In the second quarter of 2020, gurus continued to have high turnover rates in their portfolios as the economic downturn in the U.S. and much of the world has led them to re-evaluate their holdings and distribute their funds to new opportunities.
According to GuruFocus's Hot Picks, a feature which allows investors to screen for the stocks that had the most guru buys or sells over a specific time frame, the five most popular stocks among gurus during the second quarter (as determined by net buys) were CrowdStrike Holdings Inc. (CRWD, Financial), Wells Fargo & Co. (WFC, Financial), Edwards Lifesciences Corp. (EW, Financial), Carrier Global Corp. (CARR, Financial) and Aon PLC (AON, Financial).
CrowdStrike
CrowdStrike is a cybersecurity company headquartered in Sunnydale, California. The tech company's goal is to stop breaches with its cloud-native endpoint security platform. It also provides threat intelligence and cyberattack response services.
During the second quarter, 15 gurus bought shares of CrowdStrike Holdings and no gurus sold the stock, resulting in 15 net buys. As of the quarter's end, 15 gurus had a stake in the company.
T. Rowe Price Associates Inc. is the largest guru shareholder of the company with 6.35% of shares outstanding, followed by Chase Coleman (Trades, Portfolio) with 2.33% and Philippe Laffont (Trades, Portfolio) with 2.05%.
During the quarter, shares of CrowdStrike traded around $79.52 apiece. As of Aug. 18, the stock trades around $107.19 with a 52-week price range of $31.95 to $118.58.
CrowdStrike undeniably operates in a hot industry, providing artificial intelligence-powered services such as threat detection and endpoint protection to the growing cloud services industry through a software as a service (SaaS) model. The company provides services primarily to the finance, retail, public and health care sectors, and even has operations in election security.
The company mainly brings in profits through subscriptions, which made up 91% of revenue in the most recent quarter ended June 30. With an operating margin of -25.36%, the company is still in the cash-burning stages, but it is carving itself a niche in a relatively new tech space. Its main competitors are Carbon Black (CBLK) and Palo Alto Networks (PANW).
Wells Fargo
Headquartered in San Francisco, Wells Fargo is the fourth-largest bank in the U.S. by assets. Like its peers, the bank earns most of its revenue from loans and credit cards, though it also has a small but growing investment banking arm.
During the second quarter, 22 gurus bought shares of Wells Fargo, while 11 gurus sold the stock, resulting in 10 net buys. As of the quarter's end, 39 gurus had a stake in Wells Fargo.
Warren Buffett (Trades, Portfolio) is the guru that has the biggest investment in the company with 5.77% of shares outstanding, followed by Dodge & Cox with 2.51% and T. Rowe Price Associates with 1.97%.
During the quarter, shares of Wells Fargo traded for an average price of $27.42. As of Aug. 18, the stock trades around $24.04 with a 52-week price range of $22 to $54.75.
In April, the Federal Reserve announced that it was temporarily lifting the asset cap on Wells Fargo. The decision came after Wells Fargo pointed out that the asset cap prevented it from participating in the government's Covid-19 business relief efforts. The move will "temporarily and narrowly modify the growth restriction on Wells Fargo so that it can provide additional support to small businesses," according to the Fed, though on the condition that, unlike the other big banks, Wells Fargo will have to donate any potential profits from the lending programs to the Treasury or a Fed-approved non-profit.
As expected, this leaded to Wells Fargo posting lower earnings and needing to put aside higher loan loss provisions than its peers. The most important benefit to Wells Fargo here is that the decision could provide the bank a path toward redemption in the eyes of the government and the public after its fake account scandal a few years back, which was the reason for the asset cap being imposed in the first place.
Edwards Lifesciences
Based in Irvine, California, Edwards Lifesciences is a medical technology company that specializes in artificial heart valves, hemodynamic monitoring and surgical recovery.
During the second quarter, 15 gurus bought shares of Edwards Lifesciences and five gurus sold the stock, resulting in 10 net buys. As of the quarter's end, 16 gurus had a stake in the company.
Frank Sands (Trades, Portfolio) is the largest guru shareholder of the company with 2% of shares outstanding, followed by FMR LLC with 1.99% and Geode Capital Management with 1.63%.
During the quarter, shares of Edwards Lifesciences traded around $70.98 apiece. As of Aug. 18, the stock trades around $78.59 with a 52-week price range of $51.51 to $ 82.55.
With its narrow focus on artificial heart valves and related products and services, Edwards Lifesciences has become a well-known leader in its niche as it is both highly recognizable and able to refine its research efforts instead of spreading resources across different fields.
"Even with the heroic efforts of the healthcare community, we know that this remains a very difficult time for the patients we serve as they continue to weigh the risk of COVID-19 against the severe effects of progressive heart valve disease," said Michael A. Mussallem, the company's chairman and CEO, in the second quarter earnings report. "Irrespective of the unpredictable surges of this deadly pandemic, there is growing recognition that valve therapy should not be postponed as these patients have an urgent need."
Carrier Global
Carrier Global is widely recognized as one of the largest and most reputable HVAC providers in the world, with a presence in the Americas, Europe, Asia Pacific and Middle East and Africa regions. It was spun off from parent company Raytheon before its merger with United Technologies, which formed Raytheon Technologies (RTX).
During the second quarter, 13 gurus bought shares of Carrier and three gurus sold the stock, resulting in 10 net buys. As of the quarter's end, 15 gurus had a stake in the company.
Dodge & Cox is the largest guru shareholder of the company with 4.18% of shares outstanding, followed by Chris Davis (Trades, Portfolio) with 3.53% and Mason Hawkins (Trades, Portfolio) with 1.02%.
During the quarter, shares of Carrier traded for an average price of $18.38. As of Aug. 18, the stock trades around $29.46 with a range of $11.5 to $30.32 since the spinoff.
The market for HVAC is expected to grow to $136.5 billion by the end of 2024, according to a market research report published by P&S Intelligence, primarily due to increasing demand in developing countries as well as developed European countries that have seen unprecedented heat waves in recent years. The demand forecast represents a compound annual growth rate of 3.9%.
After seeing reduced demand due to the pandemic, with sales decreasing 20% year over year before beginning to increase in June, the company expects to see tailwinds from backlogged demand and new initiatives such as its Healthy Buildings Program.
Aon
Based in London, Aon is a British global insurance company that sells a range of financial risk-mitigation products, including insurance, reinsurance and pension administration plans. It operates in 120 countries, and its biggest segment in terms of assets under management is the retirement segment.
During the second quarter, 10 gurus bought shares of Aon and two gurus sold the stock, resulting in eight net buys. As of the quarter's end, 14 gurus had a stake in the company.
Longview Partners is the largest guru shareholder of the company with 2.36% of shares outstanding, followed by Geode Capital Management with 1.59% and Andreas Halvorsen (Trades, Portfolio) with 1.28%.
During the quarter, shares of Aon traded around $186.19 apiece. As of Aug. 18, the stock trades at approximately $196.42 with a 52-week price range of $143.93 to $238.19.
According to its recent earnings results, the company expects to see continued headwinds due to the economic downturn and high unemployment. However, increased trading volume offset losses in other areas. The company has structured itself to function well in all economic environments, and it is able to do this effectively in part due to its scale advantage. On the second-quarter conference call, CEO Greg Case noted the following:
"For Aon overall, organic revenue declined 1%, an outcome that demonstrates great work by our team and resilience of our business in the face of unprecedented challenges in the global economy. In particular, I'd like to highlight 9% organic revenue growth in Reinsurance Solutions, driven by net new business generation in trading and double-digit growth in facultative placements."
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.
Read more here:
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