In the first quarter of 2020, many gurus had unusually high turnover rates in their portfolios as the market downturn in March led them to re-evaluate their holdings and distribute their funds to new value opportunities.
According to GuruFocus' Hot Picks, a Premium feature which allows investors to screen for the stocks that had the most guru buys or sells over a specific time frame, the stocks that had the most sells from gurus during the first quarter (as determined by net sells) were Microsoft Corp. (MSFT, Financial), Alphabet Inc. (GOOGL, Financial)(GOOG, Financial), Citigroup Inc. (C, Financial), Oracle Corp. (ORCL, Financial) and Gilead Sciences Inc. (GILD, Financial).
Microsoft
Microsoft is a multinational tech giant headquartered in Redmond, Washington. The company develops, manufactures, licenses, sells and supports PCs, consumer software, consumer electronics and related services. As of June 1, the company has a market cap of $1.38 trillion.
During the quarter, 34 gurus sold shares of Microsoft while 17 gurus bought the stock, resulting in 17 net sells.
At the end of the quarter, 54 gurus owned shares of Microsoft. Steven Romick (Trades, Portfolio) reduced his holding in the company by 25.89%, Al Gore (Trades, Portfolio) cut the position by 61.60% and Robert Olstein (Trades, Portfolio) sold 37.58% of the holding. Other gurus who sold the stock include Diamond Hill Capital (Trades, Portfolio), Charles Brandes (Trades, Portfolio) and Dodge & Cox.
Microsoft continues to benefit from its increasing shift to digital and cloud services, seeing strong growth in software services and Azure. At a price-earnings ratio of 30.48, the stock is about as overvalued as it has been since 2014, as shown in the Peter Lynch chart below.
Alphabet
Based in Mountain View, California, Alphabet is a multinational conglomerate that was formed as part of a restructuring of Google in 2015, in which Alphabet became the parent company of Google and several former Google subsidiaries. As of June 1, the company has a market cap of $976.45 billion.
During the quarter, 28 gurus sold voting shares of Alphabet and 24 gurus sold non-voting shares, while 13 gurus bought voting shares and 15 bought non-voting shares. In total, there were 24 net sells.
At the end of the quarter, 45 gurus owned voting shares of Alphabet while 41 owned non-voting shares. Leon Cooperman (Trades, Portfolio) cut his stake in the company by 44.95%, Jerome Dodson (Trades, Portfolio) reduced the holding by 22.34% and Mario Cibelli (Trades, Portfolio) sold out of the position. Other gurus who sold the stock include Jim Simons (Trades, Portfolio)' Renaissance Technologies, Glenn Greenberg and Larry Robbins (Trades, Portfolio).
Alphabet's acquisition of Fitbit, advancements in language-focused artificial intelligence and growth in cloud services were highlights of the recent quarter. According to the Peter Lynch chart, the price-earnings ratio of 28.98 is higher than what recent earnings are worth but lower than the stock's median historical valuation.
Citigroup
Citigroup is the third-largest U.S. bank by assets. The New York-based company provides traditional banking services as well as investment banking services to individuals and institutions in the U.S. and around the world. As of June 1, the company has a market cap of $102.15 billion.
During the quarter, 23 gurus sold shares of Citigroup while seven gurus bought shares of the stock, resulting in 16 net sells.
At the end of the quarter, 26 gurus owned shares of Citigroup. Jeremy Grantham (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio), Richard Snow (Trades, Portfolio) and Ray Dalio (Trades, Portfolio) sold out of their positions in the company. Leon Cooperman (Trades, Portfolio), Ken Heebner (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio) also sold shares of the stock.
As a major multinational bank, Citigroup will likely face headwinds from the recent economic downturn, especially since more of its debt is in credit card portfolios and overseas corporate debt when compared to the other major U.S.-based banks.
Oracle
Oracle is a computer software company based in Redwood Shores, California. Best known for its Oracle database software and its computer systems and software, such as Solaris and Java, the company designs, manufactures and sells a variety of technology and software products. As of June 1, the company has a market cap of $106.71 billion.
During the quarter, 23 gurus sold shares of Oracle while seven gurus bought shares of the stock, resulting in 16 net sells.
At the end of the quarter, 27 gurus owned shares of Oracle. Simons' firm, Caxton Associates (Trades, Portfolio) and Tom Russo (Trades, Portfolio) sold out of their holdings in the stock, while Joel Greenblatt (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Jeff Auxier (Trades, Portfolio) reduced their holdings.
Oracle continues to make progress on its restructuring, with cloud services and license support now accounting for 71% of revenue. The market leader in autonomous databases has been proactive in partnering with Microsoft in order to avoid being surpassed by larger competitors, but management's goal of growing through smaller acquisitions has been hampered by high valuations, resulting in the company allocating a large chunk of capital to share buybacks instead of growth in 2019.
Gilead Sciences
Headquartered in Foster City, California, Gilead Sciences is a biopharmaceutical giant that develops, manufactures and commercializes innovative drugs in a variety of healthcare fields with a focus on HIV/AIDS, liver diseases, hematology, oncology, respiratory diseases and cardiovascular conditions. As of June 1, the company has a market cap of $94.87 billion.
During the quarter, 18 gurus sold shares of Gilead Sciences while five gurus bought shares of the stock, resulting in 13 net sells.
At the end of the quarter, 18 gurus owned shares of Gilead Sciences. Jerome Dodson (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Richard Pzena (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio) sold out of the stock, while David Carlson (Trades, Portfolio), the Parnassus Endeavor Fund (Trades, Portfolio) and Jones reduced their holdings.
Gilead Sciences saw its share price jump 15% in the first quarter due to the apparent effectiveness of its drug Remdesivir against Covid-19 in pre-clinical trials. With a significant amount of investor sentiment riding on the future success of the drug, investors may be inclined to take a profit rather than waiting for further news that could cause stock price volatility in either direction.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Investors should always conduct their own careful research and/or consult registered investment advisors before taking action in the stock market.
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