| NEW YORK, March 24
NEW YORK, March 24 High U.S. share prices are
pushing Lipper Award-winning equity fund managers into the
shares of beaten-down healthcare companies, retailers and
emerging-market stocks that they say offer a greater chance for
Fund managers from Poplar Forest, Parnassus Investments and
Brandes Investment Partners are among the 2017 Lipper Award
winners who are concerned about the high valuation of the
benchmark S&P 500 index. With a forward price-to-earnings ratio
above 18, the index is at the high end of its historical range.
Even after tumbling on Tuesday, the index is up more than 10
percent since Donald Trump's unexpected U.S. presidential
election victory on Nov. 8.
"It's absolutely harder to find stocks at attractive
valuations" now than it has been in the past few years, said
Todd Ahlsten, lead portfolio manager of the Parnassus Core
As a result, Ahlsten said he has been adding to his
positions in healthcare stocks such as Gilead Sciences Inc
, Allergan PLC and Novartis AG.
Healthcare stocks had fallen in price on concerns over
possible drug price controls ahead of the vote on the Republican
bill to repeal and replace President Obama's signature
healthcare law. Shares of Gilead Sciences have slumped 5.5
percent since the start of the year; shares of Novartis are up 2
percent over the same time.
The vote, scheduled for Thursday, has now been postponed.
The S&P is up about 5 percent in the year to date.
"We feel like the rhetoric out there is creating
opportunities," Ahlsten said.
J. Dale Harvey, portfolio manager of the Poplar Forest
Partners fund, said he has been trimming his energy and
materials shares exposure and buying into brick and mortar
retailers whose stocks have come under pressure as Amazon
continues to expand.
"Mall-based businesses are facing declining traffic, but
we're trying to look for the proverbial baby thrown out with the
bath water," he said. "So far that has been early, but we have a
habit of being early."
He recently added a position in mall-based Signet Jewelers
Ltd, which is looking to expand its number of
freestanding stores. Shares of the company are down nearly 30
percent for the year to date and trade at a price-to-earnings
ratio of 9.7.
"There's a lot of negativity embedded in its valuation that
we think is not warranted," Harvey said.
Not every Lipper Award-winning fund is turned off by the
high valuations, however.
Robert Marvin, portfolio manager of the Hood River Small-Cap
Growth fund, said the recent stock market rally prompted him to
buy recreational boat builder Brunswick Corporation and
recreational boat and yacht dealer MarineMax Inc. Shares
of both are up more than 10 percent in the year to date.
"We're starting to see significant improvement in demand as
middle- and upper-income consumers feel the wealth effect," he
Kenneth Little, a co-portfolio manager of the Brandes Global
Equity fund, said high valuations have left his fund
"significantly underweight" the U.S.
Instead, his fund has been adding positions in emerging
markets such as South Korea, Russia and Brazil, with large
overweight in energy holdings and healthcare.
The fund is focusing mostly on large-cap companies such as
Russian oil producer Lukoil, Brazilian aircraft maker Embraer
SA, and South Korean auto parts maker Hyundai Mobis Co.
"The U.S., broadly speaking, looks pretty fully valued to
us," he said. By comparison, in emerging market stocks, "if you
look through the short-term challenges, you have very good
companies trading at very attractive prices," he said.
Thomson Reuters Lipper is a division of Thomson Reuters
Corp, the parent company of Reuters.
(Editing by Jennifer Ablan and Bernadette Baum)