It's that time of the year again, and I'm not talking about heat waves or preseason football. On Wednesday, Aug. 15, we hit the quarterly deadline for money managers with more than $100 million in assets under management to report their end-of-quarter holdings to the Securities and Exchange Commission via Form 13F. These 13F filings can offer pretty substantive clues as to what stocks, industries, and trends are on the minds of the world's most successful investors.
Billionaire money managers ran for the exit with these stocks in Q2
Understandably, 13F filings aren't perfect. After all, they're filed around 45 days after the preceding quarter ends. This means what you and I are looking at now may very well have changed if we're talking about an active fund manager. Nevertheless, these filings hold value and offer insight into what billionaire money managers may be thinking.
With this in mind, here are three highly popular brand-name companies that fell out of favor with billionaire money managers during the second quarter.
Perhaps one of the more prescient moves made by high-profile money managers during the second quarter was dumping social-media platform Twitter (NYSE:TWTR).
Despite reporting three consecutive quarterly profits, Twitter's stock had tripled between August 2017 and June 2018 amid only moderate active-user growth. The writing was on the wall for profits to be taken, and that's exactly what David Einhorn at Greenlight Capital and James Simons at Renaissance Technologies did. Renaissance wound up ditching over 3.3 million shares of Twitter during the second quarter, choosing to keep just 577,400 shares. Meanwhile, Greenlight Capital sold 35% of its Twitter stake, or a little more than 901,000 shares.
As noted, these position partings turned out to be smart, as Twitter's second-quarter operating results underwhelmed Wall Street. Though total revenue grew by 24% from the previous year, average monthly active users declined by 1 million, to 335 million from the sequential first quarter. This has the Street worried that there's only so much pricing power Twitter can wield with advertisers if users aren't flocking to the platform. Until we see steady user growth, Einhorn and Simons probably have the right idea, which is to keep their distance.
Another brand-name stock that found itself on the chopping block during the second quarter was embattled money-center bank Wells Fargo (NYSE:WFC). In particular, the Oracle of Omaha, Warren Buffett, wound up selling almost 4.5 million shares of Wells Fargo, while Leon Cooperman's Omega Advisors sold its entire position, which amounted to 412,500 shares. Andreas Halvorsen of Viking Global came in with the exclamation point: the liquidation of its 12.8 million share position in the second quarter.
The good news, if there's any to be had here, is that Warren Buffett's view on Wells Fargo hasn't changed, despite Berkshire Hathaway's slightly declining ownership. His company still owns 452 million shares, which is good enough for a 9.3% stake. Buffett simply doesn't want to cross the 10% ownership threshold in Wells Fargo, which would restrict its commercial activity with the bank. Additionally, with Wells Fargo actively buying back stock and reducing its outstanding share count, it's easier to understand why Buffett has wanted to stay ahead of the game with regular small dispositions of Wells Fargo stock.
As for Cooperman and Halvorsen, they very well may see a company that could take years to regain the trust of the American public. Let's not forget that an internal analysis uncovered the unauthorized opening of 3.5 million accounts, some of which may have incurred fees. This multi-year problem puts Wells Fargo square in the sights of regulators, and it could notably slow bread-and-butter loan and deposit growth for the foreseeable future.
Finally, high-profile money managers pumped the brakes on Detroit's General Motors (NYSE:GM) during the second quarter.
With the exception of Warren Buffett, who added to his position in GM, the 13Fs show selling from Paul Tudor Jones' Tudor Investment, Barry Rosenstein's Jana Partners, and George Soros' Soros Fund Management. Soros wound up disposing of all 600,000 shares of General Motors it acquired in the third quarter of last year, with Tudor likewise dumping its 18,948 share stake. Meanwhile, Jana Partners trimmed its holdings by just over half, selling almost 671,000 shares.
The concerns money managers have with GM appears to be twofold. First, automakers tend to be strong performers in the early part of an economic expansion. We are, however, 109 months and counting into our current expansion cycle. Further, pundits have been calling for a peak in auto unit sales in either 2017 or 2018 for some time. Since the market is forward looking, it suggests a rougher road lies ahead for General Motors and its peers.
The other concern is what might happen as a result of the U.S. and China trade war. President Trump aims to level the playing field through tariffs on aluminum, steel, and other imported Chinese goods. Unfortunately, U.S. companies and U.S. consumers could be footing the bill for these tariffs. Last month, General Motors cut the midpoint of its full-year adjusted profit forecast by about 10% as a result of higher material costs.
While I do see value in General Motors' stock at its current level, I don't believe it's out of the question that GM could move even lower if it hits additional speed bumps.