Buying Goldman, Amex, Selling Altaba, Apple -- Barrons.com
DOW JONES & COMPANY, INC. 7:04 AM ET 3/13/2018
Symbol Last Price Change
GS 271.3455up -2.0345 (-0.74%)
AXP 96.15up -1.52 (-1.56%)
AABA 76.45up -1.11 (-1.43%)
WBA 70.13up -0.02 (-0.03%)
AAPL 182.4up +0.68 (+0.37%)
QUOTES AS OF 01:09:58 PM ET 03/13/2018
Ohio Public Employees Retirement System, the state's largest pension fund, has been hot.
Opers, as the pension is known, saw a 16.61% overall return in 2017 and assets now stand at $99.56 billion. What a rebound. The overall return in 2016 was only 8.23%, better than the anticipated 7.5% return projected, but lower than the benchmark return of 8.53%, and the assets stood at $90.6 billion at the end of the year.
Opers is also feeling the heat from retirees incensed that a bill would cut annual cost-of-living adjustments to a 2.5% cap from a fixed 3% to the percentage increase in the Consumer Price Index. The could reduce the system's $19 billion in unfunded liabilities by $4 billion. Opers Executive Director Karen Carraher "told lawmakers that the fund is indeed in a strong financial position," which makes coming off a good year "an ideal time" to address the funding gap.
How did Opers end 2017 strongly and position itself for 2018? A look at some recent stock trades yields some interesting moves. The pension added to positions in Goldman Sachs Group(GS) and American Express(AXP) in the fourth quarter while selling Altaba(AABA) , Walgreens Boots Alliance(WBA) and Apple(AAPL) .
Goldman had an unremarkable year, rising 7.7%, excluding dividends, in 2017, not even half of the 20% gain in the Standard & Poor's 500 Index. Yet 2018 has been headed off with the announcement of a change at the top. In our bullish January cover story, Chairman and Chief Executive Lloyd Blankfein told us, "I hear, 'Don't you know the world is different?' It is, but it's not as different as they say." It's going to be quite different now. Blankfein could retire as early as the end of the year and an heir has already emerged. We think this could be good news for shareholders. And good news for Opers, which bought 75,700 more Goldman shares in the fourth quarter, ending the year with 339,600 shares. Shares have already nearly duplicated last year's entire gain; they are up 7.6% for the year-to-date through Monday's close.
American Express (AXP) shares surged 36% in 2017. The financial-services giant has just replaced its CEO; Stephen Squeri replaced Kenneth Chenault. Another change: American Express(AXP) agreed earlier this month to disclose its gender pay gap and work to close it. The pension bought 55,900 additional American Express(AXP) shares to end the year with 571,800 shares. So far this year, the stock has eased 1%.
Opers hacked off over two-fifths of its stake in Altaba(AABA), selling 69,000 shares of the former Yahoo operations in the fourth quarter to end 2017 with 93,800 shares. And why not? Altaba(AABA) shares rocketed 81% in 2017. So far this year, they're up another 11%. Altaba(AABA) has said it will begin to sell its Yahoo Japan stake in the second quarter. We've noted speculation that the end game for Altaba(AABA) will be a purchase of the company by Alibaba Group Holding (BABA) -- effectively, a share repurchase by Alibaba, as Altaba(AABA) owns a 15% Alibaba stake.
Walgreens certainly wasn't too big for its boots, as shares slumped 11% in 2017. Our colleagues at The Wall Street Journal have noted that the pharmacy chain's interest in acquiring all of drug distributor AmerisourceBergen (ABC) may have wavered. Opers decided it needed a dose of selling in the fourth quarter, selling 31,500 Walgreens shares to reduce its stake to 610,300 shares, which have fallen 3% year-to-date.
Even after the pension sold 191,300 Apple(AAPL) shares in the fourth quarter, the remaining investment of 3.7 million shares remained the largest holding in dollar value. Apple(AAPL) shares soared 48% in 2017 and are up another 8% so far in 2018, despite questions about iPhone X demand. A new acquisition by Apple(AAPL) adds some texture to the outlook.
Speaking of outlook, it seems there may be some steam gathering to pass a bill to force Opers to divest from Russia. The move would be a retaliation against Russia for "its invasion of Crimea and interference in the 2016 election." Unfortunately, Opers may not have that much invested in Russian entities. It had about $2 million invested in Gazprom, and Opers has already lost more than half of that in its remaining Walgreens shares.
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