Top 3 Blog Posts of 2020

Posted by Dana Funds Investment Team on Jan 5, 2021 3:30:01 PM

As 2021 kicks off, we wanted to share a few blog posts that could help you and your clients navigate the coming year. These were among our most read blogs of 2020, but they continue to be relevant today.

The first reflects on the extreme concentration risk within the S&P 500 index. We believe this is an issue that will bear watching in 2021. The second offers several stats aimed at keeping clients invested through a bear market. We hope it provides a timeless reference guide for any client you have who may have trouble staying the course when volatility strikes. The third offers perspective on the historical divergence between growth and value stocks in recent years, which remains a topical issue.

As always, we welcome your questions or comments. If you would like for us to cover a specific topic, we would love to hear from you. Just fill out the form on our contact us page and we will be in touch! 

Warmly,

Dana Investment Team 


Top-Heavy & Troubling: S&P 500 Bears Extreme Concentration Risk

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The S&P 500 bears an extreme risk: too few stocks account for too much of its weight. The index is experiencing extreme concentration risk not seen in the last 30 years, with its five largest stocks now accounting for more than 20% of the entire index.

The chart below shows just how out of balance the weightings of the largest S&P 500 stocks have become. Currently, the total index weight of the five largest holdings is more than five standard deviations1 above normal.

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Five Stats to Keep Clients Invested Through a Volatile Market

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It’s a natural reaction to every bear market. As stocks plummet, clients start wondering whether they should pull money out of equities and wait on the sidelines until conditions improve. If you’re an advisor, you may have had several conversations along these lines recently. We salute your efforts to help clients stay the course.

At Dana, we realize the importance of staying fully invested and reflect it in our investment process, which dictates that funds hold minimal cash. Our view is that it is always better to stay fully invested because not even experts can perfectly time a rebound.

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Three Charts That Put Historic Growth-Value Divergence in Perspective

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Value stocks have quietly made a bit of a comeback in recent weeks, due in part to positive news on coronavirus vaccines, which could hold the key to opening the economy and helping many of the cyclical businesses in value indices. If this is the sign of a new turn for value, it was a long time coming.

The charts below offer perspective on just how wide the gulf between value and growth stocks has become. While we won’t try to predict whether a recent bounce by value stocks – the Russell 3000 Value Index outperformed the Russell 3000 Growth by more than 600 basis points the week ending 11/13 – we believe the wide delta in performance and valuation suggests an attractive entry point for value stocks, and a potentially long run for the investment style when it returns to favor. See below, for insight into how much value stocks have been out of favor:

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The Dana Funds are distributed by Ultimus Fund Distributors, LLC. There is no affiliation between Ultimus Fund Distributors, LLC. and the firms referenced in this blog post.