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With Tech Oligarchy Shaken, active funds are having fun

(Bloomberg) – The turmoil in megacaps like Apple Inc. is causing investors anxiety. But for professional stock pickers, it’s mostly good news when the biggest companies on the market loosen their grip. Since the beginning of the year, 57% of large-cap mutual funds have surpassed their benchmarks, marking the industry’s best start in almost a year. decade, show data compiled by Goldman Sachs Group Inc .. One of the main drivers is the decrease in the dominance of mega-companies whose funds chronically have very little. Now, the hope of an economic recovery is giving life to everything, from small caps to previously ignored stocks, such as energy, expanding the set of winners. The Russell 2000 is about to beat the Nasdaq 100 for the sixth consecutive month, while a version of the S&P 500 that eliminates the market value bias is up 6.6% this year, double the weighted indicator per cap. “As the market is seeing more leadership coming from stocks that are lower in the market capitalization spectrum, this ability to choose stocks will add value,” said Matt Miskin, chief investment strategist at John Hancock Investment Management. “It really means that active managers will finally have their day in the sun.” Value gains and cyclical stocks – companies trading at low multiples of earnings or geared more towards an economic recovery – have been a favorable factor for active funds, according to a Goldman Sachs study of strategists, including David Kostin. Towards 2021, fund managers have increased their value exposure to a record high, while leaning towards cyclical actions such as finance and energy. These are the best performances this year and the value is the best start of the year in two decades compared to its growth counterpart. So far, the year has turned out to be more favorable for active investments after staying at home, security trading ruled stocks in 2020. Among the top six stocks – a cohort loosely defined as Faang that includes Facebook Inc., Amazon. with Inc., Apple, Microsoft Corp., Alphabet Inc. and Tesla Inc., a new addition to the S&P 500 – four are in red in 2021. Altogether, 54% of the S&P 500 shares fared better than the gauge wide. This contrasts with last year, when only 37% of the S&P 500 shares exceeded the general indicator, the lowest proportion since 1999, and the Faang block was responsible for half of the index’s gain. Among some 250 S&P 500 referenced funds that have at least $ 500 million in assets, about a fifth of them hold Faang shares in greater proportion to their weight in the index. On average, Faang-loving funds have risen 3.2% this year, lagging behind a 5.7% gain for those who have no stake, show data compiled by Bloomberg. For Morgan Stanley analysts, stock picking will be a major driver now that the broad market is pricing an economic recovery and the S&P 500 has limited its rise, close to the company’s end of year goal of 3,900. The team developed a model to identify areas where the benefits and harms related to Covid appear to be poorly evaluated. For them, banks, energy and airlines are among the sectors with underestimated opportunities, while sectors linked to durable goods and domestic consumption are perfectly priced. Lawrence Creatura, a fund manager at PRSPCTV Capital LLC, agrees that there are a lot of price errors in “It’s like someone walks into the supermarket and changes all the product’s price tags,” he said. “There are now more products with the wrong prices on the shelves and this is great for stock pickers.” For more articles like this, visit us at bloomberg.comSubscribe now to stay up to date with the most trusted source of business news. © 2021 Bloomberg LP

Paula Fonseca