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 Fidelity Investments can be insightful.
According to the Capital IQ database and using the September 30, 2015 13-F filing, Fidelity increased the stake in half of its 20 largest equity positions, while reducing the share count of the remainder. While information technology remained the largest overall sector exposure, at 20% of assets, management across various portfolios meaningfully sold shares in two tech heavyweights. During the third quarter, the share counts of Apple (AAPL) Fidelity's largest overall position, and Microsoft (MSFT 54 ***) declined by 7.5% and 14%, respectively.
Since then, Apple posted fiscal fourth quarter EPS of $1.97 vs. $1.42, beating the Capital IQ consensus, aided by 22% sales growth. Meanwhile, Microsoft reported $0.67 adjusted EPS in the quarter ended September vs. $0.65 that was $0.08 above the Capital IQ consensus, as revenues fell 12%.
However, the share count in MasterCard (MA) and Visa (V) rose by 2.8% and 1.8%, during the same period. MA reported third quarter GAAP EPS of $0.86 vs. $0.87, missing the Capital IQ consensus estimate of $0.88. Meanwhile, V reported EPS of $0.62 vs. $0.55 in the quarter ended September, a penny below Capital IQ consensus.
Fidelity Holdings by Sector
The share count for consumer discretionary holding Disney (DIS) was cut by 15%, the highest of any of the 20 largest recent positions, while fellow sector constituent Amazon.com (AMZN) increased 7.2%, making it now the third largest overall position behind AAPL and Facebook (FB) Consumer discretionary made up 16% of Fidelity equity data, according to Capital IQ data, behind technology, health care and financials. During the quarter, Fidelity decreased its stakes in Wells Fargo (WFC) and J.P. Morgan (JPM), by 6.5% and 3.5%, respectively.
S&P Capital IQ provides rankings and research on more than 20,000 mutual fund shares classes based on performance, risk and cost factors.
Fidelity Contrafund (FCNTX), a large-cap growth fund, has top-10 holdings in FB, AAPL, WFC AMZN, V and DIS (in order of weightings).
Meanwhile Fidelity Low-Priced Stock Fund (FLPSX), a mid-cap core fund, has a top-10 positions in MSFT as well as Ross Stores (ROST) and Unum Group (UNM).
Both FCNTX and FLPSX rank as S&P Capital IQ five-star funds for the favorable valuation and risk characteristics of their respective holdings. The funds also have above-average three-year records combined with below average volatility.
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.