Doug Kass Model Portfolio Update ~ market folly

Tuesday, June 16, 2009

Doug Kass Model Portfolio Update

Doug Kass over at just updated his model portfolio and we wanted to post up some of his notable changes. Firstly, here's his breakdown as compared to the S&P500. His recommended weightings vary from the S&P and he provides rationale for his adjustments.

(click to enlarge)

The most noticeable differences are in the Technology and Health Care sectors. Kass thinks business spending will stay low and that government intervention threatens pricing, respectively. Kass' also keeps 29% in cash which is a smart move, as you can deploy it should opportunities arise and use it as a buffer should trouble continue. His 15% exposure to credit is interesting as well, as he deems it 'opportunistic.'

He also included a list of stocks to be used in the portfolio and we just wanted to highlight his major moves. In the financial sector, he is dropping Visa (V) from his list, and that's probably a wise move. As we've noted in our hedge fund portfolio tracking series, a TON of hedge funds own V. And, when you start to see everyone and their dog holding a stock, it's usually time to get out (or at least take profits).

Kass likes some regional banks such as SunTrust (STI), PNC (PNC), Regions Financial (RF), among other plays. In technology, he thinks the typical titans are now overvalued and instead likes Microsoft (MSFT), Dell (DELL), and Qualcomm (QCOM). Numerous hedge funds agree with him in this regard, as we've seen many funds holding large MSFT and QCOM stakes. As a matter of fact, many hedge funds also owned the titans like RIMM and AAPL too, which Kass says to avoid. But, of course, the hedge funds could have possibly already sold out by now. Lastly, in terms of credit plays, Kass likes bank debt, high yield debt, and select bank loans.

It's been a little while since we last covered Kass, as we've been inundated with the hedge fund filings. But, since Kass is a hedge fund manager himself (and noted short seller), we still like to keep track of him. In the past, we've covered his signs needed for a market recovery. Make sure to check out his model portfolio update over at TheStreet in its entirety here.

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