It was rocketing ASX tech stocks that generated big returns for fund managers, but these professionals are switching horses.
The latest fund manager survey by JPMorgan found that this group of investors are increasingly banking on the “reopening trade”.
This trade refers to buying the COVID-19 casualties – stocks that took the brunt of the sell-off from the pandemic.
Ugly ducklings to swans?
Some examples include the Qantas Airways Limited (ASX: QAN) share price and Webjet Limited (ASX: WEB).
“This month saw the first signs of a positioning tilt towards the ‘reopening trade’,” said the broker.
“The largest move during August was in Industrials, where the average OW [overweight] increased by 39bp [basis point] and 72% of managers increased holdings.
“Other cyclical sectors also saw inflows, with Discretionary and REITS enjoying up-weights of over 10bp.”
Hot property
What’s also notable is that the concentration of real estate investment trusts (REITs) in top stocks holdings is the highest its every been at 5%, added JPMorgan.
Property stocks have also been hammered by COVID. The accelerated shift towards online shopping forced mall owners like Vicinity Centres (ASX: VCX) and Scentre Group (ASX: SCG) to write down the value of their assets.
Social restrictions and border closures have also negatively impact on office and residential stocks.
Best reporting season on record
Another interesting finding in JPMorgan’s Fund Manager Radar survey was that fund managers enjoyed their best reporting season month ever in August.
“Average relative outperformance of the funds that we track was an outstanding 80bp, a stark contrast to the 30bp underperformance in the previous season,” said JPMorgan.
“August was also the second-best month of performance on our records.”
Turning of the tide
Most of the outperformance can be attributed to rocketing ASX tech stocks like the Afterpay Ltd (ASX: APT) share price and Appen Ltd (ASX: APX) share price.
One has to wonder if the next phase of the S&P/ASX 200 Index (Index:^AXJO) will be led by the COVID-19 underperformers.
As for specific stocks that fund managers are snapping up, two stand out from the crowd. JPMorgan noted that supermarket chain Coles Group Ltd (ASX: COL) and investment bank Macquarie Group Ltd (ASX: MQG) moved from “neutral” to “well held”.
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Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited and Webjet Ltd. Connect with me on Twitter @brenlau.
The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Webjet Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO, Appen Ltd, and COLESGROUP DEF SET. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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