The first quarter of 2023 was quite eventful for investors, marked by several major bank collapses due to insufficient preparation for the rising interest rate environment and renewed fervor for artificial intelligence stocks following the rollout of OpenAI’s ChatGPT. The S&P 500 climbed 7.45% for the quarter, while the Nasdaq soared 21.34% and the Dow Jones Industrial Average was mostly flat, up just 0.41%.
However, there were still plenty of stocks that investors were bearish on. According to GuruFocus’ Hot Picks, a Premium feature which allows investors to screen for the stocks that had the highest number of guru buys or sells based on the most recent regulatory filings, here are the five stocks that gurus were most bearish on in the fourth quarter, as determined by net sells.
Investors should be aware the data in this article is based on 13F filings for investing firms and portfolio updates for mutual funds, which do not provide a complete picture of a guru’s holdings. The 13Fs include only U.S. common stocks, while the mutual fund updates typically include both U.S. and foreign common stocks. Neither include other assets or investments such as bonds, credit, etc. All numbers are as of the quarter’s end only; it is possible the gurus may have already made changes to the positions after the quarter ended. However, even this limited data can provide valuable information.
Meta Platforms
Meta Platforms Inc. (META, Financial) was sold by 30 gurus and bought by 13 during the quarter, resulting in 17 net sells. Those selling the stock included Ken Fisher (Trades, Portfolio) and Robert Olstein (Trades, Portfolio), while buyers included Tom Gayner (Trades, Portfolio) and Baillie Gifford (Trades, Portfolio). This marks a turnaround from net bullish sentiment in several of the preceding quarters.
Formerly known as Facebook and home to other major global social media platforms such as Instagram and WhatsApp, Meta sent a tsunami through the investing world when it rebranded to its new name in late 2021 to represent that it is pinning its hopes for future growth on the Metaverse, a 3D interactive version of the internet.
Meta wants to become the “Apple (AAPL, Financial) of the Metaverse” so that it can have a sweet deal like what Apple has on its IOS platform, where it can charge developers a chunk of their profits as a “platform fee.” This could be hugely lucrative if the Metaverse takes off, but that is a long-term play. For now, the company still makes most of its profits from advertising on its family of apps, which suffered due to the struggling economy in 2022 as well as intense competition.
Cisco Systems
Cisco Systems Inc. (CSCO, Financial) had 20 guru sellers and four buyers during the quarter for a total of 16 net sells.
Jeremy Grantham (Trades, Portfolio) and Chuck Royce (Trades, Portfolio) were among those selling the stock during the quarter, while guru buyers included Charles Brandes (Trades, Portfolio) and Murray Stahl (Trades, Portfolio). This marks the second quarter in a row where Cisco has made the list of most-sold guru stocks.
Cisco Systems is a multinational technology company and worldwide leader in IT, networking and cybersecurity solutions. Based in San Jose, California, the company develops, manufactures and sells networking hardware, software, telecommunications equipment and other tech products.
Despite the growth of its cybersecurity business, Cisco is far from a growth stock, falling more in the value basket with its slow but steady growth, a solid dividend yield of 2.93% and a Piotroski F-Score of 6 out of 9 indicating a strong balance sheet. However, the company’s growth has slowed down even more in recent years with a three-year revenue per share growth rate of 1.8% and a three-year earnings per share growth rate of 2.6%.
Visa
During the quarter, 22 gurus sold shares of Visa Inc. (V, Financial) while eight bought shares, resulting in 14 net sells. Sellers included Baillie Gifford (Trades, Portfolio) and Frank Sands (Trades, Portfolio), while buyers included Gayner and Fisher. Gurus have become more bearish on Visa in recent quarters.
Visa is the main rival of Mastercard Inc. (MA, Financial). From the customer’s perspective, these two American credit card giants are practically interchangeable, offering nearly identical transaction services and global merchant acceptance, though Visa is the larger of the two in terms of transactions, purchase volumes and cards in circulation.
The company makes money by charging interest on credit card balances as well as by taking a percentage of the profits of each transaction processed through its network from businesses, which provides built-in inflation protection and allows the company to directly benefit from economic growth. On the flip side, this business model also means Visa falters in the face of major economic downturns as people spend less money on fewer purchases. Any extra gains from customers having to carry larger credit balances due to a floundering economy are mitigated by bankruptcies.
Comcast
Comcast Corp. (CMCSA, Financial) was sold by 21 gurus and bought by eight gurus during the first quarter for a net 13 sells. John Hussman (Trades, Portfolio) and First Pacific Advisors (Trades, Portfolio) were among the gurus selling the stock, while buyers included Gayner and Charles Brandes (Trades, Portfolio). This marks a sharp bearish turn compared to neutral or bullish sentiment in 2022.
Comcast is an American telecommunications conglomerate that operates through two main segments: Comcast Cable, which provides video, high-speed internet and phone plans to residences under the XFINITY brand, and NBCUniversal, which owns a portfolio of television news and entertainment assets.
A leader in the internet and cable businesses for decades, Comcast is one of the old giants that is still going strong, even if growth has slowed down in recent years due to cord-cutting as more cable customers switch fully to streaming services. On the bright side, the stock offers a dividend yield of 2.67%. Even though the cable business is dying, Comcast’s high-speed internet revenue has surpassed its cable revenue. Unfortunately, the return on invested capital is lower than the weighted average cost of capital, meaning the company is not creating value for shareholders.
Apple
Apple Inc. (AAPL, Financial) had 20 guru sellers and eight buyers during the quarter for a total of 12 net sells. Sellers included Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Ray Dalio (Trades, Portfolio)’s Bridgewater, while buyers included Baillie Gifford (Trades, Portfolio) and Chase Coleman (Trades, Portfolio). Overall, gurus have mostly been bearish on Apple in recent years, with a few exceptions, though things are more even on a volume basis.
Apple is a consumer electronics giant headquartered in Cupertino, California that is famous for its stylish, high-performance Mac laptops and desktops as well as its iPhones and iPads. The company has also been expanding into services with online entertainment, financial services, health care, licensing and more, and even producing its own semiconductors.
The services segment is a major component of Apple’s growth strategy because it provides sources of recurring revenue and helps maintain customer share of mind, thus reinforcing its brand image and helping cross-sell products. It has been working well so far, but with risk appetite for growth stocks beginning to come back due to the artificial intelligence hype, perhaps some investors are worried that Apple’s behemoth size will result in relatively unattractive growth numbers going forward. The GF Value chart rates the stock as fairly valued.
