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Cornerstone Portfolio Pulse – 2nd Quarter 2017

A summary of portfolio positions and holdings in the CornerstoneAMS tactical portfolios.

Is the Technology Sector’s Leadership Run Over?


Click for Larger/Updated View:  http://schrts.co/Py7gAc

The above chart is $NDX – Nasdaq 100 Index, a tech-heavy index, and was shared by Ken Reinhart, Director of Market Research, in a Weekly View email (Another Out of Nowhere Dip), now over a month ago. The red arrows indicate 3 strikes, or ‘shot’s across the bow’, that came during the past few months – and the last one on June 9th was our signal it was time to go, or at very minimum reduce exposure to the sector.

Since that date, $NDX struggled around it’s 20-day moving average, and then it’s 50-day moving average before failing and going below the 50-day solidly to end the quarter.  It’s now moved higher again, back to the previous highs which begs the question – are we vulnerable for another similar-looking pullback here?

The significance of this move should not be underestimated.  We are talking about the well-established leader of 2017 so far beginning to struggle with a few real ugly days in there.  My question as portfolio manager is what does that mean going forward?


This chart shows the weightings for each sector of the S&P 500 Index, a much larger index and generally accepted as ‘the’ index for the US stock market.  It’s important to realize that Technology now represents more than 22% of the S&P 500, and begs the question; IF Technology loses it’s ‘mojo’ how will that impact the S&P 500 moving forward?

CAMS Capstone Portfolio As I said above, we limited exposure to Technology and Technology-related areas in June, selling USSCX –  USAA Science & Technology & RYELX – Rydex Electronics, keeping a single Tech fund (with a Biotech slant).  In the 2nd quarter we added exposure to Gold & Precious Metals and Long Term Government Bonds, and maintained a position in the Healthcare sector.  Cash has stayed consistent in the 30-40% range.

Q2 Results: CAMS Capstone Portfolio, +2.51%, net of fees. (S&P 500 Index Q2 Results, +2.57%)

CAMS Cornerstone Portfolio Cornerstone’s allocation wasn’t as Tech-heavy, however we did sell two Large-Cap Growth funds which were significantly overweight in Tech names, both at nice gains, +5% & +12%, respectively.  Minimizing that risk, we were able to maintain a single choice in the Tech space (the same one as above with the Biotech slant).  Additions to Healthcare, Utilities and Global Bonds also occurred throughout the quarter.  Cash stayed in the 40-50% range.

Q2 Results:  CAMS Cornerstone Portfolio, +2.46%, net of fees.

CAMS Foundation Portfolio Foundation didn’t hold any Tech funds coming into the quarter, however did hold two Large-Cap Growth funds dominated by Tech names, so they were also sold in June, at +9% & +10% gains, respectively.  Being a more conservative portfolio, the decision became easy one – we shouldn’t hold any ‘concerns’.  We’ve maintained a position in Utilities for almost the full year now.  In the 2nd quarter, we added Healthcare, Global Bonds and some Intermediate Term Bonds.  Cash was consistent in the 40-%0% range.

Q2 Results:  CAMS Foundation Portfolio, +1.65%, net of fees.

CAMS Managed Bond Portfolio In the sense of reducing ‘concerns’ we were able to sell a Convertible Bond fund in June as ‘concerns’ rose, capturing a quick +2%.  We also sold a long-held ‘hedge’ position in Rising Rates as the yield curve rewarded being long, not short.  In an effort to gain some yield to the portfolio, we added a Long Term Government Bond position, knowing that the addition may add some near-term volatility, however offset that volatility by raising Cash for the immediate future to 20-30%.

Q2 Results:  CAMS Managed Bond Portfolio, +0.44%, net of fees.

For information on any of the other Cornerstone tactical portfolios – specifically the ‘Fund Family’ portfolios at American Funds, Invesco Funds, Oppenheimer Funds, Pioneer Funds or Franklin Funds, just reach out to portfolio manager – Nicholas Anastasakis via email at: nick@cornerstoneassetmgmt.com.

Our allocations can and do change quite frequently, so the above allocations may have changed significantly since the writing of this summary.

Sincerely,

Nicholas E. Anastasakis Senior Vice President Portfolio Manager CAMS Capstone, Cornerstone & Foundation Portfolios CAMS Managed Bond Portfolio CAMS Equity Rotation Portfolio

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