Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn


How often do fund managers check their stocks?

Morningstar.com.au  |  21 Jul 2021Text size  Decrease  Increase  |  
Email to Friend

Active equity managers are under more pressure than ever to outperform their passive counterparts and must stay on top of current market trends. This prompted Morningstar Manager Research analysts to ask: how often portfolio managers check the performance of stocks they hold?

The short-term ups and downs of the stock market can seem like a casino. Prices updating every second, flashing green and red lights, and constant news updates can lure investors into checking their portfolios constantly. Even some professional portfolio managers admitted that it is hard not to check at times.

Several managers check performance throughout the day, citing the importance of looking for fresh opportunities. Others said that they try to ignore daily returns to disregard as much short-term noise as possible.

“It’s like looking at paint dry,” said John Mowrey, manager of Virtus NFJ Dividend Value (PNEAX), when asked how often he checks the performance of the stocks in his portfolios.

The NFJ team prefers daily monitoring of relative valuations rather than price movements. The team creates custom peer groups that it feels are more suitable comparisons than traditional industry groupings. This relative valuation approach allowed the value-oriented team to snap up growthier names such as Microsoft (MSFT) and Mastercard (MA) when their valuations nearly halved during 2020’s first-quarter sell-off.

Others also cited monitoring valuation, not price movements, on a regular basis. Caesar Bryan, longtime manager of Gabelli Gold (GOLDX), watches the performance of his stocks closely but rarely trades. He prints out two sheets with the same metrics every day: one has the portfolio’s current holdings, while the other has stocks on his watchlist. Bryan believes that it can be instructive to see how similar companies can trade relative to one another.

While investors expect daily price fluctuations, it is occasionally unclear what’s driving trading activity. To avoid overthinking short-term movements, some managers rely on their analysts to alert them of material news. This approach came up in several conversations.

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

Ethan Meyers, manager of Touchstone Mid Cap Growth (TEGAX) and Harbor Small Cap Growth (HASGX), confessed that he feels the impulse to review returns after a few hours away. Indeed, Meyers believes there is some value in staying on top of market developments. Yet Meyers tries to ensure the constant checking doesn’t impact decision-making. The team’s sector heads access real-time attribution, allowing the rest of the group to focus its efforts and attention elsewhere.

Mike Smith, comanager of Wells Fargo Discovery (WFDAX) and Wells Fargo Enterprise (SENAX), also relies on his team for relevant updates; traders notify him of unusual price activity. Smith, who started as a trader, believes that if an investment depends on the fluxes of a few decimal points, it’s not a good idea.

Managers often cited the trailing week’s returns as the shortest stretch that provided insight. Wells Fargo Discovery comanager Chris Warner and Harbor Small Cap Value’s (HASCX) Pavel Sokolov shared this sentiment. Sokolov and company review performance on a weekly basis in recurring meetings but try to avoid overanalysing short-term price movements. The weekly review does, however, often spark broader discussions about names in the portfolio.

While most managers seemed to regularly check stock returns or valuations, Austin Hawley of Diamond Hill Large Cap (DHLRX) was not so keen on checking performance daily, weekly, or even monthly. Hawley is vaguely aware of performance over various periods but believes monitoring short-term gyrations has little to do with his long-term investment theses. The fund’s low turnover backs up Hawley’s statements. It has ranged from 22% to 33% over the past three years, versus 28% to 43% for the large-value Morningstar Category median.

The wide array of answers shows there is no one right way of going about checking performance. Rather, the question gives a glimpse into managers' own unique processes. One could argue that how often a manager checks on the performance of holdings is far less important than when a manager chooses to act on those impulses.


© 2022 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'regulated financial advice' under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

Email To Friend