5 Most Popular S&P 500 Stocks

Gurus overwhelmingly invested in these companies during 4th quarter

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Mar 07, 2016
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The following were five of the most popular Standard & Poor's 500 stocks among the gurus during the fourth quarter, according to results from GuruFocus’ All-in-One Screener.

Apple (AAPL, Financial)

Twenty-one gurus bought new stakes or added to existing holdings in Apple during the fourth quarter. The tech giant’s stock has declined 22% over the past year partly due to concerns about slowing growth in iPhone sales, the company’s flagship product. The price decline has caused the stock to trade at a discount, according to the Peter Lynch earnings line, which equates $1 in earnings with $15 in stock price.

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During the first quarter, Apple reported record profits at $18.4 billion. What spooked investors, however, was its revenue estimates for the second quarter of $50 billion to $53 billion. In the prior-year quarter, Apple had revenue of $58 billion, and this would be its first decline in the past 13 years.

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Carl Icahn (Trades, Portfolio) owns the largest stake in Apple among the gurus with more than 45 million shares, which comprises 16.36% of his portfolio. The latest 13F filing revealed Icahn had trimmed his position by more than 13% in the fourth quarter, making further headlines as investors were concerned whether Icahn was bearish on the company’s future.

Microsoft (MSFT, Financial)

During the fourth quarter, 15 gurus bought shares in Microsoft, which saw its stock rise 20% over the last year. Dodge & Cox is the largest guru shareholder with more than 66.5 million shares.

During the second quarter of 2016, Microsoft reported net income of about $5 billion, down from $5.8 billion in the year-ago quarter. Among the highlights in the report was revenue from Windows phones declined 49% while Surface revenue increased 29% due to the launches of the Surface Pro 4 and Surface Book.

The graph below shows Microsoft’s annual earnings per share.

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Microsoft’s trailing dividend yield is 2.56%, and the payout ratio is 92%.

Alphabet (GOOG, Financial) (GOOGL, Financial)

Primecap Management is the largest guru shareholder of Alphabet’s GOOGL stock with more than 2.5 million shares while Dodge & Cox is the main guru shareholder of GOOG with over 3.2 million shares.

For the first time in its fourth-quarter results, Alphabet separated results from the core search business from other segments such as Google Capital and Google Ventures. The Google segment’s operating income for the full year was $23.4 billion, and “other bets” generated an operating loss of $3.5 billion.

In the first week of February, Alphabet briefly surpassed Apple as the world’s most profitable company when the stock price increased 8% on the strong fourth quarter results.

Wells Fargo (WFC, Financial)

Eleven gurus purchased shares of Wells Fargo during the fourth quarter, including Warren Buffett (Trades, Portfolio), who upped his stake by 2%. The stock traded down by 8% over the past year. Buffett is by far the largest guru shareholder, holding 9.45% of shares outstanding. Dodge & Cox is second with almost 70 million shares.

The Peter Lynch earnings line is at $62.30, indicating Wells Fargo is undervalued at its current price.

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For the fourth quarter, Wells Fargo reported profit that was flat compared to the previous year quarter. The bank has struggled with loans in the oil and gas industry, as well as a slowing housing market, which caused mortgage income to decline 6% year over year.

The dividend yield is close to the five-year high at 3.01%, and the payout ratio is 36%.

Johnson & Johnson (JNJ, Financial)

Thirteen gurus bought shares of consumer products and pharmaceutical company Johnson & Johnson during the quarter. The largest guru shareholder is James Barrow (Trades, Portfolio) with over 15 million shares.

Over the past year, the stock has traded up 5% and now trades at 19.4x earnings. Johnson & Johnson’s business predictability is rated 3.5 out of 5 stars according to GuruFocus.com. During the fourth quarter, the company earned $1.15 per share, up from 89 cents in the year-ago quarter.

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The stalwart company pays a dividend yield of 2.82% and has a payout ratio of 54%.

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