One of the benefits of active management is that a portfolio manager or team can increase or decrease exposure to a stock for fundamental and/or valuation purposes. Unlike a passive ETF that tends to have more quarter to quarter consistency in its holdings and allocations, changes at active mutual funds is to be expected. As such, S&P Capital IQ thinks looking at the stakes on a large asset manager such as American Funds can be insightful.
According to the Capital IQ database and using the September 30, 2015 13-F filing, the manager of American Funds increased the stake in half of its 20 largest equity positions, while reducing the share count of the remainder. Unlike at peer Fidelity that had the most assets in technology stocks, consumer discretionary was the most represented at American Funds at the end of third quarter. This, despite the 8.4% reduction in the number of shares the firm held in Amazon.com (AMZN). Other major positions in the sector were reduced last quarter, with Comcast (CMCSA) and Home Depot (HD) being cut by 6.8% and 5.4%, respectively.
Since the end of the third quarter, Amazon posted Q3 EPS of $0.17 vs. $0.95 loss per share, much stronger than the Capital IQ $0.13 loss per share estimate. Third quarter sales grew 23%, even with a currency headwind.
Home Depot posted $1.36 per share for the quarter ended October vs. $1.15, $0.04 higher than the Capital IQ consensus.
Financials was the second largest sector weighting for Capital Research and Management, aided by higher share counts for leading diversified banks. JP Morgan (JPM) and Wells Fargo (WFC) share counts rose by 5.1% and 4.7%, during the quarter for American Funds; Fidelity sold some of its positions in these banks during the quarter.
Not surprisingly these positions are held in a meaningful way in some of the largest American Funds offerings. For example, American Funds Growth Fund of America (AGTHX) has top-10 positions in AMZN and HD. AGHTX has generated a slightly below-average three-year total return, but has lower volatility, helping it generate a 1.56 Sharpe ratio (1.44 for large-cap growth peers). The mutual fund earns neutral ranking inputs in S&P Capital IQ research for its risk considerations.
S&P Capital IQ most recent data available as of November 18, 2015. Much of this analysis is based on 13F filings.
Form 13F Reports are required to be filed within 45 days of the end of a calendar quarter by institutional investment managers with the U.S. Securities and Exchange Commission (SEC). An institutional investment manager is an entity that invests in, buys or sells securities for its own account, or a natural person or entity that exercises investment discretion over the account of any other natural person or entity. Only securities on the 13F list provided quarterly by the SEC (13F Securities) are required to be included in Form 13F Reports. Therefore, Form 13F Reports may not reflect the most current holdings of institutional investment managers because it is required that the 13F Report include only 13F Securities, is filed on a lag, and some funds may not meet the filing thresholds or other requirements. In addition, because the 13F Reports are as of the last date of the quarter, the 13F Report may not describe intra-quarter activity.