One way retail investors monitor “smart money” is by monitoring hedge funds. With enough resources, connections and investment skills, a hedge fund may “know” things you don’t. By following their latest moves, you are more likely to be able to determine if a particular stock has an opportunity or a problem. In fact, I learned about 7 stocks that hedge funds are selling.
So how do you keep track of hedge fund buys and sells? On a quarterly basis, large institutional investors such as hedge funds report their portfolio holdings in he 13F filings. we Securities and Exchange Commission (U.S. Securities and Exchange Commission). Many sites online track this 13F data and can provide insight into which stocks are online buying and selling online among hedge funds.
according to TipRanks.comhedge funds have their Alibaba (New York Stock Exchange:baba) held 12 million shares in the quarter ended September 30. So far this year, China’s once-booming e-commerce play has fallen out of favor with investors on Main Street and Wall Street. A number of headwinds in the home market, along with the drop in tech stocks, have given BABA stock a 24% haircut to him this year so far. Indeed, in the past month, BABA has recovered. But this recovery, largely fueled by expectations that China will ease its “zero Covid” restrictions, could soon reverse course.
China’s “reopening”, which could help the economic recovery, may not materialize until mid-2023. In the meantime, it may be wise to trade BABA cautiously, although some might argue that the stock (12.3 times his expected earnings) is selling at a heavily discounted valuation. not. High on the list of stocks sold by hedge funds.
Costco (Nasdaq:price) is another popular retail stock marketed by hedge funds. Between July 1 and his September 30, hedge fund holdings fell by 1.8 million shares. To some this may sound surprising.
After all, have discount retail club operators held up well in this challenging environment? , that may be correct, but there may be another factor convincing hedge funds to bid farewell to COST stocks.
At current prices, COST sells for 33.9 times the estimated revenue for the current fiscal year (ending August 31st). Costco’s monthly sales growth has been trending downward lately. Revenue growth could slow down soon. If this happens, it will become increasingly difficult for this retailer to maintain such a premium valuation against its peers, which could result in lower future returns for the stock.
Institutional investors invested in technology last quarter, especially in September, according to reports at the time. intel (Nasdaq:INTC) was not one of the top names hedge funds were lagging behind.
Simply put, this INTC stock outflow makes sense. Shares of semiconductor companies have fallen significantly over the course of the year, and for good reason. The company’s fundamentals have been weakened by lower chip demand due to the recession and Intel’s falling market share. Advanced Micro Devices (Nasdaq:AMD).
Worse, as Louis Navellier claimed earlier this month, Intel will (probably) take years to complete a successful turnaround. In the meantime, the aforementioned negative factors may further reduce the company’s profitability. Do not hold this bag in this likely value trap because of INTC’s low earnings multiple (14.6) and high dividend yield (5.1%).
Palantir Technologies (PLTR)
The hedge fund community is also turning its back Palantir Technologies (New York Stock Exchange:PLTR). A hedge fund investor cut his position in the data analytics firm by 1.8 million shares last fiscal quarter. Hedge funds may have pressed the ‘sell’ button on PLTR shares, worried about the impact of a slowing economy on the company’s growth. If so, “smart money” has made a smart move. Earnings growth was at its slowest pace in two years when Palantir reported third-quarter numbers last month.
PLTR has been trading flat since the disappointing earnings news. A broad market rally in November may have helped soften the blow. But as stocks continue to trade at frothy earnings multiples, another major downturn could be in store if the severe growth slowdown continues.
hedge fund hung up AT&T (New York Stock Exchange:T.). ‘Marvel’ has become one of the stocks hedge funds are selling, with hedge fund positions in telecom stocks dropping to 5.5 million shares last quarter.
T shares may trade at low valuations (7.3x P/E), but such low valuations are not unusual among telecom stocks. verizon (New York Stock Exchange:VZ), for example, traded at a futures return of 7.31x. T’s dividend (5.84%), which was cut last year, trails Verizon’s 7.04% dividend.
But the reason hedge funds are ignoring AT&T may be because the company continues to give off a “value trap” vibe. So far, restructuring moves such as selling media have failed to unlock value for shareholders. Despite positive signs, such as a significant increase in subscriber numbers, a “wait and see” may still be the best approach for his T-share.
A 434,200-share reduction in hedge fund holdings may not sound like much, but the figure shows just how much Wall Street moguls have lost faith in electric vehicle (EV) makers. may be underestimating. Tesla (Nasdaq:TSLA).
As motley fool As commentators discussed in November, a number of billionaire-controlled hedge funds sold or reduced their TSLA stock positions in the third quarter of 2022. Renaissance TechnologiesKen Griffin’s Citadel Advisorand the English of Israel millennium management.
Interestingly, one of these hedge fund giants (Ken Griffin) made a big bet on another leading EV stock. Rivian (Nasdaq:Riven). Last month, Luke Lango, along with George Soros and David Einhorn, said that Griffin’s big bet on RIVN meant that these investment legends see Rivian as a potential “Tesla killer” frontrunner. Rivian’s continued success could cost Tesla both in company and stock.
Reduced last quarter exposure by 11.1 million shares, visa (New York Stock Exchange:Ⅴ) is another popular stock that has made the “stocks hedge funds are selling” list. That said, hedge funds may have made the wrong move by dumping the stakes in the payment processing giant as if they were obsolete.
As Barons refuted in October, recession fears for V shares may be exaggerated. Reported growth during past recessions suggests that V’s earnings may continue to grow during the current recession. On longer timeframes, double-digit earnings growth is projected, which could pave the way for continued strong returns. Stocks have rebounded so far this quarter, but the opportunity here hasn’t come and gone. In short, the lesson here may not be to follow the lead of the hedge fund world. Instead, I suggest following Warren Buffett’s lead and piling up your V stock positions.
On publication date, Thomas Neal I did not hold (directly or indirectly) any position in any of the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the InvestorPlace.com Publishing Guidelines..