The Zhitong Finance App learned that the “Active Manager Positions Update” report recently released by Bank of America Securities indicates that active fund holdings fully reflect the “shift from consumption to capital expenditure” theme, and that it is becoming more and more difficult to earn excess income by buying AI capital expenditure beneficiaries and selling white-collar consumer themes. Selective shift is recommended.
Selling Consumption and Buying AI Capital Expenses: Excess Earnings Are Hard to Make
The report is based on an analysis of the exposure and history of the Only Go Long (LO) active fund industry, and the current positions fully reflect the “shift from consumption to capital expenditure” theme. Positions for industrial products are close to historic highs compared to non-essential consumption; positions for “victims of AI disruption” such as IT services, consumer finance, and software are close to historic lows; the weight of essential consumption compared to optional consumption, and tobacco has soared compared to luxury goods.
Bank of America said that given the current structure of its position portfolio, it may be more difficult to obtain excess income by buying capital expenditure beneficiary stocks and selling white-collar consumer-themed stocks. The bank cautioned that the needs of American consumers should not be underestimated. Strong capital expenditure may have been priced more by the market, so it is recommended to shift selectively.
TMT: Overall neutral, position differentiation is obvious
Apple (AAPL.US) and Microsoft (MSFT.US) are still “stable core holdings” and are held by more than 80% of the fund, but they are slightly undervalued due to their high benchmark weight; other technology stocks have jumped markedly since 2015. Bank of America has a neutral view of TMT (Technology/Media/Telecom) as a whole, and believes that the risks and rewards of TMT's large stocks are more reasonably reflected in the price.
Active Funds: Non-S&P 500 Exposures Approaching Historic Low
After the S&P 500 index has easily outperformed most global stock indices for many years, active fund managers' holdings outside of the S&P 500 have reached an all-time low. Non-S&P 500 exposure is about 15%. It was as low as 14% in 2024 and 20% in 2020. Cash levels have been low since 2024, while ADR (American Depositary Receipt) holdings have remained almost constant over the past few years, at around 2%.
Healthcare: Back in the eyes of fund managers
Whether it's AI fatigue or the market has been overexploited, Bank of America said that recently more and more customers are inquiring about growth stocks unrelated to AI. Healthcare companies have re-entered the field of view of fund managers because of their specificity, outstanding performance in screening indicators, and benefiting from demographic needs and AI adoption. But policy risk is a key constraint, especially before the US midterm elections. What is gratifying is that compared to previous negative policy shocks (such as Hillary Clinton's tweet in 2015 and Sanders' “universal health insurance” proposition in 2019), the industry is currently less crowded, with about 10% of funds being overallocated, compared to close to 20% in the previous two periods.
Selling at a loss of tax: selling pressure has not been overcome
Bank of America usually publishes a tax-loss sales screening list around October because October is the peak of institutional sales. However, due to earlier customer requests, the bank published it in advance in the “Position Report” last month. The screening targets are S&P 500 index constituent companies that have declined by at least 10% from the beginning of the year to date and have been widely overrated. The stocks have since declined by about 6 percent. However, Bank of America believes that the sell-off pressure may not be over: on the one hand, institutional investors did not sell in a big way last month; on the other hand, the return of this strategy is usually the worst in October. Historical experience shows that it is sold now and bought as early as November.
According to reports, the so-called tax-loss sale means that investors sell loss-making securities and turn their losses into realized capital losses to offset capital gains from other investments, thereby reducing the tax burden. In markets where capital gains taxes are levied, such as the US, this is a common legal tax strategy.
The polarization of individual stocks: the most crowded and the most overlooked
The Bank of America report also lists the “most crowded” and “most overlooked” S&P 500 stocks in various industries that only long funds.
The most crowded stocks include Meta (META.US), Starbucks (SBUX.US), Philip Morris (PM.US), Constellation Petroleum (COP.US), Schw.US, Vertex (VRTX.US), Boeing (BA.US), Broadcom (AVGO.US), Corteva (CTVA.US), Welltower (WELL.US), Constellation Energy (CEG.US).
The most overlooked stocks include News Corp-B (NWS.US), Hasbro (HAS.US), Hormel Foods (HRL.US), Texas Pacific Land (TPL.US), ERIE.US (ERIE.US), Han Ruixiang (HSIC.US), Generac (GNRC.US), Tianbao Navigation (TRMB.US), Amcor (AMCR.US), and Eversource Energy (ES.US).