Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Portfolio > Economy & Markets > Stocks

Bart Geer of Putnam Equity Income Fund

Your article was successfully shared with the contacts you provided.

Quick Take: Smaller-cap stocks’ long run of outsized gains may be ending soon, says Bart Geer, lead manager of Putnam Equity Income Fd/A (PEYAX). Going forward, he predicts large-cap stocks will most likely provide the high-quality dividends his fund seeks.

Though the fund may have shifted too early into large-caps, Geer says, it is starting to see positive results. Over the long term, performance has been competitive. For the five-year period through May, the fund rose 2.7%, on average, versus 1.5% for its large-cap value fund peers. This year through June 18, the portfolio was up 2.2%, versus 2.8% for the S&P 500.

In addition to sustained outperformance, the fund has been less volatile than its peers. The portfolio’s three-year standard deviation, a measure of volatility, trails its peers. The fund has dampened volatility with its diversified strategy and by keeping stocks positions small. At the end of May, the $3.2-billion fund held 152 issues.

The Full Interview:

S&P: What are the fund’s objectives?

GEER: We aim for income and, secondarily, growth of capital. It’s easy to get income, but it’s harder to get both income and growth of capital. About 93% of our holdings have a yield. We are a well-diversified, high-quality fund, and seek to be a low risk.

S&P: Does your investment approach focus more on bottom-up or top-down criteria?

GEER: We are primarily bottom-up investors, but we have a fair number of top-down tools, so we don’t have unintended bets on things like currency and leverage. Our primary criteria are valuation to cash flow and a dividend discount model.

S&P: What have been the main changes in the fund in the past year?

GEER: We moved to a large-cap focus in May 2003, which has persisted into this year. We think the era of small- and mid-cap outperformance is coming to a close, as large-cap stocks seem to offer better discounts. We may have shifted too early, but we’re starting to see positive results from this move.

S&P: What are the fund’s largest sectors?

GEER: Our sector weightings haven’t changed very much in the past year. The largest sectors are financials, 34%; consumer cyclicals, 11.4%; energy, 10.8%; and technology, 7.2%.

Financials are inexpensive and a big piece of our universe. Two years ago, we were dramatically overweight in regional banks, but today we’re underweight in that area. Now, we have some credit card companies, insurance companies, and money center banks. The large banks are more diversified than regional banks. Citigroup Inc. (C) has a big international presence, so it’s not solely dependent on the U.S.

S&P: How are you approaching the technology sector?

GEER: We have two big positions: Xerox Corp. (XRX), which is a late turnaround story, and Hewlett-Packard (HPQ), which we bought when investors didn’t like the Compaq takeover.

S&P: Have the dividend tax cuts affected your investment process?

GEER: If last year wasn’t a high-return year, people might have cared about tax breaks. Going forward when returns aren’t so robust, it might make a difference, but probably on the margins.

S&P: Why is the fund less volatile than its peers?

GEER: We are a low risk fund. When building the portfolio, we are very diversified and spread our bets.

S&P: Why have the fund’s long-term returns been competitive?

GEER: Over the long term, the fund has been disciplined and generally stuck to its knitting.

S&P: What are the fund’s largest holdings?

GEER: Citigroup, Exxon Mobil (XOM), Bank of America (BAC), U.S. Bancorp (USB), and Hewlett-Packard.

Contact Robert F. Keane with questions or comments at:

[email protected].


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.