polo assn Mutual funds dump Fortune Brands
Institutions controlling $16.4 trillion sold $1.8 billion more than they bought of department stores, distillers and hoteliers this month, according to data compiled by State Street Corp. As Nordstrom Inc. to Deerfield based Fortune Brands Inc. more than doubled from the market’s low in March, the biggest investors became net sellers, Bloomberg data show.
“There’s concern by consumers about everything, not only future employment but also the value of their house and their retirement plans,” said Randy Bateman, the Columbus, Ohio based chief investment officer at the asset management unit of Huntington Bancshares, which oversees $12 billion. “Whenever you have a question mark with regard to their ability to spend, you’re going to have a drawback in those stocks.”
Investors are dumping shares with the closest links to economic growth. financial system spurred record profits at New York based Goldman Sachs Group Inc., Commerce Department data show salaries for Americans dropped the most in at least five decades during the 12 months through June. homeowners may owe more on mortgages than the properties are worth by 2011.
Bateman said his firm is “underweight” stocks of chain stores and restaurants. He expects any recovery will be driven by the government because consumers, whose spending accounts for about 70 percent of the economy, will boost savings.
The government’s rescue of companies from New York based Citigroup Inc. to Fannie Mae in Washington drove the S 500 Financials Index up 137 percent since March 9 even as losses and writedowns related to the collapse of the credit markets last year climbed to $1.6 trillion.
Shares of chain stores, car companies and restaurateurs in the S 500 Consumer Discretionary Index added 66 percent since March 9, when the S 500 fell to a 12 year low. The group along with financial stocks posted the biggest gains among the 10 industries in the index.
Money managers unloaded a record amount of consumer discretionary shares compared with the industry’s market value in the 20 trading days ended Aug. 20, according to data from Boston based State Street, the world’s largest investor for institutions. equities began to rebound in March, according to the data, which stretches back to 1995. At the same time, they bought $2.7 billion of financial companies’ stocks, the highest percentage of any group.
Shares of Nordstrom, the Seattle based department store chain, slipped 3.6 percent in 1995 and fell 13 percent in 1996. As the stock rallied 132 percent since March, institutional investors pared their stakes by 3 percent last quarter, regulatory filings compiled by Bloomberg show.
London based Schroders, Standard Life Plc, located in Edinburgh, and the Austin, Texas based Teacher Retirement System of Texas, which together oversee more than $500 billion, were among more than 80 mutual funds, insurers and pensions that cut their holdings by at least half since April, the data show.
Nordstrom said on Aug. 13 that second quarter profit declined 27 percent after it marked down apparel and customers held back on purchases of non necessities. Per share income and sales trailed analysts’ estimates. Year over year revenue has decreased for seven consecutive quarters, Bloomberg data show.
Since July 20, investors have boosted their sales of Nordstrom even as the shares climbed 22 percent. They unloaded about $17 million more in shares than they bought during that time, based on money flow data that exclude block trades compiled by Bloomberg.
Institutions dumped Fortune the maker of Courvoisier cognac, Titleist golf clubs and Moen faucets even as the shares climbed 126 percent since March, data compiled by Bloomberg show.
The Ohio Public Employees Retirement System, located in Columbus, Ohio,
and the Employees Retirement System of Texas in Austin, Texas, which together oversee $82 billion, cut their shareholdings in Fortune by 15 percent and 11 percent last quarter, regulatory filings show.
Mutual funds, pensions and endowments sold 3.6 million more shares of Fortune than they bought, reducing their ownership by about 3 percent, data compiled by Bloomberg show. Sales accelerated this month after Fortune cut its full year profit forecast on July 24, predicting “challenging” sales in its golf and home products units.
Investors have pulled a net $2.1 million out of Fortune shares in August, money flow data compiled by Bloomberg show.
Consumer and financial companies led the S 500’s 52 percent increase in the past six months, the steepest rally since the Great Depression, amid bets the government’s $12.8 trillion in pledges to revive the credit markets and banks will jump start economic growth.
David Rolfe, who oversees $500 million as chief investment officer for Wedgewood Partners in St. Louis, says institutional investors are concerned the rally in consumer companies has outstripped their potential earnings. Profits at financial firms are being bolstered after the Federal Reserve pushed borrowing costs to the lowest ever, he said. lenders and the Fed’s target rate for overnight loans between banks was 5.09 percent last week, near the highest on record, data compiled by Bloomberg show.
“If you’re a bank, when you turn on the lights every day, you make money, but that’s not the same situation” for retailers, Rolfe said. economy from its deepest recession in seven decades will buoy spending. unemployment rate fell in July for the first time since April 2008, data from the Labor Department showed this month. Home sales increased more than economists estimated. The Conference Board’s consumer confidence index has more than doubled since February. The Commerce Department reported a smaller drop in consumer spending than economists forecast last quarter.
Analysts have ratcheted up 2010 profit forecasts for companies that rely on consumer spending, estimating they will report an adjusted $13.61 a share, Bloomberg data show.
That’s a 37 percent increase from this year’s estimate of $9.97 a share and would be the third highest reading since 1994, when Bloomberg’s quarterly data began.
“The consumer is probably going to be stronger than people think,” said Highmark Capital’s Goerz.
Joseph Keating, the chief investment officer of Raleigh, North Carolina based RBC Bank, the unit of Royal Bank of Canada that oversees $33 billion in client assets, isn’t convinced. The firm is “underweight” consumer stocks because spending will stagnate as Americans pay debts and hold off buying items they don’t need, he said.
Wages and salaries, which drive spending, fell 4.7 percent in the 12 months through June, the biggest drop since records began in 1960, Commerce Department figures showed.
The percentage of “underwater” loans may rise to 48 percent, or 25 million homes, as prices decrease through the first quarter of 2011, Karen Weaver and Ying Shen, analysts in New York at Deutsche Bank, wrote in a report on Aug. 5.
Plunging home prices helped lower household net worth by a record $13.9 trillion from the third quarter of 2007 through this year’s first quarter, data from the Fed show.