and 61 medical specialists with first aid equipment to the quake-stricken areas in order to treat the wounded.
All health centers of villages and towns in the epicenters conducted medical treatment for injured ones immediately after preliminary safety check of their buildings,” Li said. (REUTERS)
by Robie de Guzman | Posted on Tuesday, June 18th, 2019
At least 161 people have been killed in a north-eastern province of Democratic Republic of Congo in the past week, with survivors who fled to safety saying on Monday (June 17) that people were killed and homes set of fire.
The violence is an apparent resurgence of ethnic clashes between farming and herding communities.
Survivors who spoke to Reuters said they had lost members of the families.
Ngorima Bakambu Godefroid, who fled from the village of Kpatsi-Solenyama said his sister-in-law and her five children were all killed.
Others said some people were burned alive inside houses, while others were killed with machetes
A series of attacks in Ituri province has mostly targeted Hema herders, who have long been in conflict with Lendu farmers over grazing rights and political representation, although the exact identity of the assailants remains murky.
Open conflict between Hema and Lendu from 1999-2007 resulted in an estimated 50,000 deaths in one of the bloodiest chapters of a civil war in eastern Congo that left millions dead from conflict, hunger and disease. (REUTERS)
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