Buy great stocks at a bargain. That's what many of the most successful investors are doing with the steep stock market sell-off so far this year.
But there's a flip side of the coin also. Some of those same people have completely bailed on a few stocks. Here are three stocks the world's smartest investors are selling.
1. Bristol Myers Squibb
Warren Buffett prefers to buy and hold stocks for the long term. However, he doesn't always do so. As a case in point, Buffett's Berkshire Hathaway (BRK.A -0.28%) (BRK.B -0.68%) bought shares of Bristol Myers Squibb (BMY -0.27%) in the third quarter of 2020 but completely exited the stake in Q1 of this year.
We don't know why Buffett and/or his investment managers soured on the company. However, the dumping of the shares was part of an overall pattern of significantly reducing Berkshire's exposure to pharma stocks.
This could be one of Buffett's relatively rare mistakes, though. Bristol Myers Squibb has been a big winner so far this year, with its shares jumping close to 18%. Indeed, healthcare has been one of the two best-performing sectors in 2022.
2. General Motors
Appaloosa Management founder David Tepper isn't nearly as well known as Warren Buffett is. But the hedge fund manager, who owns the NFL's Carolina Panthers, is a supersuccessful investor. His net worth stands at $16.7 billion, according to Forbes.
Tepper first bought 2.25 million shares of General Motors (GM -0.04%) for Appaloosa in late 2021. However, the stock seemed to be like a hot potato for the hedge fund. Appaloosa sold 100% of its stake in GM in Q1.
It's possible that Tepper sold GM because of worries that a recession could be around the corner. Automotive stocks tend to perform dismally during economic downturns.
3. Micron Technology
In 2019, an article in The Economist called Renaissance Technologies founder Jim Simons "the most successful investor of all time." There's a good case to be made that the accolade is well deserved. Simon's Medallion Fund has achieved an average annual return of around 40% since 1988.
In the first quarter, Renaissance sold its stakes in a whopping 656 stocks. The most notable of these was Micron Technology (MU -0.60%), which had previously ranked as the hedge fund's second-largest holding.
Simons is a pioneer in quantitative trading. The reasons behind his trading aren't always obvious. In this case, the decision to sell Micron almost looks prescient. The chip stock has plunged nearly 40% year to date, with most of the decline coming in the second quarter after Renaissance exited its position.
Follow the leaders?
Buffett, Tepper, and Simons definitely know what they're doing. So should small investors follow their lead and sell their shares of Bristol Myers Squibb, General Motors, and Micron? Not necessarily.
For one thing, all of these sales occurred months ago. The dynamics for each stock have changed to some extent in the meantime.
Just as important, your investing goals and time horizon will be different than those of these multibillionaires. That's especially the case with Tepper and Simons. Their hedge funds attempt to deliver short-term gains to attract and keep investors. Small investors are better off focusing on the long-term prospects for the stocks they buy.
The best approach is to fully understand your assumptions and investment thesis for stocks before you buy. If those assumptions or the underlying thesis changes significantly, then sell. Even if you might never be one of the most successful investors in the world, you can still be among the smart ones by following this plan.
