Giroux selling energy / value stocks. “We have really fundamentally changed…” WSJ

hank

David Giroux, portfolio manager at T. Rowe Price, said he has already sold shares of energy companies in his portfolio—which have outperformed this year—while buying tech stocks like Nvidia Corp., Apple Inc. and Amazon.com Inc. He said he expects oil prices to fall and inflation to moderate over the coming year while economic growth slows down, helping tech stocks. He predicts major indexes can still notch gains for the year, recovering their steep losses. “We have really fundamentally changed” our portfolio, Mr. Giroux said. “A year ago you would’ve seen a big bet on value [stocks]. Now everybody loves that stuff—we’ve been selling that hand over fist.”

Excerpted from: “Ukraine Crisis Upends Investing Playbook for 2022”
The Wall Street Journal, February 28, 2022

Crash

Thanks for that, @hank. Good to know what is actually what.

davidrmoran

Giroux buys Apple and Amazon ! [hed]

johnN

Thx he maybe 3 6 months early imho
Techs although appear cheaper than last yr

LewisBraham

https://yardeni.com/pub/stylegrval.pdf

Mark

For those who may be wondering about Lewis' link "Style Guide: S&P 500 Growth vs Value"

hank

Here’s the part I found most interesting - “He predicts major indexes can still notch gains for the year, recovering their steep losses.” You’d think that for such a bold prediction the WSJ would have quoted directly rather than summarizing or paraphrasing Giroux’s words.

I believe it was Yogi (the 1st) who said making predictions - especially about the future - is difficult. Giroux turned guru?

Thanks @LewisBraham for the plethora of charts showing relative values & performances of value stocks vs growth over many years. Still trying to digest.

PS - Looks like another blood-bath in the markets shaping up today - unless you like seeing oil jump higher by 10% or so in a day’s time. Wonder if that interview was conducted prior to the invasion of Ukraine? Likely.

Sven

Good link provided by @LewisBraham. Sounders (Schwab) often stated that investor sentiment contributes to shift between growth vs value stocks. Have growth stocks reach an attractive pricing range ?

Roy

How about that, Giroux has finally purchased Apple which he has stated in the recent past has been his biggest miss. In the past he and his team have never been able to justify the purchase based on valuation and anticipated sales growth metrics.

Sven

Sound very reasonable. Given the size of the fund, he would buy the stocks in increments over time in order to build a meaningful position in the fund. Apple is large enough (liquidity) large lots bought or sold would not change the pricing as it would in thinly traded smaller cap stocks. Similarly he bought GE prior to spring 2020’s drawdown and continued afterward. Today GE is the 4th position. The fund often has high single digit % in cash.

hank

Looks like he was early selling energy. Wonder when that was? It’s just now getting “exciting”. Tack on another 2.5% rise today beyond what the chart displays.

Personally, I wouldn’t be loading up on Amazon and the mega-caps now. But that’s why he’s paid big bucks to manage PRWCX and has won all kinds of awards, plus coverage in Barron’s and the WSJ and is also widely acclaimed on this forum. I do wonder to what extent his hand is forced, as the size of PRWCX would really impact the price of smaller companies when bought or sold in any appreciable amount.

Chart XLE

Sven

Fund managers have target range of sell prices so to ensure they capture majority of upswing. It is likely that he still have some energy allocation. In the meantime, Apple and Amazon were off for their peaks in January and he bought them at their lows. He must believes Apple and Amazon will be much higher 12 months from now whereas the conflict will be over and oil will return to typical range. In that sense he is very opportunistic in order to gain exposure to those tech stocks at reasonable prices. Buffet often said that when you can buy solid business at good price, it actually lowers the risk on that investment.

davidrmoran

ah !

davidrmoran

https://www.nytimes.com/2022/03/04/business/military-stocks-russia-ukraine.html

Charles

Looks like MSFT, AMZN, GOOG make up 16% of his portfolio. He is still holding GE at 4.4%. And, 11% cash.

Sven

Data from M* or TRP on holdings are dated through 1/31/2022. If he is buying Apple, that would be a new position for the fund. It will be awhile before it reaches top 10 holdings given the large asset base. Health care and technology are the largest sectors he invested in.

golub1

This makes me ponder how big can a large cap fund before even with a good manager it loses too much flexibility to perform it's best. I know there are many fund managers that continue to outperform with very large AUM. Would they perform even better with lower AUM? Has that what has happened with Star managers?

Sven

PRWCX is closed to new investors for some time. It invests in large cap stocks so it is less of an issue than those invested in smaller cap stocks. Certainly small AUM would be easier for manager to do well. In Giroux case, he has a team of analyst to support him. Noted that the fund focus on a handful of sectors and some has none.

Fidelity, on the other hand, seldom closes their funds. Dandoff’s Contra fund is still good but nowhere near as dominant as when the fund was much smaller.

JonGaltIII

Hard to question Giroux but hard to argue with @Hank who said "Looks like he was early selling energy" ... In related news... SLB was up 8.03% today.

MikeW

here are the top holdings of PRWCX as of 2/28/22. I believe that BD is the only new company in the top 10. So if he's making changes in the portfolio its outside the top 10. Alphabet's % of the overall portfolio has decreased.

Top 10 Holdings (02/28/2022)
Data as of:
02/28/2022

Holding Name

% of Fund

Microsoft--6.55%
Amazon.com--5.76%
GE -- 4.67%
Alphabet --3.97%
Yum! Brands-- 3.16%
Thermo Fisher Scientific-- 2.99%
Humana-- 2.54%
PerkinElmer-- 2.46%
Becton, Dickinson & Company-- 2.34%
PNC Financial Services Group-- 2.32%

Sven

Last I looked the top holding is dated as of 1/31/22. It must got updated in the last several days. Giruox still has over 10% cash according to Charles.