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Stock picking is making a comeback in 2012 as global macroeconomic concerns dissipate and the Federal Reserve hints at removing liquidity , causing stocks to rise or fall on their own merits again and not as one giant, correlated basket as they did during the financial crisis and its aftermath.
Since the start of the year, 63 percent of fund managers are beating the S&P 500 , up from just 26 percent over the last 12 months, according to a report from Bank of America Merrill Lynch. Even more impressive, 95 percent of growth fund managers are beating the S&P 500 over the last three months.
“ Stock picking paid in 1Q,” wrote Savita Subramanian, chief equity and quant strategist for the firm in a note to clients Tuesday. “While fund managers in 2011 were likely hurt by record-high correlations in the second half, correlations have since dropped dramatically, remaining at low levels throughout the first quarter of this year. In general, when correlations abate and stocks are more differentiated, active stock selection strategies may start to add more alpha.”
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