We are getting rid of the last part of the Mega-Cap Exposure and also trimming some Industrial, investing all of the proceeds into Technology. With the recent drop in ORCL, GOOG looking like a breakout, AAPL coming back to life, AMZN declining sharply and some other component moves, I wanted to move the portfolio a bit more towards the sector. On 2012 Consensus, Technology trades at a slightly lower PE than Industrials. When one looks at the valuation after incorporating cash and debt, Tech looks even better. In a real downside scenario, Tech should win. I think also in the base case Tech will fare slightly better - smaller tickets than Industrials for the most part. In a reflation trade, though, Industrials will likely appreciate more. I feel like our large exposure to Emerging Markets and Financials as well as Small-Caps balances out that scenario. Tech should beat Mega-Caps in the bullish scenario as well.
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December 26, 2011
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