State Street Global Advisors has bought more mining stocks, sold some of their bank shares and increased their holdings of health care and retailers in a stock market they see as “fair value,” says Olivia Engel, head of active Australian equities for the fund manager.
The S&P/ASX200 Index is currently trading at 14 times forecast earnings, in line with its historical average, meaning it is neither cheap nor expensive, Engel told Markets Spectator. But “volatility keeps coming at us,” she says.
The benchmark index is up 8.3 per cent so far this year with more than half its gains coming this month. In July the index has risen for all but five trading days, adding 4.8 per cent.
State Street has bought resource stocks as “they presented an opportunity” but was “careful on quality and risk,” says Engel. She favours BHP and similar “high quality names” among mining stocks.
Still, mining stocks, which make up 17 per cent of the index’s market value, comprise only about 6 per cent of the State Street portfolio, says Engel.
The fund manager is also underweight banks relative to its weighting in the index, which is about a third. Share prices for the four biggest Australian banks have risen too fast and too far according to Engel. State Street has sold some of its holdings in banks.
Engel says State Street has bought more health care and retail shares. The fund manager has invested in Ramsay Health Care, Sonic Healthcare, Woolworths, Wesfarmers, Coca-Cola Amatil and Metcash.