GMO’s $8 Billion Fund Beats S&P 500 Even Without Nvidia, Tesla

HFA Padded
Advisor Perspectives
Published on
Updated on

Jeremy Grantham is a famous bubble hunter, quick to point out speculative excess on Wall Street and beyond.

So it would seem like a surprise that the biggest mutual fund at his firm — GMO — is betting on many of the so-called Magnificent Seven tech stocks that have surged so much this year that they may look, well, a little bubbly.

Q3 2023 hedge fund letters, conferences and more

But to Tom Hancock, manager of the $8 billion GMO Quality Mutual Fund, there’s no contradiction per se: Hancock’s just following the firm’s recipe for investing in companies with solid track records. That’s driven the fund to an approximately 25% gain this year, outpacing the roughly 18% advance by the S&P 500 — even after it shied away from two of the benchmark’s biggest gainers, Nvidia Corp. and Tesla Inc.

The strategy is mirrored in the firm’s first ETF, the $17 million GMO US Quality ETF that was launched last month.

“It’s funny — companies like Microsoft and Apple, you would think those would be super crowded companies but I actually don’t know that they are,” said Hancock, who has been the lead portfolio manager of the mutual fund since 2015 and with GMO since 1995. “We hold them. Obviously, we think the valuations are reasonable.”

The perspective may allay some worries that big tech stocks have run too far, with the recent leg up fueled by speculation the Federal Reserve will pull the economy to a soft landing and shift to cutting interest rates early next year. The Nasdaq 100 Index, one proxy, is up 44% this year, mirroring the gain in 2020 when the Fed’s near-zero rates set off a trading frenzy.

NASDAQ 100 Still Elevated

The GMO fund has a majority of its holdings — around 90% — in consumer staples, tech and health-care. It’s underweight on industrial and financial stocks, and, at least in the last four years, has avoided telecom, utilities and energy companies. It has beat over 90% of its peers one a one-, three- and five-year basis, according to data compiled by Bloomberg.

Article by Isabelle Lee, Denitsa Tsekova of Bloomberg News, Advisor Perspectives

HFA Padded

The Advisory Profession’s Best Web Sites by Bob Veres His firm has created more than 2,000 websites for financial advisors. Bart Wisniowski, founder and CEO of Advisor Websites, has the best seat in the house to watch the rapidly evolving state-of-the-art in website design and feature sets in this age of social media, video blogs and smartphones. In a recent interview, Wisniowski not only talked about the latest developments and trends that he’s seeing; he also identified some of the advisory profession’s most interesting and creative websites.