U.S. fund managers move into consumer stocks as oil prices fall

By David Randall

NEW YORK (Reuters) - Falling oil prices are spurring U.S. mutual fund managers to pick up shares of restaurants, airlines, and retailers, all consumer stocks that have been among the worst performers in the stock market this year.

The logic? With gas prices down about 95 cents per gallon over the last six months, consumers will spend more freely this holiday shopping season than last year.

"It's starting to sink into people's psyches that the drop in oil prices is real," said Robert Stimpson, a co-portfolio manager of the White Oak Select Growth Fund.

Stimpson added retailers Ann Taylor parent Ann Inc and Guess? Inc to his portfolio over the past month. Overall, he has about 18 percent of his holdings in companies that hinge on consumer spending, up from about 6 percent at the start of the year.

Poor performances by retailers and other consumer companies earlier this year led many fund managers to pare their holdings. The average large-cap fund had 11.6 percent of its portfolio in consumer companies at the end of September, according to Morningstar data, compared with an average of 13.1 percent at the start of the year.

Since then, retailing shares have jumped 7.8 percent, nearly double the 4.6 percent gain in the broad Standard & Poor's 500 index - suggesting fund managers are moving back in.

Phil Orlando, chief equity market strategist at Federated Investors Inc has been adding consumer companies such as Alaska Air Group Inc over the past two months. He said he was not concerned by the 11 percent decline in Black Friday sales reported by the National Retail Federation.

"The behaviors of retailers themselves have changed," now that many deals are now offered before Thanksgiving, he said.

While there is little evidence yet that consumers are spending more due to lower gas prices, Eric Marshall, a co-portfolio manager of the Hodges Small Cap fund, has been buying restaurant chain stocks such as Cracker Barrel Old Country Store Inc., Popeyes Louisiana Kitchen Inc, and Brinker International Inc, the parent company of Chili's Bar and Grill.

"We see this is as a way to protect ourselves from having too much energy exposure out there," he said.

(Editing by Tim McLaughlin and Jeffrey Benkoe)