Greg Sweeney, cio and manager of $900 million in fixed income at State Bank and Trust of Fargo, is looking to industrials and utilities to even out his portfolio. "Right now, my focus has been to look for value in industrials and utilities, especially in first mortgage bonds, and to avoid financials within the corporate sector," Sweeney commented. He noted that he is "too full on financials. I'm putting whatever new cash that comes in toward industries and utilities."
He admits that the last month or so has been quite slow when it comes to investing. "I really haven't been doing anything for a while now, there hasn't been much cash coming in and I haven't had any maturities come up lately. In a way, I've almost been helped [by the inactivity] as interest rates on the 10-year Treasuries have been rough," he explained.
Sweeney describes his investment strategy as "reluctant." He prefers not to enter into any deals unless he can get good spreads. "It all comes down to who you believe, the news or your data. If you watch the news, they say things aren't great; that inflation pressure is building, not waning. We trust our data and we disagree with those statements. That's the reason for our short benchmark," Sweeney noted. His benchmark is the Lehman Brothers Government Credit Index. His duration is a short 3.6 years.
Sweeney feels that despite reports, the economy is strong, there is the potential for growth, the stock market is undervalued, bonds are overvalued and inflation is understated, said he, adding that believes that it is actually closer to 3% than the widely reported 2%. "Personally, I like to look at the shape of the yield curve and apply that to my portfolio structure. I can go out just far enough to go past my current duration and invest in the five-year maturity range that comes up in 2010 or 2011. I rarely like to go further than that; I need to stay within that range," Sweeney added.
His portfolio is close to, or heading toward, neutral in all areas save for industrials and utilities in which he is underweight, but as stated, not by his design as he is full up on financials.
