Wells Fargo lists 25 big-name stocks to hedge against fund favorites
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The equity team at Wells Fargo constructed a pseudo-hedge portfolio for those who want protection against stocks loved by active long-only money managers.
"It contains 25 stocks that are the (long-only fundamental core) funds' largest consensus underweights as of Dec. 2021," Chris Harvey, head of equity strategy, wrote in a note. "Broadly speaking, we would expect this basket to outperform the S&P500 (SP500)
(NYSEARCA:SPY) when LCF Core funds are underperforming the same benchmark."
"Overweights and underweights for (large cap fundamental) and (large cap quant) portfolios are highly skewed: the largest underweights ('Bottom 5') are 1.5-3.3x bigger than their largest overweights ('Top 5')," Harvey said. "This suggests PMs firmly believe select uber-caps (Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA)) will underperform their sector peers."
"In our view, the asymmetric weighing scheme does not make sense because these uber-cap underweights are some of the most widely-followed and analyzed stocks in the world. Why would the average PM have their largest active underweights in the most efficient part of the market? It is hard for us to see the logic, and the results do not help."
They noted four things about manager weightings:

"Active managers do not like playing "D" (Underweight Defensive sectors)."
"PMs want access to the Asian consumer."
"AAPL, MSFT and TSLA remain major underweights, and there is little love for Disney (NYSE:DIS)."
"ESG funds are warming up to Energy (NYSEARCA:XLE)."

The 25 stocks in the Wells Fargo Equity Strategy Active Management Hedge Portfolio are:

AT&T (NYSE:T), portfolio weighting 2.5%, analyst rating Equal Weight
Verizon (NYSE:VZ), 2.7%, Equal Weight
Amazon (NASDAQ:AMZN), 8.4%, Overweight
Home Depot (NYSE:HD), 3.1%, Overweight
Lowe's (NYSE:LOW), 2.5%, Overweight
McDonald's (NYSE:MCD), 2.6%, Overweight
Target (NYSE:TGT), 2.4%, Equal Weight
Tesla (TSLA), 6.9%, Equal Weight
Costco (NASDAQ:COST), 2.7%, Overweight
Coca-Cola (NYSE:KO), 2.7%, Overweight
Procter & Gamble (NYSE:PG), 3.1%, Overweight
Walmart (NYSE:WMT), 2.6%, Overweight
Chevron (NYSE:CVX), 2.8%, Overweight
Exxon Mobil (NYSE:XOM), 3%, Overweight
JPMorgan Chase (NYSE:JPM), 3.2%, Equal Weight
AbbVie (NYSE:ABBV), 2.7%, Overweight
Johnson & Johnson (NYSE:JNJ), 6.2%, Overweight
Merck (NYSE:MRK), 2.6%, Overweight
Pfizer (NYSE:PFE), 2.9%, Overweight
Apple (AAPL), 12.1%, Overweight
Cisco (NASDAQ:CSCO), 2.7%, Overweight
IBM (NYSE:IBM), 2.4%
Intel (NASDAQ:INTC), 2.6%, Equal Weight
Microsoft (MSFT), 11.1%, Overweight
Nvidia (NASDAQ:NVDA), 3.7%, Overweight

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