The middle of May typically brings two things I look forward to: changing weather patterns and Form 13F filings with the Securities and Exchange Commission by institutional investment managers. In other words, it allows Wall Street and investors an intricate look at what some of the top money managers have been up to over the past quarter.
As you might imagine, what billionaire money managers are buying is often the water cooler talk that gets all the attention. But, analyzing what they were selling can be just as telling. Here are four popular stocks that billionaire money managers cast out of their portfolios during the first quarter.
Technology giant Apple (NASDAQ:AAPL) was actually a popular pickup for quite a few money managers during the first quarter, including for the Oracle of Omaha, Warren Buffett, who snagged 9.8 million shares of Apple for Berkshire Hathaway's investment portfolio.
But one billionaire investor that was having none of the Apple powwow was activist investor Carl Icahn. According to 13F filings, Icahn sold the entirety of his 45.76 million share position in Apple, which was his largest portfolio position in dollar value on Dec. 31, 2015, during the quarter. Icahn shared concerns with CNBC in late April about Apple's expansion into China and what sort of obstacles it could encounter given China's unpredictable government and regulatory environment. While crediting Apple CEO Tim Cook with doing a remarkable job at Apple, Icahn simply didn't see a clear path forward to growth in China, and headed for the exit.
For what it's worth, of the four stocks billionaire money managers couldn't wait to part ways with in Q1, Apple is probably my favorite to consider buying today. Even if Apple transitions from a growth to value play, its substantial cash flow provides a foundation for a steadily growing valuation over the long-term.
Boring business models can often be the best long-term investments, but Nelson Peltz's Trian Fund Management wasn't drinking that Kool-Aid in Q1, choosing instead to exit his funds' 18.32 million share stake in PepsiCo. (NYSE:PEP) which was worth around $2 billion.
Peltz is an activist investor, and he had been soliciting PepsiCo. to break itself up by spinning off its slower-growing beverage unit from its faster-growing snacks segment since 2013. Peltz did gain a nice concession in Jan. 2015 with the addition of William Johnson to PepsiCo.'s board (Johnson is an advisor to Trian Fund Management), but he never convinced PepsiCo. to break up.
However, during Trian's three-plus years of PepsiCo. stock ownership, the company "increased productivity efforts, reduced overhead, and delivered consistent earnings growth on a constant currency basis," as summarized in a statement by Trian Fund Management. It also handily outperformed rival Coca-Cola since Trian became a shareholder, so there should be few complaints.
Telecom giant AT&T (NYSE:T) may be one of the least volatile companies you can buy today, but that didn't stop billionaire Warren Buffett and Berkshire Hathaway from dumping its remaining 46.58 million share stake in the telecom giant during the first quarter.
Should this move surprise investors? Probably not considering that Buffett dumped close to 13 million shares of AT&T during the sequential fourth quarter as well. It wasn't Buffett's decision to own AT&T's stock so much as he inherited it with AT&T acquiring previous Berkshire holding DIRECTV. However, with Buffett already owning $811 million worth of Verizon (NYSE:VZ) stock, it's pretty clear that he and his team view Verizon as the better long-term growth opportunity. With Verizon holding a lead in 4G LTE-covered cities compared to AT&T, and AT&T more focused on its synergy opportunities with DIRECTV, Buffett could indeed be correct.
Lastly, Third Point, which is run by activist investor Dan Loeb, jettisoned the entirety of its 4 million share position in online marketplace eBay (NASDAQ:EBAY), which it had held since the third quarter of 2014.
Far from shy, Loeb had been petitioning eBay for a number of corporate changes, but unlike Peltz above with PepsiCo., Loeb got exactly what he wanted with eBay spinning off its electronic payment business PayPal, and longtime CEO John Donahoe, who had manned the helm for a decade, stepped down in July 2015. Loeb primarily viewed his eBay acquisition as a way of benefiting from the unlocking of shareholder value via the PayPal split. With that split now in the rearview mirror, and eBay's online marketplace now growing at a much slower pace than before, it's possible Loeb simply felt that eBay's best days were now behind it.
Stay tuned, because in the coming days we're liable to get an even more in-depth look into the minds of some of America's most-watched investors.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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