Kentucky’s teachers’ pension reduced positions in Apple, Microsoft, and Intel stock in the second quarter. It also initiated a position in Slack stock.
Justin Sullivan/Getty ImagesThe latest fiscal year for Kentucky’s teachers’ pension was relatively successful.
Teachers’ Retirement System of the State of Kentucky said last month that its investments posted a 5.8% gross gain for the fiscal year ended June 30, placing it “among the top 5% of large pension plans.” In the second calendar quarter, the last of its fiscal year, the pension made some big changes in its stock investments, lowering stakes in Apple (ticker: AAPL), Microsoft (MSFT), and Intel (INTC), and initiating a position in Slack Technologies (WORK).
Although the latest fiscal year had upbeat results, TRS remains challenged. The latest actuarial valuation of the pension showed that its funded ratio as of June 30, 2019, stood at 58.1%; in other words, it had 58.1 cents for every dollar of obligation owed. Still, that was an improvement from 57.7% the year before.
The pension, which manages $22 billion in assets, said selling Apple, Microsoft, and Intel stock during the second quarter “was just the normal process of TRS rebalancing its portfolio.”
“As the market ran up, TRS rebalanced periodically by selling stocks and purchasing bonds,” the pension wrote in an email. “Most of the rebalancing was accomplished by selling from TRS’s passively managed S&P 500 index fund.”
The pension added that “outside managers for TRS added Slack in late May.”
TRS sold 80,785 Apple shares in the second quarter, reducing its investment to 740,787 shares of the iPhone maker.
Apple stock has soared 52.6% year to date through Friday’s close, including a 22.8% surge in the third quarter. In comparison, the S&P 500 is up 3.4% year to date, including a 7.8% gain in the third quarter.
Apple recently became the first publicly traded U.S. company to reach a market capitalization of $2 trillion. Its valuation remains near that mark despite recent volatility. Apple’s forthcoming introduction of 5G phones could boost shares.
The pension sold 127,348 Microsoft shares, lowering its investment to 1.3 million shares of the software giant at the end of June.
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Microsoft stock has gained 29.4% year to date, including a flat performance so far in the third quarter.
Microsoft earnings have been strong through the coronavirus pandemic. One observer thinks the Microsoft Teams communications platform can continue to take market share from rivals.
Intel stock sits with a 17.7% loss year to date, about the same drop in the third quarter.
Production problems have weighed on the shares of the chip giant. CEO Bob Swan defended the company’s research and development spending. “The returns we generate continue to be extremely, extremely attractive and our expectation is that would be the case going forward.”
TRS sold 111,950 Intel shares in the second quarter, lowering its investment to 802,280 shares.
The pension also initiated a position of 193,680 Slack shares in the second quarter. It hadn’t owned any shares of the messaging-platform provider at the end of the first quarter.
Slack stock has tacked on 14.1% year to date after a 17.5% drop in the third quarter.
Despite strong second-quarter revenue, reported earlier this month, billings were disappointing. Analysts have been lowering target prices.
Inside Scoop is a regular Barron’s feature covering stock transactions by corporate executives and board members—so-called insiders—as well as large shareholders, politicians, and other prominent figures. Due to their insider status, these investors are required to disclose stock trades with the Securities and Exchange Commission or other regulatory groups.
Write to Ed Lin at edward.lin@barrons.com and follow @BarronsEdLin.
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