In this article, we examined Motley Fool Asset Management’s approach to investing in stocks. We also reviewed 10 stocks to sell according to Motley Fool. You can skip our detailed discussion about Motley Fool’s investment philosophy and portfolio management strategies and jump directly to 5 Stocks to Sell According to Motley Fool.
Large-cap growth stocks like Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL) remained among the leading long positions of Motley Fool, which sold off several of its most prominent stock holdings during the Q3 2021 period.
Motley Fool Asset Management was founded in 2009 by a financial services firm and has grown its assets under management to $1.4 billion as of the end of September 2021. The firm is also engaged in growing its high return investment opportunities for clients. It recently converted its mutual funds into ETFs and introduced two new index funds. Bryan Hinmon, chief investment officer and senior portfolio manager, has played an important role in expanding the firm’s assets under management and creating new investment options for clients. He is responsible for leading the investment team, managing client assets, and maintaining the firm’s investment philosophy.
High-quality growth companies are at the core of the firm’s investing philosophy. Bryan Hinmon believes the long-term investment potential of these companies makes them an attractive proposition. Companies he selects for active management strategies need to meet four core pillars. These pillars include management, culture, and incentives; economics of the business; competitive advantage; and trajectory.
As of September 2021, Motley Fool Asset Management’s 13F securities portfolio was valued at around $1.53 billion. The firm’s portfolio is mainly composed of growth stocks from the information technology, communications, and consumer discretionary sectors. Besides a greater focus on growth stocks, Motley Fool implements diversification in every aspect of its business, especially when selecting stocks. Therefore, the firm’s portfolio is well-diversified and includes stocks from the real estate, healthcare, finance, industrial, and other sectors.
In addition to stock selection, it is equally important to exit positions at the right time to maximize gains or minimize losses and to move capital towards better investment opportunities. Motley Fool Asset Management constantly reviews its positions and sells stocks that no longer match its investment criteria. During the September quarter, Motley Fool Asset Management completely sold out of 10 stock positions. Some of the notable names include Editas Medicine, Inc. (NASDAQ:EDIT), Chewy, Inc. (NYSE:CHWY), Copart, Inc. (NASDAQ:CPRT), Wayfair Inc. (NYSE:W), and Peloton Interactive, Inc. (NASDAQ:PTON).
Our Methodology
This analysis is conducted using Motley Fool Asset Management’s 13F portfolio as of September 30, 2021. The following is a list of 10 stocks to sell according to Motley Fool Asset Management.
10 Stocks to Sell According to Motley Fool
10. Chewy, Inc. (NYSE:CHWY)
Number of Hedge Fund Holders: 32
Motley Fool sold out its entire position in Chewy, Inc. (NYSE:CHWY) during the September quarter of 2021. The firm’s strategy worked in the case of Chewy, Inc. (NYSE:CHWY) as shares of the e-commerce platform have plunged sharply since the beginning of this year. Investors’ move towards value stocks along with easing social distancing policies contributed to its selloff. Moreover, lower than expected results for the December quarter added to investors’ concerns.
Chewy, Inc. (NYSE:CHWY) is an online provider of pet food, pet medications, pet supplies, and pet services. Market analysts are also showing concerns over its short-term fundamentals. For instance, Piper Sandler downgraded its shares to “Neutral” from “Overweight” due to concerns over sales and margins. The firm also dropped its price target for Chewy, Inc. (NYSE:CHWY) from $70 to $55 a share.
Elite hedge fund managers are less bullish on Chewy, Inc. (NYSE:CHWY) when compared to Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL). The number of long hedge fund positions was cut by 11 in recent months. Chewy, Inc. (NYSE:CHWY) was in 32 hedge funds’ portfolios as of September 2021. It is also not on the list of the 30 most popular stocks among hedge funds according to data tracked by Insider Monkey.
9. Copart, Inc. (NASDAQ:CPRT)
Number of Hedge Fund Holders: 42
Copart, Inc. (NASDAQ:CPRT) is among the 10 stocks to sell according to Motley Fool. The firm exited its stake in the company during the September quarter to capitalize on its recent share price run. Copart, Inc. (NASDAQ:CPRT) is engaged in providing online auctions and vehicle remarketing services. The company generated 32% year-over-year revenue growth in the December quarter while earnings per share jumped 30% from the previous year period.
Compared to large-cap growth stocks like Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL), Copart, Inc. (NASDAQ:CPRT) is a mid-cap with a $30 billion market capitalization. The company does not offer dividends and seeks to invest profits back into its business.
Out of 867 hedge funds tracked by Insider Monkey, Copart, Inc. (NASDAQ:CPRT) was in 42 hedge funds’ portfolios as of the end of September.
8. Wayfair Inc. (NYSE:W)
Number of Hedge Fund Holders: 31
Motley Fool first initiated a position in Wayfair Inc. (NYSE:W) during the third quarter of 2020. After generating substantial returns during 2020 and in the first half of 2021, shares of Wayfair Inc. (NYSE:W) plummeted sharply over the past couple of months. Wayfair Inc. (NYSE:W), which is engaged in the e-commerce industry, has seen its revenue growth slow over the past two quarters as pandemic habits have begun fading.
Other hedge funds are also selling their stakes in the company. According to data tracked by Insider Monkey, there has been a decline in the number of long positions in Wayfair Inc. (NYSE:W) over each of the past five quarters. The number of long hedge fund positions fell to 31 at the end of the third quarter of 2021 compared to 35 in the previous quarter.
In its third quarter investor letter, Vulcan Value Partners, an investment management firm, mentioned a few stocks, including Wayfair Inc. (NYSE:W). Here is what Vulcan Value Partners stated:
“Wayfair Inc. was a material detractor during the quarter. Wayfair Inc. is a premier e-commerce retailer for home goods and furnishings. As a result of the pandemic, online purchases and spending on home furnishings dramatically increased in the second and third quarters of 2020. Consequently, the company’s revenue accelerated immensely last year. More recently, the company has been facing stockouts, shipping delays, and supply chain issues which have negatively impacted the business and its stock price. The company’s operating margins and free cash flow generation remain strong. We believe the current challenges are transitory, and Wayfair’s long-term prospects are intact.”
7. Peloton Interactive, Inc. (NASDAQ:PTON)
Number of Hedge Fund Holders: 62
Peloton Interactive, Inc. (NASDAQ:PTON), which provides connected interactive fitness products with a touchscreen that streams live and on-demand, is among the 10 stocks to sell according to Motley Fool. The firm managed to escape the recent price collapse by selling its entire stake in the company during the September quarter of 2021.
Peloton Interactive, Inc. (NASDAQ:PTON) is among the worst performers in the past two quarters amid slowing demand. In response to Peloton Interactive’s 80% stock price drop, activist investor Blackwells Capital LLC is reportedly calling for the company to put itself up for sale and fire its CEO. The company’s stock price lost investor traction as the benefit from stay-at-home policies ended and people began returning to gyms.
Like Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL), Peloton Interactive, Inc. (NASDAQ:PTON) was among the favorite stocks of growth investors in 2020. However, there has been a decrease in hedge fund sentiment towards Peloton Interactive, Inc. (NASDAQ:PTON). Out of the 867 hedge funds tracked by Insider Monkey that filed 13Fs in Q3, 62 held PTON shares at the end of September 2021.
6. Pinterest Inc. (NYSE:PINS)
Number of Hedge Fund Holders: 58
Pinterest Inc. (NYSE:PINS) is among the 10 stocks to sell according to Motley Fool after the firm sold its stake in the social media platform during the September quarter. The share price of Pinterest Inc. (NYSE:PINS) plunged sharply in the past two quarters amid easing social distancing policies.
Compared to well-established large-cap growth stocks like Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL), Pinterest Inc. (NYSE:PINS) has been heavily impacted by easing pandemic-related restrictions and investors’ move towards value stocks.
Recently, multiple analysts have urged caution on Pinterest Inc. (NYSE:PINS). For instance, Guggenheim downgraded the stock amid a decline in users for the second straight month. The firm cut its price target for Pinterest Inc. (NYSE:PINS) to $39 from $46. Wolfe Research also pointed out near-term uncertainties for Pinterest Inc. (NYSE:PINS) while alternatively, Piper Sandler analyst Thomas Champion claims that the recent selloff is providing a buying opportunity.
In its fourth quarter investor letter, asset management firm Baron Funds mentioned a few stocks, including Pinterest Inc. (NYSE:PINS). Here is what Baron Funds stated:
“As of December 31, 2021, Baron Asset Fund held 65 positions. The Fund’s 10 largest holdings represented 42.0% of assets, and the 20 largest represented 64.3% of assets. The Fund’s largest weighting was in the IT sector at 31.1% of assets. This sector includes software companies, IT consulting firms, internet services companies, technology distributors, and data processing firms. The Fund held 26.5% of its assets in the Health Care sector, which includes investments in life sciences companies, and health care equipment, technology, and supplies companies. The Fund held 14.7% of its assets in the Industrials sector, which includes investments in research and consulting companies, industrial conglomerates, and machinery companies. The Fund also had significant weightings in Financials at 11.3% of assets and Consumer Discretionary at 7.7% of assets. We also sold Pinterest, Inc., a social media network, because of concerns about the sustainability of its long-term growth rate.”
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