By David G. Barry
Goodbye Mark Zuckerberg and Samsung Electronics.
Hello Warren Buffet and Exxon Mobile.
If you want a snapshot of what’s happened in the stock market in 2022 look no farther than how the California State Teachers’ Retirement System’s list of top 10 public equity holdings has changed since the start of the year. At 36.7%, public equity is CalSTRS’ largest asset allocation segment. It also was the system’s worst performing asset class during the 2021-22 fiscal year, coming in at a negative 16.6%
According to information disclosed at CalSTRS’ November investment committee, the $338 billion system’s five top holdings as of August 31 were the same as they were at Dec. 31. Apple remained on top with CalSTRS’ exposure to the maker of iPhones and Macs increasing to 3.7% from 3.4%. Its exposure to Microsoft, Alphabet and Amazon decreased slightly to 2.9%, 2.1% and 1.8%. CalSTRS’ exposure to Tesla rose to 1.1% from 1%.
Apple stock has been down just over 20% year to date, Microsoft and Alphabet’s have both been down over 30%, while Amazon and Tesla’s each have fallen some 45%.
Also staying in CalSTRS’ top 10 were UnitedHealth Group, whose exposure rose from 0.6% to 0.7% and Taiwan Semiconductor, which increased to 0.8% from 0.7%.
Falling out of the top 10 were Meta Platforms, headed by Zuckerberg; Samsung and chipmaker Nvidia Corp. As of December 31, CalSTRS held 0.9% of Meta, 0.8% of Nvidia and 0.6% of Samsung. It did not disclose its new holdings for those companies, but it did say that CalSTRS had total fund portfolio exposure to Meta and Nvidia of 0.3%.
Thomas Lawrence, a senior information officer with CalSTRS, said the system’s public equity portfolio “uses passive and active strategies” and that the portfolio’s holdings “can change for many reasons, including managers rebalancing exposure to desired active or index weights due to corporate actions, such as a company merger, stock split, name change, or similar activity.”
Entering the top 10 were Buffet’s Berkshire Hathaway, Exxon Mobil, and Johnson & Johnson. CalSTRS said it had a 0.6% exposure to each within its public equity portfolio.
Berkshire Hathaway’s stock is down 3%, while Exxon Mobile has gained more than 91% and Johnson & Johnson some 4%.
The fact that Exxon Mobile is now in CalSTRS’ top 10 holdings is especially noteworthy. The system has long faced calls from activists and even some of its own members to divest from its oil and gas holdings.
CalSTRS, however, has taken a different approach. It instead has sought to engage with Exxon Mobile and others to alter their approach to climate change. As of earlier this year, CalSTRS, according to reports, had $15.6 billion invested in fossil fuels, with ownership stakes as well in Chevron, Shell, BHP and BP. The pension fund, for instance, last year supported activist investor Engine No. 1’s successful campaign to replace a fourth of Exxon Mobile’s board.
CalSTRS’ Exxon Mobile holdings as of December 31 were not disclosed in the report. But in an interview with Bloomberg in late 2021, Chief Investment Officer Christopher Ailman warned that if Exxon Mobile did not change its ways it was in danger of going the way of such once high-flying companies as Blockbuster Entertainment and Eastman Kodak.
Exxon Mobile has clearly benefitted this year from oil prices being driven up by the boycotts related to Russia’s invasion of Ukraine.
Lawrence, the CalSTRS’ spokesman, did not have any specific comments about Exxon Mobile being in the top 10 and whether its placement would lead the system to increase its efforts with the oil company.
CalSTRS’ largest single holding in its entire fund portfolio is the U.S. government. It accounts for 13.7% of the system’s total holdings and accounts for 60% of its fixed income exposure.