Big problem for fund managers: liking Apple too much

admin   •   March 16, 2015   •   2534

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.

RISKS

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.

BIG BETS

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)

Iraqis defy tear gas, upcoming curfew as protests stretch on

Robie de Guzman   •   October 29, 2019

 Iraqi protesters react after police fired tear gas at them during a protest at al-Tahrir square, central Baghdad, Iraq, 28 October 2019. EPA-EFE/MURTAJA LATEEF

Thousands of people in Baghdad continued their protests at Tahrir Square in central Baghdad on Monday (October 28), defying a curfew scheduled to be imposed from midnight until 6am (2100GMT to 0300 GMT).

Protesters took to the streets for a fourth day, despite having endured bloody clashes over the weekend and an overnight raid by security forces seeking to disperse them.

At least 74 Iraqis were killed and hundreds wounded across the country on Friday (October 25) and Saturday (October 26) as demonstrators clashed with security forces and militia groups in the second wave of this month’s protests against Prime Minister Adel Abdul Mahdi’s government.

More than 200 people have been killed in October so far.

Iraqi security forces on Monday fired tear gas at school and university students who defied a warning from the prime minister and joined anti-government protests.

A spokesman for Abdul Mahdi, whose position is increasingly precarious as he faces the largest challenge since he came to power a year ago, said on Sunday (October 27) that anyone disrupting work or school days would be severely punished.

Mass street protests in Baghdad and other cities in the southern Shi’te heartland against economic hardship began at the start of the month and resumed on Friday after a pause of about two weeks. (Reuters)

READ: DFA cautions Filipinos against travel to Iraq

(Production: Haider Kadhim, Mohammed Al-Ramahi, Mohammed Katfan, Hannah Ellison)

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US Military: No footage on Baghdadi’s death will be released

Robie de Guzman   •   October 29, 2019

US President Donald J. Trump answers a reporter’s question as he participates in a briefing with senior military leaders in the Cabinet Room of the White House in Washington, DC, USA, on 07 October 2019. At right is United States Army General Mark A. Milley, Chairman of the Joint Chiefs of Staff. EPA-EFE/Ron Sachs

Islamic State (IS) leader Abu Bakr al-Baghdadi’s remains had been disposed of and there were no plans to share footage on his death, Chairman of the Joint Chiefs of Staff Mark Milley announced on Monday.

U.S. President Donald Trump said on Sunday that al-Baghdadi had been killed in a U.S. military operation in Syria.

Trump said earlier that part of the footage on the operation would be released, but military sources said that the footage might expose some confidential information about the U.S. military, adding that the footage should go through strict checks before it is published.

The Associated Press on Monday released footage taken by a witness when the U.S. military launched a raid in northwestern Syria — but the authenticity of the footage has not been verified.

Kremlin spokesman Dmitry Peskov on Monday expressed “prudent welcome” to Baghdadi’s death, saying the U.S. has made a big contribution to fighting terrorism “if confirmed”.

The Russian Defense Ministry said on Sunday that it does not have reliable information about the U.S. operation in the Idlib de-escalation zone in Syria that allegedly killed IS leader Abu Bakr al-Baghdadi.

Iranian Foreign Ministry Spokesman Abbas Mousavi on Monday stressed that the extremist ideology and the support for it still exist in the Middle East, and the death of Baghdadi was a “creature” killed by the U.S.

On the same day, Iranian government Spokesman Ali Rabiee said al-Baghdadi’s death is the end of a symbol of “destructive terrorism,” and the U.S. should end its interventions in the Middle East. (Reuters)

Tokyo 2020 gymnastics, boccia venue unveiled

Robie de Guzman   •   October 29, 2019

The Tokyo Organising Committee of the Olympic and Paralympic Games (Tokyo 2020) on Tuesday (October 29) unveiled the new Ariake Gymnastics Centre, which will host Gymnastic and Boccia events during the Tokyo 2020 Games.

The 12,000-seat, 30-meter height venue, whose construction was completed on 25 October, has no pillar in the performance area.

The central element of the architecture is a 90-meter spanned, local larch wood roof that arches over the building’s core.

Timbers of Larch were all domestically sourced including from Hokkaido, Nagano and Miyazaki prefectures to name a few.

The venue, located in the Ariake district of the Japanese capital that will host many other Olympic events, will be also used as an exhibition center when the Games are over.

One of the Tokyo 2020 officials at a press viewing of the venue, Koichi Fukui, told reporters that wood materials would eventually be used as partitions at exhibitions and all the bench boards would be recycled into shoe shelves for schools.

The venue will host the 34th FIG Trampoline Gymnastics World Championships in November. (Reuters)

(Production: Akira Tomoshige, Yoko Kono)

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