Whats the funds weighting of convertible securities?
About 20%. Convertible securities provide participation in the underlying equity, assuming it goes up, and they help smooth out the ride. Q: Do you consider any top-down macroeconomic criteria? A: We don’t pay attention to where a company is in its profit cycle. We’re more interested in companies with below-average profits for transitory reasons. For example, we’re avoiding Toys ‘R’ Us (TOY ) because of its weak position relative to Wal-Mart Stores (WMT ), not because of overall demand due to the economic cycle. Q: What are the fund’s largest sector weightings? A: At the end of May, financials were 15.2% of the fund; energy, 11.3%; consumer noncyclicals, 10.7%; industrials, 9.6%; and utilities, 8.7%. Financials are our biggest underweighting relative to the S&P 500. Financials are a cyclical area like technology and are now overloved and overowned. Earlier this year, we had an overweighting in asset managers, but we’ve since pared back our holdings, including T. Rowe Price Group (TROW
