We track the positions of sixteen billionaires to fuel our “beat the billionaires” strategy. As savvy market participants, this group of billionaires serves as an indicator of where the smart money is flowing. Today, we’ll look at their sector allocations and portfolio changes for fourth quarter 2017.

The first thing we observe from the sector breakdown, shown below, is that the consumer discretionary, financials, and information technology sectors remain the most heavily weighted. Telecommunications saw the largest net positive change.

#SectorSector ETFQ4Q3 – Q4 Change
1Consumer DiscretionaryXLY24.14%-0.66%
4Health CareXLV8.07%6.46%
5Fund – 7.37%3.22%
9Consumer StaplesXLP3.92%-5.77%
10Telecommunications ServicesVOX1.03%21.18%

The billionaires’ allocation to consumer discretionary declined by a very small amount (almost to the point of being unchanged)… while allocation to the financial sector increased… and allocation to information technology declined significantly.

The consumer discretionary sector (XLY), shown below, remains strong in price performance terms. This is not surprising, as it remains the billionaires’ heaviest weighted area by a large margin. The TradeStops SSI trend is up, and XLY is currently in the Green Zone.

XLY strong price performance

The financial sector (XLF) – which saw a net increase of billionaire interest also appears strong, as shown below. This makes sense against the current economic backdrop, as the banks are expected to benefit from expanding loan margins as the US economy recovers and interest rates rise. The TradeStops SSI trend is up, and XLF is currently in the Green Zone.

Strong XLF performance and billionaire interest

Information technology (XLK), the third most heavily weighted sector by our billionaires, saw a significant percentage drop in the fourth quarter. This suggests the billionaires are cooling toward the tech sector, or they may see better profit opportunities elsewhere. The TradeStops SSI trend is up, and XLK is currently in the Green Zone.

XLK 4th quarter drop

The health care sector (XLV) has seen more volatility than other sectors. XLV actually stopped out during the recent correction. The SSI trend is rolling over too. But the billionaires are increasing their allocation to the health care space, which suggests an improving outlook.

XLV drops during market correction but may be improving

Finally, industrials (XLI) are flashing a warning sign. Industrials have seen a high degree of volatility relative to the other, stronger sectors. At the same time, the billionaires made their second largest rotational move out of the industrials sector with an 18.20% decline.

XLI is showing a warning sign

The overall picture from our billionaires suggests that the consumer discretionary sector remains strong… information technology is also strong but cooling somewhat… interest in financials and health care is picking up… and industrials could be in trouble.