Influential hedge fund manager Ken Fisher recently released his Q1 2012 holdings report to the SEC. This report showed various changes, both large and small. The table below provides details of four changes that I noted. They are included because Fisher either added or dropped a notable percentage of shares in widely held equities.
% Change in Shares Held
% of Total Portfolio
Exxon Mobil (XOM)
General Electric (GE)
SPDR S&P 500 Trust (SPY)
Wells Fargo (WFC)
In the case of SPDR S&P 500 Trust, Fisher's holdings totaled $862 million going into the first quarter of this year. This was 2.58% of his $33.5 billion portfolio. So, by shedding $850 million of that value in the first quarter, through the sale of close to 99% of shares, Fisher could send one of two signals:
- He is bearish on the economy for the foreseeable future; or
- He is somewhat bearish or not bearish at all, but sees another opportunity that is ripe for greater ROI.
There are good arguments for both angles and Fisher's views are up for interpretation. If he sees a very grim future, selling SPY would be a way to diversify into various equities he thinks will best weather the storm. As SPY models the aggregate sentiments of the economy, it is subject to assertions of disappointing growth and uncertain government fiscal/monetary policies.
Alternatively, this could simply represent a neutral outlook on the S&P 500. Fisher could be dealing with a perceived opportunity cost of holding SPY: There are higher equity gains to be had. But this doesn't answer why Fisher sold nearly all of his shares. If he wasn't bearish on SPY, why not skim some off the top to reallocate (which he is known to do)? This is why I think he is bearish on the economy and therefore bearish on SPY.
By this logic, moving his money into Exxon Mobil, General Electric, and Wells Fargo signals their relative stability in Fisher's mind. These mature companies are arguably undervalued with respect to significant cash flow and profitability. Thus, I think these companies are great additions to any long-term portfolio for reasons I will discuss with more detail in my next few articles. If nothing else, their dividend yields are respectable and provide some assured ROI:
- General Electric: 3.40%
- Exxon Mobile: 2.60%
- Wells Fargo: 2.60%
I would take Ken Fisher's recent changes to heart when considering your own portfolio. By selling off nearly 99% of SPY rather than skimming off the top to redistribute in other promising equities, he is clearly signaling some worry about SPY's performance in the near future. So far, SPY has been trading near its 52-week high, but as we all know it is subject to change given the inconsistent growth numbers of the U.S. economy.
As for why Fisher may have it right, you need to have consistently good wits about you to become a historically successful manager. By that logic, it makes sense to at least reevaluate your SPY position and take a look at Exxon Mobile, General Electric and Wells Fargo.
Disclosure: I am long WFC.