5 Stocks Billionaire Ken Fisher Dumped

Superinvestor and billionaire Ken Fisher manages a multibillion-dollar hedge fund, and his picks have outperformed the S&P 500 by more than 5% on average annually for the past 15 years.  Every quarter, money managers like Fisher must disclose their stock comings and goings. Investors watch their every move to glean nuggets of investing wisdom.

Let's take a closer look at some stocks that Fisher offloaded this past quarter as per Fisher Asset Management's most recent 13-F SEC filing.

Company

Action

P/E Ratio

5-Year Return

Baidu (Nasdaq: BIDU  )

Decreased position by 60%

17

150%

Freeport-McMoRan Copper & Gold (NYSE: FCX  )

Decreased position by 99%

12

(22%)

Starbucks (Nasdaq: SBUX  )

Decreased position by 98%

28

117%

Las Vegas Sands (NYSE: LVS  )

Decreased position by 99%

26

(61%)

Wynn Resorts (Nasdaq: WYNN  )

Sold out completely

20

(15%)

Sources: Whale Wisdom, The Motley Fool, Yahoo! Finance. 

Referred to as the "Chinese Google," Baidu is the most visited website in China and the fifth-most-visited website in the world. But risks to Baidu that may have triggered Fisher's decision to sell 60% of his position in the company are numerous. First, a slowdown in the Chinese economy could diminish advertisers' spending. Second, Baidu could fall short of developing free services to retain strong usage numbers. And as search traffic moves to mobile devices, Baidu will need to develop a profitable way to monetize search ads. 

Fisher all but completely sold out of his Freeport-McMoRan Copper & Gold position in the third quarter. The stock appears undervalued at a P/E ratio of 12 compared with the P/E of the S&P 500, currently near 15. Even though Freeport is an inexpensive producer of copper, it's been hurt by low copper prices and the economic slowdown in China.  Freeport has a lot of potential for the patient investor, but clearly Fisher had enough. The stock has retreated 22% during the past five years.

Highly profitable Starbucks boasts tremendous size and brand equity. These competitive advantages will help the company gain market share and grow profits as it integrates recent Teavana, La Boulange Bakery, and Evolution Fresh acquisitions  and expands into foreign markets. But Starbucks faces commodity cost inflation  and increasing coffee competition from McDonald's, Dunkin' Brands, and others. Also, a weak and prolonged consumer-spending environment could detrimentally affect Starbucks' higher priced products. And Starbucks' frothy valuation can't be ignored. Its P/E ratio is nearly twice that of the overall market. Fisher decreased his position in Starbucks by 98% in the third quarter.

Both Las Vegas Sands and Wynn Resorts doubled down on Macau several years ago, a bet that's paid off tremendously for both companies. But continued slowing growth in China may impede growth from the Macau properties. Las Vegas Sands now looks to expand in Spain, a country with pervasive unemployment and an already established gaming industry.  Meanwhile, Wynn Resorts is embroiled in a battle with major shareholder and Japanese billionaire Kazuo Okada that may cost the company millions of dollars and legal damages. 

Some big gaming companies are splitting off their real estate assets into real estate investment trusts, or REITs, a move that saves these companies tons of money in real estate taxes annually. Neither company has made this move yet, nor is Fisher waiting around for them to do so. He completely sold out of his position in Wynn Resorts and virtually all of his Las Vegas Sands stock as well. With P/E ratios of 26 and 20, respectively, both stocks traded at rich valuations compared with that of the overall market.

Foolish bottom line
While I agree with Fisher's moves regarding Las Vegas Sands and Wynn Resorts, I disagree with the Baidu and Freeport sells. As a patient and long-term investor, I think these two stocks still hold a great deal of promise. I also feel the same about Starbucks, and I'd hold on to that stock if I owned it (unfortunately, I don't).

But don't take Fisher's (or my) word for it. Do your own homework. Come up with your own investing thesis. You'll be a better investor for it.

Regardless of your short-term view on the Chinese economy, opportunities abound for Baidu. Our brand-new premium report breaks down the dominant Chinese search provider's strengths and weaknesses. Just click here to access it now.


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