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Holly LaFon
Holly LaFon
Articles (7914) 

S&P Stocks the Most Investment Gurus Sold or Reduced in Q3: JPM, KO, C, INTC

December 14, 2011 | About:

Gurus reduce or abandon stocks for a variety of reasons. The stock may have reached its fair value, they may have taken some profits, or the business may have dropped in quality. These are the S&P 500 stocks most sold or reduced by gurus in the third quarter: JPMorgan Chase (NYSE:JPM), Coca-Cola (NYSE:KO), Citigroup (NYSE:C) and Intel (NASDAQ:INTC).

To see more guru buys and sells by different categories, go to GuruFocus’ S&P 500 Grid screener.

JPMorgan Chase (NYSE:JPM)

JPMorgan Chase & Co. is a global financial services firm. JPMorgan Chase has a market cap of $115.85 billion; its shares were traded at around $31.29 with a P/E ratio of 6.5 and P/S ratio of 1.2. The dividend yield of JPMorgan Chase stocks is 3.3%.

In the third quarter, two gurus sold out of their JPMorgan Chase positions: Andreas Halvorsen and John Paulson. Five others reduced their holdings: James Barrow, David Dreman, Dodge & Cox, Mario Gabelli, John Griffin, Ron Baron, Ruane Cunniff, Lee Ainslie, Leon Cooperman.

JPMorgan’s stock has fallen 26% year to date, although it had performed quite well in the last year and a half. The bank’s third-quarter net earnings for 2011 came in at $4.3 billion, down from $4.3 billion the year prior, representing a 14% return on tangible common equity. The bank’s return on assets, 0.78%, was the third lowest of the four largest banks (WFC, BAC, C). It also ended the quarter with a Basel I Tier I Common ratio of 9.9%, and repurchased $4.4 billion of common stock. Deposits for the quarter increased to $1.1 trillion, a 21% year-over-year increase.

In a presentation at an investor conference on December 7, CEO Jamie Dimon announced that the company plans a “modest dividend increase” in 2012. He also mentioned in the report that the bank’s exposure to troubled European countries increased to $15.9 billion on November 17, from $15.1 billion on September 29.

Coca-Cola (NYSE:KO)

The Coca-Cola Company is the world's largest beverage. Coca-Cola Co. has a market cap of $148.33 billion; its shares were traded at around $66.48 with a P/E ratio of 17.3 and P/S ratio of 4.2. The dividend yield of Coca-Cola Co. stocks is 2.9%. Coca-Cola Co. had an annual average earnings growth of 7.3% over the past 10 years. GuruFocus rated Coca-Cola Co. the business predictability rank of 4-star.

Reduce: Arnold Van Den Berg (NYSE:KO), Robert Olstein Tweedy Browne, Chris Davis, Ruane Cunniff, Tom Gayner, Kenneth Fisher, Steve Mandel, Dodge & Cox, Donald Yacktman, Mario Gabelli, Richard Aster Jr.

Sell: Ray Dalio

Most of the guru reductions were small; only two reached double digits: Arnold Van Den Berg (36%) and Robert Olstein (41%). Some of the investors who bought the stock low may have wanted to take some profits from it as the stock price has increased 35% over the last five years.

The company’s revenue has continued to trundle upward as it has for the past eight years, aside from a slight dip in 2009, to a record $35 billion in 2010. Net income also reached a high of almost $12 billion, and free cash flow was stronger than ever at $7.5 billion.

In December, the company announced that it would acquire roughly half of Aujan Industries Co., a large beverage company in the Middle East, for $980 million. It is the largest-ever investment by a multinational firm in Middle East’s consumer goods sector. The deal will enable Saudi Arabia-based Aujan Industries to accelerate its international growth. In May, CEO Muhtar Kent said that Coca-Cola, “plans to invest more than $25 billion over the next five years to help reach its $200 billion sales target in 2020.”

Earlier this year, Coca-Colar’s fourth-quarter profit more than tripled after it acquired its North American bottling operations.

In Tweedy, Browne’s third-quarter investor letter, they mentioned that “As market volatility spiked up over the last three months, it was the consumer staples stocks, which are the more traditionally defensive stocks, that held up best in our mutual fund portfolios, i.e., the food, beverage, tobacco, and healthcare holdings. This included companies such as Unilever (UL), Coca Cola (KO)…”

Citigroup (NYSE:C)

Citigroup Inc., the global financial services company, has some two hundred million customer accounts and does business in more than hundred countries, providing consumers, corporations, governments, and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management. Citigroup Inc. has a market cap of $77.01 billion; its shares were traded at around $26.9 with a P/E ratio of 7.1 and P/S ratio of 0.9. The dividend yield of Citigroup Inc. stocks is 0.1%.

Sells: Richard Perry, Arnold Schneider, David Williams, Ruane Cunniff, Kenneth Fisher

Reduce: David Tepper, Lee Ainslie, John Paulson, Steve Mandel, David Dreman, Charles Brandes, Bruce Berkowitz, George Soros, Steve Mandel

Citigroup’s stock has slumped 45% over the last year. It has a lower return on average equity than most of its peers, with the exception of Bank of America, which has a negative return. The same is true for its return on average assets, operating margin and net profit margin. Citigroup will lay off 413 New York City employees, primarily in its Global Markets division, SNL Financial reported, citing a U.S. Labor Department filing.

On October 17, the bank reported third-quarter 2011 net income of $3.8 billion, compared to $2.2 billion the prior year.


Reduce: Primecap Management, David Dreman, Arnold Van Den Berg, James Barrow, Charles Brandes, Mario Gabelli, Joel Greenblatt

Sells: Ray Dalio, George Soros

Intel Corporation is one of the world's largest semiconductor chip maker. Intel Corp. has a market cap of $118.19 billion; its shares were traded at around $23.56 with a P/E ratio of 9.7 and P/S ratio of 2.7. The dividend yield of Intel Corp. stocks is 3.7%. Intel Corp. had an annual average earnings growth of 9.5% over the past 10 years. GuruFocus rated Intel Corp. the business predictability rank of 2-star.

Intel’s stock has advanced almost 11% year to date. After decreasing each year from 2007 to 2009, Intel’s revenue bounced back to a record high of $44 billion in 2010, and net income followed suit. Free cash flow has been copious for the last decade and reached an all-time high of $11.5 billion in 2010.

Recently, Intel purchased McAfee, the antivirus and security software company, for $7.7 billion, which will enable it to integrate security software into its desktop and notebook chips.

In December, Intel cut its fourth-quarter outlook due to hard disk drive supply shortages resulting from flooding in Thailand. Updated revenues expectations are $13.7 billion, plus or minus $300, instead of $14.7 billion, plus or minus $400, which it previously expected. It also expects personal computers sales to increase sequentially in the fourth quarter, although the worldwide PC supply chain is reducing inventories and microprocessor purchases as a result of the hard disk drive supply shortages. The company believes the shortages will continue into the first quarter, followed by a rebuilding of microprocessor inventories as supplies of hard disk drives recover during the first half of the year.

To see more guru buys and sells by different categories, go to GuruFocus’ S&P 500 Grid screener.

Rating: 3.6/5 (16 votes)


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