Buy-side still concentrated in most liquid stocks despite market recovery

Investment managers are still limiting their investments to the most liquid US stocks despite recent economic recovery, according to research by Abel/Noser.

Investment managers are still limiting their investments to the most liquid US stocks despite recent economic recovery, according to research by Abel/Noser.

Nearly 25% of asset managers’ investments are spread across just 40 of the 13,000 stocks in the US market, showing institutions are still cautious to invest in less liquid companies more than five years after the financial crisis.

An analysis of 13-F filings found Apple, Google, ExxonMobil, Microsoft and Well Fargo were the stocks most held by institutional investors. These five accounted for 6.45% of asset managers’ total investment.

Three quarters of all dollars traded daily in Q4 2013 were spread among the 600 most liquid stocks, with institutional investors accounting for the bulk of those trades.

The five most traded shares include Apple, Facebook, Tesla Motors, Google and Microsoft, and between them account for 8.83% of average daily trading volume.

Bill Conlin, president and CEO of Abel/Noser, said: “Nearly five-and-a-half years after the great financial crisis of 2008, liquidity is still king.

“Despite the run-up in the S&P 500 over the past few years, and even as small-caps trade at more compelling valuations, institutional investors remain skittish about putting money into stocks they can’t get in and out of easily. Traders need to be extra vigilant when taking a position in names outside of the top 50.”

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