Friday, April 18, 2008

Fund Positions by Market Cap - Mid April Update

I haven't done one of these updates in a long time [Nov 13: Fund Positions by Market Cap - Mid November] but here is a comprehensive look at all fund positions by market capitalization (which is a fancy word for "size"). Essentially a company has X number of shares and $X stock price. By multiplying the two you get 'size'/market capitalization (or "cap" for short).

I explained my original strategy in terms of market capitalization back in early October [Breakdown: Fund Positions by Market Capitalization], about 650 blog subscribers ago so let me repeat - I am curious where my strategy would fit in the Morningstar world of market capitalizations.

Why does it matter? Well all conventional wisdom says you should diversify your assets among different sizes of stocks as certain sizes fall in and out of favor with the investment community over time. For example in the late 90s, large cap stocks were all the rage, but the past half decade it's been small cap stocks time to dominate. While I agree with the conventional wisdom that your investments should be spread out among many different sizes, especially if one is a passive investor (i.e. buy a mutual fund and look at it twice a year), this stringent labeling of mutual funds has pushed the mutual fund industry to really limit the ability of their mutual fund managers by forcing many to only allow investments in certain size of companies

The mock fund I have here, and a small % of funds out there in the real world are "go anywhere" funds, meaning they can buy any size. This lets the manager to buy what he/she prefers, rather than be limited by size. I generally prefer (all things being equal) smaller over larger as it is easier to sustain higher growth rates when companies are smaller. This makes the remarkable growth rates of companies the size of Apple (AAPL) and Google (GOOG) the exception, and not the rule.

I measure the fund versus 2 indexes, (1) S&P 500 - whose median market cap is $13.1 Billion and (2) the Russell 1000 - whose median market cap is $5.8 Billion. The median market cap of the Russell 1000 is still smaller (by nearly half) of Rising Tide Growth Fund but represents 1000 of the largest 3000 securities in the Russell 3000, so should be a closer measure to what type of stocks this fund owns.

When I looked in October the median stock was @ $9.9 Billion, and in November $9.8 Billion (both times the median stock was Jacobs Engineering). Now that we are 5 months later, let's see how it's changed...

These are the parameters I use:
  1. Mega cap: >$100 Billion market cap
  2. Large cap: $12-$100 Billion
  3. Medium cap: $3-$12 Billion
  4. Small cap: $500 million - $3 Billion
  5. Micro cap: under $500 million
As always the exact cut offs are debatable... I exclude any index ETFs or UltraShort ETFs

Mega Cap

PBR $275 B
RIO $188 B
AAPL $136 B

Large Cap
RIMM $66.8 B
POT $61.4 B
MOS $59.4 B
EOG $32.6 B
MA $30.2 B
BLK $26.0 B
NOV $25.7 B
MTL $20.8 B
IBN $18.6 B
DO $18.5 B
KGC $15.3 B
CNX $15.2 B
SLT $14.6 B
FLR $13.9 B
MDR $13.3 B
HDB $12.2 B

Medium Cap
BIDU $10.6 B
JEC $9.8 B
FWLT $9.0 B
CF $8.5 B
ACI $8.1 B
CLF $7.1 B
COG $5.9 B
DHI $5.1 B
GFA $4.7 B
CBI $4.3 B
SGR $4.3 B
MEE $4.2 B
ILMN $4.0 B
SLW $3.9 B
CTRP $3.6 B
HMX $3.5 B
LDK $3.5 B
ATW $3.4 B
ANR $3.3 B
FCN $3.3 B
CLB $3.1 B
DRYS $3.0 B
LEN $3.0 B

Small Cap
EDU $2.6 B
MELI $2.2 B
SOHU $2.1 B
WX $1.2 B
TSL $1.1 B
HURN $0.8 B

Micro Cap
PBR $0.3 B

In this case we have 49 pure stock positions (non ETFs) so the name in the middle, position #25 is Cleveland Cliffs (CLF) @ $7.1B. Again this is not dollar cost weighted median (i.e. larger positions get heavier weights) ...but it's a sharp drop from the nearly $10B slot that the last 2 surveys showed, so this simply means I have a few less positions of the large cap variety and a few more mid cap. Ironically, Jacobs Engineering (JEC) which used to be my midpoint for the last 2 surveys is STILL stuck at exactly the same valuation its been since fall, $9.8B. :)

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