Guru’s May 2016 Rebalance Report
- Between the most recent quarterly rebalances (February 25th and May 25th), Guru is up 6.63%.
- Much of the positive performance can be attributed to the Financials, which Guru was overweight 6.5% to the S&P 500, and the Technology sector which had good within-sector picks by hedge funds.
- Guru’s May rebalance saw 9 stocks leave the fund and 7 new additions, representing approximately 18% quarterly turnover.
- The fund had a noticeable shift out of cyclical sectors and into sensitive sectors like Information Technology and Energy.
While Guru broadly benefited from the market’s rebound over the past few months, exposures to Financials and Technology stocks generated a significant share of the positive gains from February 25th to May 25th. Holdings in these sectors contributed to over 60% of the positive returns, despite only making up 40% of the portfolio. The Financials sector saw a gradual rebound after its steep selloff in January. Guru’s Technology holdings were led by a strong earnings season with 76% of companies in the Tech sector beating estimates 1. Guru’s Health Care holdings exhibited negative performance, but were underweight 4.5% relative to the S&P 500. Poor selection within the Health Care sector has been the main culprit in the fund’s 105 basis point underperformance versus the S&P 500 over the most recent rebalance period2.
For GURU performance data current to the most recent month- and quarter-end, please click here.
Guru’s May 25th rebalance saw the removal of 9 of the fund’s 49 components and the addition of 7 new holdings.
While quarterly turnover was in-line with historical averages, Guru saw a noticeable shift out of cyclical sectors and into more sensitive sectors. Cyclical sector holdings like Financials and Consumer Discretionary were reduced while sensitive sectors like Information Technology and Energy came back into favor.
The fund also increased its Large Cap exposure from 55% in February to 65% in May, while reducing its SMID exposure by approximately 10%. These shifts in the portfolio may reflect a more risk-adverse positioning among hedge funds.