To say that hedge fund and mutual fund managers tend to follow the herd is an incredible understatement and always has been. While publicly they sometimes seem reluctant to discuss their holdings, especially stocks they short, the reality is managers tend to talk among themselves as they run in the same circles. Often those discussions are centered around their portfolios and what is in them.
In a recent Jefferies report, superb equity strategist Steven DeSanctis breaks down the top holdings in not only all three market capitalization groups — large cap, mid-cap and small cap — but also into core, growth and value categories.
Here are the top five holdings of mid-cap value managers.
This is one midcap bank pick that makes good sense for 2018. KeyCorp (NYSE: KEY) operates as the bank holding company for KeyBank National Association, which provides deposit, lending, cash management and investment services to individuals, small and medium-sized businesses.
The company also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets banner.
The top managers are attracted to the larger regional banks, as valuations look very reasonable and cost-saving plans are helping to make forward estimates look very achievable. With overall credit remaining solid, earnings and loan deposit and fee growth all are positive metrics for the bank. A whopping 59.6% of the managers in the survey own the shares of this top regional bank.
KeyCorp investors receive a 2.07% dividend. The Wall Street consensus price target is $23.29. The shares closed Thursday at $20.29, in a 52-week trading range of $16.28 to $22.40.
This was a huge 2015 merger that Wall Street has been positive on from the get-go. Zimmer Biomet Holdings Inc. (NYSE: ZBH) is a global leader in musculoskeletal health care. The company designs, manufactures and markets orthopaedic reconstructive products; sports medicine, biologics, extremities and trauma products; spine, bone healing, craniomaxillofacial and thoracic products; dental implants; and related surgical products.
The stock currently trades at a huge forward price-to-earnings discount to its large-cap medtech peers. While some feel there is still risk of future supply-related hiccups as Zimmer Biomet completes its root cause/action plans and transitions into its action implementation for various form 483 observations, many believe the valuation, at just over 14 times estimated 2018 earnings, is compelling enough to assume risk. Some 57.3% of the managers appear to agree with that thesis, according to the Jefferies survey, and own the shares.
Shareholders receive just a 0.83% dividend. The consensus price objective is $137.57, and shares closed on Thursday at $115.10. The 52-week trading range is $104.38 to $133.49.