A recession is expected in an economy within the next year. Portfolio Manager A has shifted more of their stocks from the financial industry to the health care industry. Portfolio Manager B has shifted more of their stocks from the technology industry to the utility industry. Which of the following statements is most accurate regarding the performance of each manager?
A) Portfolio Manager A is expected to underperform the broad market while Portfolio Manager B is expected to outperform the broad market.
B) Portfolio Manager A is expected to outperform the broad market and Portfolio Manager B is expected to outperform the broad market.
C) Portfolio Manager A is expected to outperform the broad market while Portfolio Manager B is expected to underperform the broad market.作者: bpdulog 时间: 2011-7-13 16:05
C
Growth: HC to outperform in recession.
Value: Utilities to underperform in recession.作者: Zestt 时间: 2011-7-13 16:05
A - i always mess this up though...
utes def defensive. financial also defensive
Healthcare and tech are growth.
Do you want to be in growth or value in a recession....value will have earnings ties to cycles, while growth should not per CFA which is BS in my opinion. No one spends on IT in the recession, but they pay their electric bill...so i would want to be in the defensives, but alas I think im wrong here. CFA looks at earnings cyclicality and value is highly cyclical.
Edited 1 time(s). Last edit at Thursday, June 2, 2011 at 04:28PM by june2009.作者: mp3bu 时间: 2011-7-13 16:05
paraguat was correct... growth outperforms in a recession and HC is considered growth per CFAI作者: nannan66 时间: 2011-7-13 16:05
Don't defensive stocks do well in a recession? i would have thought that growth stocks get beaten --- perhaps logic is beating me here作者: jmh530 时间: 2011-7-13 16:05
It's the stupid texts that say Growth stocks outperform in recession because people are willing to pay more for GARP. I hate the answer but it is in there.
Value moves from making a profit to no longer profitable during recession.
Answer is move to growth if recession coming.
I would move to utilities but that is me.作者: Darien 时间: 2011-7-13 16:05
logic doesnt work here, thats why i posted this... its not about defensive, its about growth vs. value... CFAI says growth outperforms in recession.作者: ohai 时间: 2011-7-13 16:05
growth stock outperforms in recession because in recession seldom companies get earnings growth , it is in book ... but not reality作者: Windjammer 时间: 2011-7-13 16:05
F this......i hate these generalities about cycles and earnings sensitivity in growth and value.
I guess we just take it at face value....focus on CFA views on cyclicality.作者: Colum 时间: 2011-7-13 16:05
