In this article, we discuss 10 stocks you should sell according to Motley Fool.
Motley Fool Asset Management is a private investment adviser that manages a $1.5 billion portfolio for investors as of Q4 2021. The hedge fund is known for its six major exchange traded funds – Motley Fool 100 Index, Motley Fool Small Cap Growth ETF, Motley Fool Global Opportunities ETF, Motley Fool Mid Cap Growth ETF, Motley Fool Next Index ETF, and Motley Fool Capital Efficiency 100 Index ETF.
Bryan Hinmon was appointed as the chief investment officer of Motley Fool in 2017, and he serves as the senior portfolio manager as well. He also works as an analyst at Motley Fool Wealth Management, where he identifies and researches investments for the firm’s separately managed accounts. Prior to joining Motley Fool, he worked at Bulwark Capital Management as a portfolio manager, which is a hedge fund focused on long-term equity investing, option income, and special situations. Before that, Bryan Hinmon was a research analyst for an asset manager in Naples, operating a covered-call hedge fund.
Motley Fool invests primarily in the information technology, industrials, finance, healthcare, consumer discretionary, and communications sectors. Some of the most notable securities in the hedge fund’s Q4 portfolio were Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL), and Amazon.com, Inc. (NASDAQ:AMZN). However, in this article our focus would be on the stocks which the fund either trimmed its stakes in or completely exited in the fourth quarter of 2021.
Our Methodology
We used Motley Fool’s Q4 2021 portfolio and selected the firms in which the fund trimmed or completely sold off a previously held position.
Stocks You Should Sell According to Motley Fool
10. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 72
Percentage Decrease in Stake in Q4: 100%
Intel Corporation (NASDAQ:INTC) is an American multinational technology corporation that specializes in semiconductors, computer hardware, autonomous cars, automation, and artificial intelligence.
Motley Fool held 99,991 shares of Intel Corporation (NASDAQ:INTC) in the third quarter of 2021, worth $5.3 million, representing 0.34% of the total 13F securities. In Q4 2021, Motley Fool discarded its Intel Corporation (NASDAQ:INTC) stake entirely.
On April 14, Intel Corporation (NASDAQ:INTC) declared a quarterly dividend of $0.365 per share, in line with previous. The dividend is payable on June 1, to shareholders of the company as of May 7. On April 27, Intel Corporation (NASDAQ:INTC) delivered a dividend yield of 3.20%.
Citi analyst Christopher Danely on April 13 reiterated a Neutral rating on Intel Corporation (NASDAQ:INTC) with a $55 price target. The analyst observed that Q1 notebook shipments were down 20% quarter-over-quarter, below Citi’s expectation of down 18%, due to ongoing component supply tightness, logistics constraints, and slow Chromebook demand. He views this as “another yellow flag” and believes PC sales could “cool off” in the second half of 2022 given a reversion to the mean after two consecutive years of double digit growth.
According to Insider Monkey’s Q4 data, 72 hedge funds were bullish on Intel Corporation (NASDAQ:INTC), compared to 66 funds in the third quarter. Seth Klarman’s Baupost Group is the leading stakeholder of the company, with more than 18 million shares worth approximately $929 million.
Motley Fool completely sold out of Intel Corporation (NASDAQ:INTC) during the December quarter, but the hedge fund held significant stakes in Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL), and Amazon.com, Inc. (NASDAQ:AMZN).
Here is what O’Keefe Stevens Advisory has to say about Intel Corporation (NASDAQ:INTC) in its Q1 2022 investor letter:
“Intel announced they are removing stock-based compensation from non-GAAP earnings in 2022 to report results aligning with semiconductor peers. This may seem like a reasonable thing to do as comparability between peers becomes easier. On the other hand, what exactly is the point of adjusted earnings? It is not to conform to some industry norm or because the management teams need to make performance metrics. The point of adjusting earnings is to present results in a light that more closely reflects the actual underlying performance of the business. That is, backing out expenses that might be one-time in nature, such as legal or fire expenses. First off, share-based compensation is an actual expense. Decreasing my ownership stake in a company without receiving any compensation is not free. If a company paid its employees in all stock, would they add back the entire SBC? What a margin profile that would be. Second, should a company be worried about reporting results similar to other companies? Every company is unique. Management should not waste time determining what expenses should be excluded. Run the business, don’t worry about adjusting the numbers.”
9. S&P Global Inc. (NYSE:SPGI)
Number of Hedge Fund Holders: 79
Percentage Decrease in Stake in Q4: 100%
S&P Global Inc. (NYSE:SPGI) is a New York-based company that provides credit ratings, benchmarks, data analytics, and workflow solutions to the global capital and commodity markets. The company has six main segments – S&P Global Ratings, S&P Dow Jones Indices, S&P Global Commodity Insights, S&P Global Market Intelligence, S&P Global Mobility, and S&P Global Engineering Solutions.
In the third quarter of 2021, Motley Fool acquired 6,191 shares of S&P Global Inc. (NYSE:SPGI), worth $2.63 million, representing 0.17% of the total 13F portfolio. Motley Fool discarded 100% of its stake in S&P Global Inc. (NYSE:SPGI) in the December quarter.
On April 7, Raymond James analyst Patrick O’Shaughnessy lowered the firm’s price target on S&P Global Inc. (NYSE:SPGI) to $475 from $497 and maintained an Outperform rating on the shares ahead of Q1 results. The analyst believes an aggressive share repurchase program during 2022 should support S&P Global Inc. (NYSE:SPGI) shares and anticipates solid execution as the company integrates with IHS Markit.
Among the hedge funds tracked by Insider Monkey, 79 funds held long positions in S&P Global Inc. (NYSE:SPGI) at the end of December 2021, with collective stakes worth $7.82 billion. Chris Hohn’s TCI Fund Management is the largest position holder in the company, with 3.7 million shares worth $1.76 billion.
Here is what Cooper Investors Global Equities Fund has to say about S&P Global Inc. (NYSE:SPGI) in its Q1 2022 investor letter:
“This quarter, S&P Global announced the successful completion of its acquisition of IHS Markit. The deal makes S&P a global leader across the information services industry. The Fund has been long term shareholders of S&P, building a position back in 2015 when the organization was still named McGraw-Hill Financial. We saw the initial opportunity as it refocused the business from a publishing and financial conglomerate towards its core data and financial assets. S&P’s credit ratings, benchmarks and analytics businesses in global capital and commodity markets carry leading positions, defensible offerings, consistent growth and high margins – as true today as it was seven years ago. With the increased focus management have applied over a lengthy period we see improved revenue growth, margins and cash flows…” (Click here to see the full text)
8. Texas Instruments Incorporated (NASDAQ:TXN)
Number of Hedge Fund Holders: 53
Percentage Decrease in Stake in Q4: 100%
Texas Instruments Incorporated (NASDAQ:TXN) was founded in 1930 and is headquartered in Dallas, Texas. The company designs and sells semiconductors to electronics designers and manufacturers around the world. Motley Fool entirely discarded its $4.3 million Texas Instruments Incorporated (NASDAQ:TXN) stake in the fourth quarter of 2021.
On April 26, Texas Instruments Incorporated (NASDAQ:TXN) reported its Q1 results, posting earnings per share of $2.42, beating consensus estimates by $0.22. Revenue for the period grew 14.36% year-over-year to $4.91 billion, surpassing analysts’ predictions by $173.06 million.
Truist analyst William Stein lowered the firm’s price target on Texas Instruments Incorporated (NASDAQ:TXN) to $172 from $189 and maintained a Hold rating on the shares on April 27. The analyst noted that Texas Instruments Incorporated (NASDAQ:TXN) reported a “strong” Q1 but guided Q2 “well below consensus”, citing supply chain challenges from pandemic-driven lockdowns in China.
According to the fourth quarter database of Insider Monkey, 53 hedge funds were bullish on Texas Instruments Incorporated (NASDAQ:TXN), up from 40 funds in the earlier quarter. The total stakes held in Q4 2021 amounted to $2.9 billion. Jean-Marie Eveillard’s First Eagle Investment Management is the biggest position holder in the company, with 3.3 million shares worth $625.2 million.
Here is what Davis Opportunity Fund has to say about Texas Instruments Incorporated (NASDAQ:TXN) in its Q4 2021 investor letter:
“Within technology and communication services, we own a number of online businesses and semiconductor related companies, including Alphabet, Amazon, Intel, Applied Materials and Texas Instruments. Within the realm of high technology, we believe that leadership positions reflect enduring and widening competitive advantages over smaller competitors, with few exceptions. This is because online businesses, as well as semiconductor companies, benefit from economies of scale. An online search and advertising engine will, in general, be more profitable per unit of cost as it grows larger in terms of users and advertising dollars. It is a hub-and-spoke model, in other words, where it is generally not necessary to grow expenses at the same rate that revenues grow beyond a certain threshold. Therefore, returns on capital tend to be higher, the larger and more dominant the online search company is.”
7. Zoetis Inc. (NYSE:ZTS)
Number of Hedge Fund Holders: 61
Percentage Decrease in Stake in Q4: 100%
Zoetis Inc. (NYSE:ZTS) is a New Jersey-based drug company that distributes animal health medicines, vaccines, and diagnostic products in the United States and internationally. Motley Fool reported discarding 100% of its Zoetis Inc. (NYSE:ZTS) stake in Q4 2021, which consisted of 11,886 shares worth $2.30 million.
Zoetis Inc. (NYSE:ZTS) reported earnings for Q4 2021 on February 15, posting an EPS of $1.00, above consensus estimates by $0.04. The $1.97 billion revenue jumped 8.85% year-over-year, surpassing analysts’ predictions by $35.05 million. On March 9, Citi analyst Navann Ty lowered the firm’s price target on Zoetis Inc. (NYSE:ZTS) to $208 from $232 and maintained a Neutral rating on the shares following the Q4 results.
According to Insider Monkey’s Q4 database, 61 hedge funds were long Zoetis Inc. (NYSE:ZTS), compared to 58 funds in the prior quarter. The total stakes owned in the fourth quarter amounted to $2.82 billion, up from $2.71 billion in the last quarter. William Von Mueffling’s Cantillon Capital Management is the biggest shareholder of Zoetis Inc. (NYSE:ZTS), with 1.82 million shares worth $445.6 million.
Here is what Polen Global Growth has to say about Zoetis Inc. (NYSE:ZTS) in its Q3 2021 investor letter:
“Finally, exiting our position in Zoetis was purely a function of valuation. With the business trading for up to 45x forward earnings, we felt we had more attractive alternatives. We maintain high conviction in the company and their competitive advantages and hope to be owners again, at a more attractive valuation. In short, we sold what we believe to be a high-quality business at relatively high valuations to fund the purchase of equally high-quality businesses trading at lower valuations and even better long-term earnings growth prospects. While we are certainly not tactical in approach, we do aim to make prudent adjustments over time.”
6. Atlassian Corporation Plc (NASDAQ:TEAM)
Number of Hedge Fund Holders: 69
Percentage Decrease in Stake in Q4: 26%
In the fourth quarter of 2021, Motley Fool slashed its Atlassian Corporation Plc (NASDAQ:TEAM) position by 26%, holding 94,000 shares of the company, worth $35.8 million. Atlassian Corporation Plc (NASDAQ:TEAM) is a developer of software products for workflow management, data analysis, and human capital management.
On April 8, Citi analyst Fatima Boolani was bullish on Atlassian Corporation Plc (NASDAQ:TEAM) after the company’s analyst day. The analyst reiterated a Buy recommendation on the stock with a $435 price target. She told investors that her rating stemmed from a combination of product announcements and advancements, robust operational metrics and data points, and Citi’s conversations with customers and partners that reinforce the thesis that Atlassian Corporation Plc (NASDAQ:TEAM) not only has “significant runway” in enhancing and scaling its platform, but the company should is set to witness pricing power in enterprise software. The analyst suggested buying any weakness in the shares.
According to Insider Monkey’s fourth quarter database, 69 hedge funds were long Atlassian Corporation Plc (NASDAQ:TEAM), compared to 60 funds in the prior quarter. Jim Simons’ Renaissance Technologies held the biggest stake in the company, with shares worth $1.10 billion.
Motley Fool was extremely bullish on Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL), and Amazon.com, Inc. (NASDAQ:AMZN) in Q4 2021, but trimmed its Atlassian Corporation Plc (NASDAQ:TEAM) stake significantly.
Here is what ClearBridge Investments International Growth ADR Strategy has to say about Atlassian Corporation Plc (NASDAQ:TEAM) in its Q1 2022 investor letter:
“The structural bucket has the shortest investment horizon across the spectrum of growth companies we target in the Strategy. We closely monitor the macro impacts and turnaround progress of these companies and will be disciplined sellers when the thesis for a holding plays out. We also trimmed back workflow software maker Atlassian (NASDAQ:TEAM) after a strong runup in its shares in 2021. Most of our reductions in emerging growth have involved IT or related companies where innovation is a key to their business model. That said, we remain positive on the IT sector and have largely maintained holdings in our highest-conviction ideas.”
5. Discover Financial Services (NYSE:DFS)
Number of Hedge Fund Holders: 33
Percentage Decrease in Stake in Q4: 100%
Discover Financial Services (NYSE:DFS) was incorporated in 1960 and is based in Riverwoods, Illinois. The company provides digital banking products and payment services in the United States. In the December quarter, Motley Fool disposed of its Discover Financial Services (NYSE:DFS) position entirely, which consisted of 7,133 shares worth $876,000.
In 2021, Discover Financial Services (NYSE:DFS)’s full-year revenue came in at $11.8 billion, a year-over-year growth of 99.34% from the 2020 revenue of $5.95 billion. The net income in 2021 stood at $5.4 billion, up from $1.14 billion in the prior year.
Wells Fargo analyst Donald Fandetti on April 6 lowered the firm’s price target on Discover Financial Services (NYSE:DFS) to $127 from $135 and kept an Equal Weight rating on the shares. His core Q1 EPS estimate declined by $0.16 to $3.66, assuming higher operating expenses, a more conservative provision expense, and slightly lower than anticipated card loan growth.
According to Insider Monkey’s records, 33 hedge funds were bullish on Discover Financial Services (NYSE:DFS) at the end of December 2021, compared to 37 funds in the preceding quarter. Hedge funds also slashed their collective stakes in the company from $516 million in Q3 to $488 million in Q4. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is the leading shareholder of Discover Financial Services (NYSE:DFS), with 970,847 shares worth over $112 million.
4. IPG Photonics Corporation (NASDAQ:IPGP)
Number of Hedge Fund Holders: 25
Percentage Decrease in Stake in Q4: 21%
IPG Photonics Corporation (NASDAQ:IPGP) is a Massachusetts-based company that designs and distributes high-performance fiber lasers, fiber amplifiers, and diode lasers used in various materials processing worldwide. Motley Fool trimmed its IPG Photonics Corporation (NASDAQ:IPGP) stake by 21% in Q4 2021, holding a total of 39,334 shares worth $6.77 million.
On March 14, Raymond James analyst Brian Gesuale downgraded IPG Photonics Corporation (NASDAQ:IPGP) to Underperform from Market Perform without a price target. According to the analyst, almost every demand and cost input indicator has become negative over the past months, with a negligent chance of significant improvement for IPG Photonics Corporation (NASDAQ:IPGP) in 2022. The analyst believes more downside still exists to IPG Photonics Corporation (NASDAQ:IPGP)’s estimates, and said shares may not have fully reflected possible demand destruction the Europe war brings, incremental share loss risk, and a higher long-term cost structure as the company moves away from Russia, a low cost production region.
According to Insider Monkey’s Q4 database, 25 hedge funds were long IPG Photonics Corporation (NASDAQ:IPGP), with collective stakes worth $504 million. Jean-Marie Eveillard’s First Eagle Investment Management is the largest shareholder of the company, with 2.30 million shares worth $396.4 million.
Here is what Artisan Mid-Cap Fund has to say about IPG Photonics Corporation (NASDAQ:IPGP) in its Q3 2021 investor letter:
“IPG Photonics is the leading provider of fiber laser technology for industrial automation markets. Fiber lasers are faster, more powerful and efficient, yet require less maintenance and labor to operate than traditional lasers used in industrial applications—cutting and welding, marking and engraving, and micro-processing. When we initiated our campaign, we believed the company was poised to benefit from additional use cases for fiber lasers, including in the manufacturing processes of electric vehicle batteries and solar panels and in medical applications such as kidney stone removal. However, the company recently indicated supply chain delays and slowing growth in China— nearly 40% of the company’s revenue—were weighing on growth, and the exposure to emerging applications is not yet meaningful enough to offset these headwinds. With limited visibility into when these challenges may abate, we exited our GardenSM position in favor of other industrial technology holdings with stronger fundamental trends.”
3. Cardlytics, Inc. (NASDAQ:CDLX)
Number of Hedge Fund Holders: 27
Percentage Decrease in Stake in Q4: 21%
Cardlytics, Inc. (NASDAQ:CDLX) was incorporated in 2008 and is headquartered in Atlanta, Georgia. The company offers a digital advertising platform to financial institutions in the United States and the United Kingdom. Motley Fool’s 13F filings for Q4 2021 reveal that it trimmed the Cardlytics, Inc. (NASDAQ:CDLX) stake by 21%. The hedge fund owns 168,586 shares worth $11.14 million, representing 0.71% of the total portfolio.
On April 4, Wells Fargo analyst Jeff Cantwell initiated coverage of Cardlytics, Inc. (NASDAQ:CDLX) with an Overweight rating and a $72 price target. The analyst is positive on Cardlytics, Inc. (NASDAQ:CDLX)’s positioning and strategy, noting that it is set for robust top-line growth in FY22 and FY23 because of recovery across its verticals and strong execution. Cardlytics, Inc. (NASDAQ:CDLX)’s improving EBITDA profile is also forecasted to be a “nice ongoing catalyst”, the analyst added.
According to the fourth quarter database of Insider Monkey, 27 hedge funds were long Cardlytics, Inc. (NASDAQ:CDLX), compared to 23 funds in the last quarter. Clifford A. Sosin’s CAS Investment Partners is the leading shareholder of the company, with a position worth $342.7 million.
Here is what Headwaters Capital has to say about Cardlytics, Inc. (NASDAQ:CDLX) in its Q4 2021 investor letter:
“Sells: Cardlytics (“CDLX”). The CDLX position was sold during the quarter as it had become an opportunity cost in the portfolio. CDLX was a small position at the beginning of the year and has subsequently underperformed throughout the year due to a couple of poor strategic acquisitions along with a depressed spending environment from its customer base. The acquisitions were particularly concerning given that the company has not articulated a clear strategic rationale for the deals and have delayed the company’s path to profitability given that both of the acquired companies are generating losses. Given the small size of the position and the need for capital for more attractive investment opportunities, the entire CDLX position was sold during the quarter.”
2. LCI Industries (NYSE:LCII)
Number of Hedge Fund Holders: 12
Percentage Decrease in Stake in Q4: 16%
LCI Industries (NYSE:LCII) is an Indiana-based company that supplies components for the manufacturers of recreational vehicles and adjacent industries such as livestock and modular housing. Motley Fool, as of Q4 2021, slashed its LCI Industries (NYSE:LCII) stake by 16%, holding 55,148 shares worth $8.5 million.
DA Davidson analyst Brandon Rolle initiated coverage of LCI Industries (NYSE:LCII) on April 13 with a Buy rating and a $130 price target. According to the analyst, LCI Industries (NYSE:LCII)’s “dominant competitive position” can drive earnings and cash flow that surpasses investor expectations. He added that LCI Industries (NYSE:LCII) has one of the top management teams in the industry, with a robust balance sheet, balanced capital deployment strategy, and a strong track record of accretive mergers and acquisitions activity.
Among the hedge funds tracked by Insider Monkey, 12 hedge funds reported owning stakes in LCI Industries (NYSE:LCII) at the end of Q4 2021, compared to 17 funds in the preceding quarter. The total stakes held in the fourth quarter amounted to $106.2 million.
1. Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE)
Number of Hedge Fund Holders: 20
Percentage Decrease in Stake in Q4: 11%
Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) is headquartered in Novato, California, operating as a biopharmaceutical company that focuses on the commercialization of treatments for rare and ultra-rare genetic diseases in North America, Europe, and internationally.
Securities filings for Q4 2021 reveal that Motley Fool disposed 11% of its Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) stake. The hedge fund held 119,993 shares of the company in the December quarter, worth $10 million, representing 0.64% of the total 13F holdings.
On March 16, Credit Suisse analyst Tiago Fauth upgraded Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) to Outperform from Neutral with a price target of $105, up from $99. The analyst sees a “compelling risk/reward” profile on the shares ahead of the company’s Angelman syndrome program update. The analyst told investors that they might be ignoring how low the efficacy bar is in this potential multi-billion dollar market.
Among the hedge funds tracked by Insider Monkey, 20 funds were bullish on Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) at the end of the fourth quarter of 2021. Panayotis Takis Sparaggis’ Alkeon Capital Management is the biggest shareholder of the company, with 2.30 million shares valued at $194 million.
You can also take a look at 10 Stocks to Buy in April According to Jim Cramer and 7 Best Stocks to Buy Now According to Bill Ackman.
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Disclosure: None. 10 Stocks You Should Sell According to Motley Fool is originally published on Insider Monkey.
