Pimco is the largest bond investor, but it also manages quite a bit in equities. According to S&P Capital IQ, Pimco now oversees $5.1 billion in U.S. equities.
We spoke with Daniel Ivascyn, Pimco’s group chief investment officer, in July. While U.S. stocks were “a little expensive,” Ivascyn said Pimco has “a mild preference for financials, housing-related investments, and investments tied to the consumer.”
The appetite for consumer-tied stocks hadn’t abated by the fourth quarter, when Pimco increased its investment in Apple(ticker: AAPL) more than tenfold. It also quadrupled positions in Intel (INTC), Merck (MRK) and Pfizer (PFE), and bulked up its investment in General Electric (GE) by a third in the period.
Apple shares surged 48%, excluding dividends, in 2017, trouncing the 20% gain logged by the Standard & Poor’s 500 index. We’ve suggested that Apple shares looked cheap after the early February punishment meted out by the market. We contemplate seeing “$125 billion of fresh spending on stock buybacks, dividends, or both.”
Pimco bought 331,800 additional Apple shares in the fourth quarter, ending the year with 366,250 shares. Through Tuesday’s close, Apple is down 2.5% so far this year.
Intel shares gained 31% in 2017 but the chips are down this year, 3% to be precise. Pimco folded down the backseat to load up 702,400 more Intel shares in the fourth quarter, ending 2017 with 926,000 shares. Despite the stock slump, Intel surprised investors in January when it said fourth-quarter data-center revenue rose 20%, the segment’s best growth in three years.
Merck was laid out in 2017 by two major factors. Generic competition ramped up while a June cyberattack disrupted the drug giant’s manufacturing, research and sales. Considering that, Merck shares were probably lucky to only slip 1.4%. Upbeat trial data in January raised hopes that Merck could come back, but so far this year, they’re down 2.4%.
Pfizer isn’t faring any better this year, as shares have slipped 2.6%, but that follows 2017’s 16% gain. The new U.S. tax law, however, has loosened Pfizer’s purse strings. The company plans to buy back $5 billion in shares this year and invest $5 billion in manufacturing and other capital projects in the U.S. over the next five years, our colleagues at The Wall Street Journal report. Pimco was also in the mood for spending in the fourth quarter, scooping up 973,000 additional Pfizer shares to end 2017 with 1.3 million shares.
GE shares are down 16% so far in 2018, following 2017’s 50% plunge. Despite the loss in altitude, they may not yet warrant a Buy rating. Don’t tell Pimco that, however. It picked up 2.19 million more GE shares in the fourth quarter, pushing its investment to 9.19 million shares.
Last
Wednesday, Mihir Worah, Pimco’s chief investment officer of asset allocation and real return took to the company’s blog. “[R]ich valuations combined with crowded positioning is not an environment to swing for the fences, but rather to seek to grind out returns by pursuing multiple country- and sector-specific macro or micro relative value opportunities,” Worah wrote. “Singles and doubles, as baseball or cricket fans around the world would say, is the way to go, instead of looking to hit the ball out of the park.”
