Merrill Report: Growth and Value Funds Heavy on Consumer Discretionary Stocks

April 6, 2005 ( - A Merrill Lynch analysis of stock holdings at 150 mutual funds shows that both growth and value funds that are overweight in consumer discretionary stocks, among other things.

According to Reuters, the analysis shows that blend funds also overweight these stocks compared to benchmarks. Consumer discretionary stocks – such as retailers – made up 16% of the average blend fund, well above the 11% weighting in the S&P 500. These blend funds were also underweight on utilities by over half of their benchmarks.

Growth funds – those investing in fast-growing companies – are overweighed on financials and consumer discretionary stocks, while staying away from consumer staples, the report said. Value funds – which attempt to buy relatively cheap companies with low price-to-earnings rations – took an opposite stance, being underweight on financials and overweight on consumer staples.

The report also found that some well-known stocks such as Pfizer and General Electric were held by both growth and value funds.

The report also attempted to identify “overowned” and “neglected” stocks, based on Merrill’s sell, neutral, and buy listings. Dell was labeled an overowned stock, while Simon Property Group was underowned, among others.

The report was not a stock-picking tool, the company said; instead, it was meant to help fund managers see how their picks deviated from the norm.