December 3, 2021

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The 5 Most-Sold Guru Stocks of the 3rd Quarter

8 min read

The third quarter was undeniably another bull run for stock markets with the major U.S. indexes reaching unprecedented highs. The S&P 500 surpassed 3,500 for the first time in history, the Nasdaq rocketed above 11,000 and the Dow Jones Industrial Average came within a few hundred points of recovering from its pre-Covid highs.

As a result, the U.S. stock market is more overvalued than ever. The Buffett Indicator, which is the ratio of total market cap to gross domestic product, stands at 183.1% as of Dec. 7, indicating the U.S. stock market is significantly overvalued. This metric is named after Warren Buffett (Trades, Portfolio), who famously called it “probably the best single measure of where valuations stand at any given moment.”

In the midst of this overvalued market, there are some stocks that gurus are ditching at a faster rate than others, either selling while prices are abnormally high or cutting their losses on a long-term underperforming name. According to GuruFocus’ Hot Picks, a feature which allows investors to screen for the stocks that had the most guru buys or sells over a specific time frame, the five stocks that gurus sold the most during the third quarter (as determined by net sells) were Comcast Corp. (NASDAQ:CMCSA), Lowe’s Companies Inc. (NYSE:LOW), Oracle Corp. (NYSE:ORCL), JPMorgan Chase & Co. (NYSE:JPM) and Alphabet Inc. (NASDAQ:GOOGL).

Comcast

Comcast is an American telecommunications conglomerate based in Pennsylvania. It operates through two main segments: Comcast Cable, which provides video, high-speed internet and phone plans to residences under the XFINITY brand, and NBCUniversal, which owns a portfolio of television news and entertainment assets.

During the quarter, six gurus bought shares of Comcast while 27 gurus sold shares of the stock, resulting in 21 net sells. At the quarter’s end, the stock was in the portfolios of 36 gurus.

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Andreas Halvorsen (Trades, Portfolio) cut his firm’s stake in the company by 64.78% during the quarter, while First Pacific Advisors (Trades, Portfolio) reduced its position by 10.19% and Kahn Brothers (Trades, Portfolio) cut its stake by 28.86%. Ray Dalio (Trades, Portfolio) sold out of the stock.

During the quarter, shares of Comcast traded for an average price of $43.43. As of Dec. 7, the stock trades around $51.70 with a 52-week range of $31.71 to $52.49. The GuruFocus Value chart rates the stock as modestly overvalued.

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Comcast’s filmed entertainment and theme park businesses have taken significant hits due to the pandemic, which has hurt a major aspect of the company that cautious investors used to like – its balance sheet. Its cable and broadband businesses have continued to grow, as has its streaming service, but the trend of cord-cutting may be another factor that investors find to be a downside as it is expected to resume post-pandemic.

Thus, while Comcast’s diverse portfolio of entertainment assets remains a source of strength for the company, as does its strategy of utilizing existing businesses to drive the success of new ones – for example, the company’s wireless services relies heavily on its wired broadband connections – it will likely see its profits drop and its balance sheet worsen in the short term.

Lowe’s Companies

Lowe’s is a retail company that owns and operates a chain of over 2,300 home improvement and hardware stores. Most of the North Carolina-based company’s stores are in the U.S., though it has some in Canada as well.

During the quarter, three gurus bought shares of Lowe’s while 18 gurus sold shares of the stock, resulting in 15 net sells. At the quarter’s end, the stock was in the portfolios of 22 gurus.

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Mario Gabelli (Trades, Portfolio)’s firm reduced its holding in the company by 21.63% during the quarter, while Jeremy Grantham (Trades, Portfolio)’s firm made a 27.5% reduction and Lee Ainslie (Trades, Portfolio)’s firm sold 95.10%. Andreas Halvorsen (Trades, Portfolio) sold out of the stock.

During the quarter, shares of Lowe’s traded for an average price of $153.75. As of Dec. 7, the stock trades around $151.13 with a 52-week range of $60 to $180.67. The GuruFocus Value chart rates the stock as fairly valued.

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Along with its closest competitor Home Depot (NYSE:HD), Lowe’s has been a favorite “pandemic stock” among many investors as it has seen its profits increase due to the booming housing market and the increase in at-home DIY projects as consumers are staying home more often.

However, the longer the economy remains in a recession, the more this tailwind will disappear as household disposable income decreases further. On the other hand, an end to the Covid-19-induced economic recession will also mean a drop in the company’s profits as the factors that made it so attractive during the pandemic disappear. With a drop in earnings in view either way, many investors are expecting the stock to face a pullback.

Oracle

Oracle is a computer software company based in Redwood Shores, California. Best known for its Oracle database software and its computer systems and software, such as Solaris and Java, the company designs, manufactures and sells a variety of technology and software products.

During the quarter, seven gurus bought shares of Oracle while 21 gurus sold shares of the stock, resulting in 14 net sells. At the quarter’s end, the stock was in the portfolios of 29 gurus.

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The Yacktman Focused Fund (Trades, Portfolio) cut its holding in the company by 52.83%, while Charles Brandes (Trades, Portfolio) reduced his firm’s investment by 28.11% and Sarah Ketterer (Trades, Portfolio)’s Causeway Capital Management sold 43.25%. John Hussman (Trades, Portfolio), Jim Simons (Trades, Portfolio) and Charles de Vaulx (Trades, Portfolio) sold out of the stock.

During the quarter, shares of Oracle traded for an average price of $56.78. As of Dec. 7, the stock trades around $59.81 with a 52-week range of $39.71 to $62.60. The GuruFocus Value chart rates the stock as fairly valued.

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Cloud infrastructure and applications continue to be the big drivers at Oracle as the company solidifies is multiyear transition effort from its antiquated on-premises database software licensing and maintenance model.

However, the company was a bit late to the game and launched its costly restructuring effort amidst already-thriving competition while at the same time cutting off its legacy business, adding to the declines in revenue from this segment as demand dwindled. In order to prop up its flagging stock price, Oracle also relied heavily on share buybacks, adding to the cost of the restructuring effort.

JPMorgan Chase

JPMorgan is the largest U.S. bank major with approximately $2.98 trillion in assets under management. Headquartered in New York, it offers a wide variety of both traditional and investment banking services in the U.S. and internationally.

During the quarter, 10 gurus bought shares of JPMorgan while 23 gurus sold shares of the stock, resulting in 13 net sells. At the quarter’s end, the stock was in the portfolios of 31 gurus.

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Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) reduced its investment in the company by 95.64%, while the T Rowe Price Equity Income Fund (Trades, Portfolio) made a 36.17% reduction and Richard Pzena (Trades, Portfolio)’s firm made a 10.64% cut. George Soros (Trades, Portfolio), Leon Cooperman (Trades, Portfolio), First Pacific Advisors (Trades, Portfolio), Caxton Associates (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies sold out of the stock.

During the quarter, shares of JPMorgan traded for an average price of $98.20. As of Dec. 7, the stock trades around $121.51 with a 52-week range of $76.91 to $141.10. The GuruFocus Value chart rates the stock as “fairly valued.”

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The Fed has decided to keep the base interest rate at 0% to 0.25% in the long term to stimulate the weak economy and make borrowing cheaper. Citing continued low economic activity and unemployment compared to recent years, the Federal Open Market Committee now aims for inflation that will result in a “longer run” average of 2%, with no clear goal of when interest rates can be expected to increase again.

This chokes off the traditional source of income for banks. Accompanied by any loan defaults that can be expected from individuals and corporations alike due to the recession, JPMorgan’s main source of increasing profits comes from investment banking, which makes up only a small portion of its income. Given the sector headwinds, investors may expect the largest bank in the U.S. to show lackluster stock price growth in the coming years.

Alphabet

Based in Mountain View, California, Alphabet is a multinational conglomerate that was formed as part of a restructuring of Google in 2015, in which Alphabet became the parent company of Google and several former Google subsidiaries.

During the quarter, 12 gurus bought shares of Alphabet while 24 gurus sold shares of the stock, resulting in 12 net sells. At the quarter’s end, the stock was in the portfolios of 44 gurus.

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Diamond Hill Capital (Trades, Portfolio) reduced its holding in the company by 46.50%, Chris Davis (Trades, Portfolio) cut his firm’s stake by 26.58% and Glenn Greenberg (Trades, Portfolio) reduced the position by 52.23%. It is worth noting that no gurus actually sold out of the stock during the third quarter, even though many sold part of their holdings.

During the quarter, shares of Alphabet traded for an average price of $1,523.87. As of Dec. 7, the stock trades around $1,806.35 with a 52-week range of $1,008.87 to $1,843.83. The GuruFocus Value chart rates the stock as modestly overvalued.

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Some may find it surprising that Alphabet has made the list of top guru sells for the second quarter in a row. According to analysts, the stock is not terribly overvalued, as earnings per share are expected to come in at $51.43 for 2020 and increase to $58.32 in 2021 and $69.10 in 2022. The company has an undeniable monopoly with its search engine in the U.S., which should help keep the revenue it receives from third parties growing strong.

However, antitrust issues have been a concern with the company for years, and things have come to a head with the U.S. Justice Department filing an antitrust lawsuit against Alphabet in October. A bipartisan group of U.S. states is also reportedly planning to bring a lawsuit against the company as early as December. Though investors do not seem concerned enough over this to dump their positions quite yet, as everything is still up in the air, some are clearly cutting back on their risk exposure while the stock price is high.

Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Investors should always conduct their own careful research and/or consult registered investment advisors before taking action in the stock market.

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