Across all R2000 stocks (and not just those stocks in the Top 200), small-cap managers notably increased Tech, Energy, Industrials and Materials ownership breadth with more modest increases in Health Care and Consumer Discretionary. The most cutting occurred in Financials and Staples with marginal reductions in Comm Services and Utilities; Real Estate ownership breadth was unchanged.
The Top 200 notably increased its Health Care nominal and relative weights. Tech’s higher nominal weight failed to keep up with the index’ increased Tech weight. Industrials nominal and relative weight reductions were surprising though it still remains the most Overweight sector. Real Estate, Comm Services, Financials and Energy remain the most Underweight despite increased Comm Services nominal weight and reduction in the Financials underweight. The Top 200’s lack of a Tech overweight is its biggest weakness, in our opinion, though managers increased their overall Tech ownership breadth (as seen in paragraph 1) but are just not all concentrated in the same names (which is what drives Top 200 membership). Similarly, the Top 200’s Consumer Discretionary sizeable overweight, which increased over the past three months, may be due more to a lack of quality options, in effect coercing managers to huddle into common key names.