April 6, 2023 10:41am by
Ever see those IR stories announcing a firm is “increasing its exposure” or “boosting our stake” or “unloading shares” in a given company?
Sounds like someone with more resources, insights, and connections KNOWS something about a stock that you do not. Should you then follow the recommended announcements?
Here is why: These posts seem to be a bizarre combination of public 13-F records scraping and AI; they look like they were designed to generate clicks rather than reflect honest investment recommendations. Seems more like spin designed to surface companies to generate recognition than anything substantive.
They are noise.
At least, that’s been my experience with these sorts of things. I see all of the Google News headlines about my firm and its employees; I read every article about everything we do as a company. We also have an outside PR firm and an internal CCO tracking every public statement we make. We have regulatory and compliance obligations around what we say and do in public, and we do our very best to make sure that what we put out is accurate.
But this sort “RWM is buying X and Selling Y” kinda stuff? It’s at best misleading, and at worst, it’s cynical and disingenuous clickbait. You should always steer clear of these sorts of junk stories.
RWM runs ~$3 billion in client assets. Our core portfolios are built from mutual funds and ETFs – we are not individual stock pickers. Hence, any suggestions that we are “upgrading” or “embracing” or “dumping” shares is inherently misleading. Yet that is what these releases imply to their readers.
We also have a large and active Direct Indexing program through O’Shaughnessy’s Canvas (now part of Franklin Templeton). Though direct indexing, we own the individual stocks that are in our portfolio mutual funds. Specifically, we own the exact same stocks those funds own, and in the exact same proportion.
Direct indexing allows RWM clients to do all sorts of interesting things by owning shares individually; They can:
– Tax loss harvest very efficiently;
– Eliminate overconcentration in sectors related to their income;
– Tilt holdings towards specific factors (value, small cap, etc.);
– Remove companies from their portfolios that do not reflect their personal values.
We have a substantial amount of capital in direct indexing, and so it is easy to skew a news story from the public filings of holdings to make it look like we have an investment thesis on a given company.
But as the Chief Investment Officer of RWM, I can assure you that it is utter nonsense.
We have not “Acquired an Impressive Position in Acacia Research.” Rather, the holdings parallel the mutual funds clients own. No, we did not “Acquire Stake in Limbach Holdings, Inc. Amidst Impressive Earnings Growth;” I have no idea what Limbach Holdings is or whether its earnings are impressive or not; We have never so much as mentioned the company in our investment committee meetings. And we surely have not thought about “purchasing a new stake in Eni S.p.A. (NYSE:E)” – but since the mutual funds we own have, so too, have our direct indexing clients. As best as I can tell, however few shares of Campbell Soup we hold are decidedly not “Making Headlines.”
We may have increased our ownership of Veradigm, but 2 things I know for sure: 1) It is not because of “Growing Potential,” and 2) It’s definitely not because (despite a headline declaring so) we are a “Hedge Fund.” Because we are not. Ritholtz Wealth Management is a registered investment advisor (RIA), not a 2&20HF.
A reveal of just how weak the scraping/AI combo is just showed up recently when I learned from the news release that we decreased a position in Innoviva, despite the CEO acquiring shares and insider confidence shown – here comes the fun part – “Despite COVID-19 Uncertainties.”
Really, Covid 19 uncertainties? Is that a thing in March 2023?
Here is the actual reason: The fund that our direct index follows reduced their holding of the stock, so Canvas did so also.
As assets come into the firm, we buy for these clients mutual funds in our model portfolios, and stocks (in the same proportion as these funds) for the clients that use direct indexing. We do not think, “Hey, it’s time to increase our position in Sony by 23.9%;” rather, that reflects capital being put to work by either new clients or existing clients adding to their accounts.
Where the line gets crossed into the realm of “Have outside counsel send a Cease & Desist letter” level of misleading are things like a discussion on “telecommunications giant Lumen Technologies.” First, I am unfamiliar with the company, which at barely $2B is hardly a giant. It’s down 89% or so from highs, so the company does have that going for it (which is nice).
But this paragraph is wrong in so many ways, its libelous:
“However, Ritholtz recently released an explanation regarding this intriguing move. According to sources they claimed that these measures are part of their active portfolio management strategy which is premised on several factors amongst which include recent market volatility and potential risks associated with holding large positions in single stocks.”
We released an explanation? Not according to my records, colleagues or Google. Sources? No one spoke to me. Market Volatility? Not part of our strategy. Holding concentrated positions in single stocks? We don’t. Active portfolio management strategy? Go on…
Note I am not linking to these sites because I believe they inherently mislead investors and/or are dishonest. I have no desire to give them any publicity. I searched through a few of them, and there are endlessly repetitive stories about Buy This, Sell That that taken as a whole, add up to a lot of SEO nonsense.
These announcements seem designed to deceive the reader into believing something that (at least as related to RWM) is not true.
“Many experts agree that industry followers should keep a keen eye out for further strategic moves taken by prominent financial institutions like Ritholtz Wealth Management.”
No, you shouldn’t.
That’s not how we invest capital.
You shouldn’t either.
Tax Alpha (April 14, 2022)
Accessing Losses via Direct Indexing (April 14, 2021)
The Cutting Edge (September 30, 2021)
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