So what are the most popular funds held by mutual fund managers right now? This is always an interesting question, not only because it can give one ideas, but also because it can serve as a counter-indicator. Stocks that are very widely held tend to be over-bought and the most at-risk of falling sharply. The most popular stocks right now are Alphabet, Microsoft, Visa, Apple, Nestle, and Exxon-Mobil. Speaking about the outlook for these stocks, UBS, who made this report, says “Once these trades reach their critical value, or an exogenous shock occurs, we expect a sharp price reversal as investors unwind their exposure in tandem”.
FINSUM: Nothing particularly interesting in those top holdings, so the downside risk of them being there seems the most relevant.
The car industry has a big problem on its hands, and it is not something that can necessarily be solved with new technologies or better mpg. The problem is not even that that young people don’t want to buy new cars, it is that they don’t want cars at all. In fact, they don’t even care to have driver’s licenses. In 1983, half of all 16-year olds had licenses. In 2017, it was down to a quarter. Gen Z, those born after 1997, aren’t ageing into licenses and ownership either, as the rates of those who have licenses by 24 is falling. 16-year olds reportedly don’t care about the freedom of getting their own car anymore, as they have Uber and Lyft and increasingly just move from urban area to urban area as they age, where car ownership isn’t as ideal.
FINSUM: Not wanting your own car at 16 sounds almost unfathomable to older generations (including us), but it is a reality that is emerging.
The S&P 500 is up almost 4% since the end of February. Those are good numbers in anyone’s book. But some stocks in the index are absolutely scorching the market. Take a look at: Nvidia (NVDA), Advanced Micro Devices (AMD), Conagra Foods (CAG), Dentsply Sirona (XRAY), and Chipotle (CMG). NVDA is up 24% since the end of February, while Chipotle is up 17% since then, and about 123% in the last year. All the stocks have positive drivers behind them.
FINSUM: If you are momentum investor, these stocks are certainly top picks.
We wanted to write an article about a new fund we discovered in our regular course of business, but that got us excited. One of our gripes with ETFs is that there always seems to be a dearth of ways to express short-term tactical opportunities, or own a fund that does so. That is why we were excited to find a fund in New York Life’s IndexIQ ETF lineup. The fund, the IQ Merger Arbitrage ETF (MNA), seeks to gain capital appreciation by buying companies that have had public takeover announcements. The fund also includes a short on global equities as a partial hedge. Merger arbitrage is a common hedge fund strategy.
FINSUM: This is one of those area where we often wish we had exposure, but don’t have the time to actually enact a strategy, so this IndexIQ fund is very useful. The fund has a 75 basis point expense ratio.
One of the big challenges in digesting earnings is trying to parse through what are and what are not material statements made by company executives on earnings calls. Executives at publicly traded companies have become experts at deflecting tough questions and use sophisticated and evasive language to obfuscate the direction of their companies. However, American Century Investments is debuting a new piece of language processing software which can intelligently understand the commentary and identify material versus immaterial statements, or what they call “BS”. The software is highly sophisticated in spotting not just key words, but patterns and relationships between statements. It cites four areas that can help it find BS: omission, “spin”, obfuscation, and blame.
FINSUM: This seems as though it could be a useful tool, especially as it is more sophisticated than just using key words (which people can easily adapt to).