Fund managers have been buys repositioning their ASX 200 share portfolio even before the omicron COVID-19 outbreak hit.
Capital flows have been rotating into defensives from cyclical shares on the S&P/ASX 200 Index (Index:^AXJO), reported JPMorgan.
The latest fund manager survey by the broker provides insights to where these professionals see the best value buys.
ASX 200 shares that are hot and not
“Most of the flows have been directed into defensives, with Communication Services the preferred destination,” said JPMorgan.
“This pattern is evident through the performance of Value vs. Growth, with the former underperforming sharply since mid-year (-1206bp).”
The broker noted a similar theme for global shares, but it is particularly pronounced in ASX 200 shares.
One beneficiary of the rotation is the Telstra Corporation Ltd (ASX: TLS) share price. The telco is trading close to a four-year high at $4.06 at the time of writing.
“A clear favourite in the defensive dial-up has been TLS, which has seen its proportion of top stock holdings rise from 3.4% in Jan-21 to 4.3% currently,” said JPMorgan.
“In addition, this move has been accompanied by an increase in the average manager OW to 180bp. Through that period, the stock has outperformed the ASX 200 by 1100bp.”
Gold is another defensive sector that’s with the “in” crowd. That makes sense given inflation fears and jitters over renewed COVID lockdowns.
The ASX 200 share that is benefitting from this thematic is the Newcrest Mining Ltd (ASX: NCM) share price. The broker noted that the gold miner entered into the “well-held” territory this month.
Another ASX 200 finding favour
Another favourite of fund managers is the Aristocrat Leisure Limited (ASX: ALL) share price. You might not think the gaming machine maker as a defensive investment, but experts are confident in its growth outlook.
“ALL has been a near-permanent member of the ‘well-held’ cohort in our Love Index,” said JPMorgan.
“Since the turn of the year, conviction in the stock has ratcheted higher, with the number of funds holding the stock rising sharply.”
The proportion of the Aristocrat share price held by fundies rose to 5% in October from under 1.5% at the start of calendar 2021.
JPMorgan has an “overweight” recommendation on both Telstra share price and Aristocrat share price.