In this article, we discuss 10 stocks to sell now according to billionaire Ken Fisher. If you want to skip the investment philosophy of Ken Fisher and the detailed analysis of Fisher Asset Management, go directly to 5 Stocks to Sell Now According to Billionaire Ken Fisher.
Ken Fisher is an American billionaire, hedge fund manager, author, and financial advisor. Fisher is the son of a renowned stock investor and author of Common Stocks and Uncommon Profits, Philip A. Fisher.
Investment Philosophy and Strategy
Ken Fisher’s investment philosophy revolves around a fundamental belief in capitalism. He firmly believes that the supply and demand of securities solely determine pricing. Furthermore, his philosophy is also based on distinctiveness. A hedge fund manager should prefer seeking out either unique information or interpreting widely known information in a unique manner.
For retirees, Fisher advises to “be diversified, but not too diversified,” and “review your asset allocation regularly”. Moreover, Fisher advises staying away from annuities as they are complicated to understand.
Finally, he emphasizes understanding and managing social security benefits.
Fisher Asset Management
Ken Fisher founded Fisher Asset Management in 1979 with $250 and as of the second quarter of 2022, the company had $208.9 billion in assets under management. The firm follows the investment philosophy of Ken Fisher himself. Fisher Asset Management’s clients are based in the U.S., Europe, Canada, Asia, Australia, and the Middle East. Since 2013, Fisher Asset Management’s portfolio has shown a 46.18% growth, and its annualized average returns in the past three years have been around 5.05%.
In the second quarter of 2022, Fisher Asset Management managed 13F securities valued at $141.3 billion, down from $169.49 billion in the previous quarter. In Q2, the firm made 94 new stock purchases and increased holdings in 481 stocks. Furthermore, the firm sold out 109 stocks and reduced its position in 315 stocks.
CrowdStrike Holdings, Inc. (NASDAQ:CRWD), General Motors Company (NYSE:GM), and The Charles Schwab Corporation (NYSE:SCHW) are some of the major stocks that Fisher Asset Management has sold out entirely.
Our Methodology
After a careful assessment of the Fisher Asset Management portfolio, we picked the 10 most significant stocks that the firm has sold in Q2 2022. The hedge fund sentiment around each stock has been taken from the 895 elite hedge funds tracked by Insider Monkey in the second quarter of 2022.
Stocks to Sell Now According to Billionaire Ken Fisher
10. Baxter International Inc. (NYSE:BAX)
Number of Hedge Fund Holders: 37
The American health care and medical company, Baxter International Inc. (NYSE:BAX) was added to Fisher Asset Management’s portfolio in Q1 2022 with shares worth $251,000. The stock was sold out entirely in the second quarter.
Baxter International Inc. (NYSE:BAX) acquired the medical technology company, Hill-Rom, at the end of December 2021 for $12.5 billion. With the acquisition, the company expects to generate $250 million in annualized pre-tax cost synergies. However, the acquisition of Hill-Rom has left Baxter International Inc. (NYSE:BAX) with quite a significant debt load. Right after the acquisition, the company’s net debt to adjusted EBITDA ratio was 4.2x, which the company is looking to bring down to 2.75x by December 2023.
On July 29, Raymond James analyst Jayson Bedford maintained an Outperform rating on Baxter International Inc. (NYSE:BAX) shares and lowered the price target to $66 from $85. Bedford added that the company’s earning results and guidance were “messy”. The analyst believes that even with strong demand, lagging customer orders due to supply issues have turned out to be a significant problem for the company.
Baxter International Inc. (NYSE:BAX) is one of the major stocks to sell according to Ken Fisher along with CrowdStrike Holdings, Inc. (NASDAQ:CRWD), General Motors Company (NYSE:GM), and The Charles Schwab Corporation (NYSE:SCHW).
Here is what Cooper Investors had to say about Baxter International Inc. in its Q3 2021 investor letter:
“During the quarter we exited our position in Baxter, having originally bought in 2017 as a Low Risk Turnaround with clear Stalwart attributes. In essence, the core businesses were highly durable, providing life sustaining or saving medical products such as IV medication or pumps and dialysis machines.
They had been mismanaged prior to the company spinning off its biopharmaceutical business in 2015 which had generated most of the Baxter’s operating profit. With a new CEO in Joe Almeida, who came with a successful track record leading another medical device company (Covidien) we identified three sources of value latency for the new standalone Baxter.
Firstly, optimising the cost structure. Baxter were successful here – they were able to effectively double operating margins from low single digits to mid-to-high teens over a relatively short four-year period. Secondly, accelerating sales growth through a more focused R&D effort. This is inherently more difficult than cost optimisation and on this front success has been muted with only moderate impact to revenues from new product introductions. Finally, capital deployment through Baxter’s significantly under-levered balance sheet. Several smaller bolt-on acquisitions were nicely complementary to the existing portfolio, but in early September the company announced the acquisition of Hil-Rom Holdings, a medical device company with leading positions in bed systems and patient monitoring. The deal is significant at US$12.5bn in size, and exhausts all balance sheet latency in one fell swoop.
Whilst it is “EPS accretive” we believe the high single digit ROIC management are targeting over five years is most reflective of the financial merits of the deal. Put another way, despite visions of providing digital and connected healthcare (think a Baxter IV pump combined with a Hil-Rom smart bed), ultimately the combined entity will likely remain a low-to-mid-single digit grower. Baxter look like they are getting bigger but not necessarily better.
This combination of uncertainty around the merits of the Hil-Rom acquisition and the underwhelming performance on the product development side of the business led us to conclude that the investment proposition today is less attractive relative to other opportunities.”
9. The Kraft Heinz Company (NASDAQ:KHC)
Number of Hedge Fund Holders: 41
The Kraft Heinz Company (NASDAQ:KHC) is one of the largest food companies in the world. On June 19, the company announced that it completed an 85% acquisition of a Germany-based food company, Just Spices. Fisher Asset Management sold off its stake in The Kraft Heinz Company (NASDAQ:KHC) during Q2 2022.
On August 8, The Kraft Heinz Company (NASDAQ:KHC) and the UK retailer Tesco settled their dispute regarding price hikes. In late June, the British retail store called the price hike from The Kraft Heinz Company (NASDAQ:KHC) “unjustifiable” and resisted increasing costs of goods during the current inflation. Tesco took The Kraft Heinz Company (NASDAQ:KHC)’s products off its shelves. The terms of the recent agreement between the companies are unknown, however, Heinz products are returning to Tesco.
Out of the 895 elite hedge funds tracked by Insider Monkey, 41 had a stake in The Kraft Heinz Company (NASDAQ:KHC) at the end of Q2 2022, compared to 35 in the previous quarter. Berkshire Hathaway remained the most prominent stakeholder in the company in Q2 with 325.63 million shares worth $12.42 billion.
8. Archer-Daniels-Midland Company (NYSE:ADM)
Number of Hedge Fund Holders: 42
Archer-Daniels-Midland Company (NYSE:ADM) is an Illinois-based food processing and commodities trading company. In Q1 2022, Fisher Asset Management added the stock to its portfolio with 2,532 shares worth $229,000, and dumped all of the stake in the June quarter.
Archer-Daniels-Midland Company (NYSE:ADM) reported its Q2 earnings on July 26. The company recorded an EPS of $2.15, which is almost 1.6x the EPS in the same quarter of 2021. The revenue of $27.28 billion represented 19.0% YoY growth and outperformed the estimates by $2.31 billion. Archer-Daniels-Midland Company (NYSE:ADM) exited the quarter with cash and cash equivalents of $906 million and used $675 million in cash for operating activities.
The hedge fund sentiment for Archer-Daniels-Midland Company (NYSE:ADM) remained unchanged between Q1 and Q2 with 42 investment portfolios holding bullish positions in the company. In Q2 2022, Markel Gayner Asset Management was the most prominent stakeholder in the company, with 1.46 million shares worth $113.55 million.
On August 11, Wolfe Research analyst Sam Margolin initiated coverage on Archer-Daniels-Midland Company (NYSE:ADM) with an Outperform rating and a $117 price target. The analyst noted that the company offers “highly competitive dividend growth” through its nutrition segment alone.
Here is what Diamond Hill Capital had to say about Archer-Daniels-Midland Company (NYSE:ADM) in its Q1 2022 investor letter:
“ADM is a leading agricultural processor that also operates a global nutrition business focused on the development of ingredients and flavors for food and beverages, supplements and more. The company’s recent operating results have benefited (unfortunately) from the war in Ukraine as grain prices and agricultural markets globally experienced strong price increases. ADM is positioned well to benefit from the volatility due to its stable North American agricultural base.”
7. Ecolab Inc. (NYSE:ECL)
Number of Hedge Fund Holders: 43
Ecolab Inc. (NYSE:ECL) is an American company that offers food and water safety services. Bill & Melinda Gates Foundation held the most significant position in the company in Q2, with a stake value of $770.9 million. Furthermore, the fund has added $34.4 million worth of Ecolab Inc. (NYSE:ECL) stock to its portfolio in the last two weeks.
In the second quarter, Ecolab Inc. (NYSE:ECL) posted an EPS of $1.10, which was down almost 10% from the same quarter in 2021, while the revenue showed a 13.2% YoY growth to $3.58 billion. Furthermore, the company’s gross margin also went down by 345 basis points to 38.2%. At the end of the June quarter, Ecolab Inc. (NYSE:ECL) had cash and cash equivalents of $124.9 million and total debt of $8.79 billion.
Fisher Asset Management sold out of its position in Ecolab Inc. (NYSE:ECL) completely in the June quarter. In the previous quarter, the firm owned 1,259 company shares, valued at $222,000.
Here is what Baron Funds had to say about Ecolab Inc. (NYSE:ECL) in its Q1 2022 investor letter:
“Lastly, we added to our position in the leading water, hygiene and infection prevention company, Ecolab Inc. (NYSE:ECL), as the stock sold off on concerns over rising raw material costs. We believe the sell-off is overdone as Ecolab’s strong competitive positioning and proven pricing power would enable it to offset the rising costs (though with a lag). We think that the company will continue benefiting from the secular growth trends towards sustainability, while still having a long runway for growth with only an 8% share of its estimated $147 billion addressable market.”
6. Delta Air Lines, Inc. (NYSE:DAL)
Number of Hedge Fund Holders: 49
Delta Air Lines, Inc. (NYSE:DAL) is one of the world’s oldest airlines, headquartered in Atlanta, Georgia. According to Insider Monkey’s Q2 database, 49 hedge funds had long positions in the company, with combined stakes worth $887.318 million. In the previous quarter, 55 hedge funds were bullish on the company with a collective stake value of $1.275 billion.
For the second quarter of 2022, Delta Air Lines, Inc. (NYSE:DAL) was affected by labor shortages and higher fuel costs. The company posted an EPS of $1.44, compared to the $1.72 consensus. The revenue managed to grow by 93.5% on a YoY basis to $13.8 billion. Furthermore, the company had an operating margin of 11.7%. Despite missing the operating margin guidance range of 13% to 14%, the company had its first double-digit operating margins since 2019.
In the first quarter of 2022, Fisher Asset Management owned 5,374 shares of Delta Air Lines, Inc. (NYSE:DAL), valued at $213,000, and got rid of the holding in the quarter ending June 30.
On August 15, Melius Research analyst Conor Cunningham initiated coverage of Delta Air Lines, Inc. (NYSE:DAL) with a Buy rating and a $41 price target.
Delta Air Lines, Inc. (NYSE:DAL), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), General Motors Company (NYSE:GM), and The Charles Schwab Corporation (NYSE:SCHW) are some of the stocks Ken Fisher sold in Q2.
Here is what Miller Value Partners had to say about Delta Air Lines, Inc. in its Q4 2021 investor letter:
“We’ve healed greatly from the worst days of the pandemic, and we expect that to continue going forward. We see the greatest disconnects between current market expectations and 18-months-out fundamentals in names like Delta Airlines (DAL).
Delta is a quality airline with shareholder-friendly management. It was the only one not to issue equity during the pandemic. It was also the only profitable airline in the second half of 2021. It generated positive operating cash flow despite business and international travel weakness. When earnings finally normalize, which the company doesn’t expect until 2024, it should earn more than $7/share. After bouncing significantly off the lows, DAL currently trades at $41.99 or less than 6x those earnings.
We’ve believed for over a decade that the US airlines are better businesses than they’ve historically been. Consolidation led to a more rational industry. These companies shifted from growth at any cost to a return on capital mindset, the importance of which can’t be understated. We previously believed a recession would finally demonstrate the group’s improved resilience.
Unfortunately, a global pandemic did exactly the opposite. Buffett, who bought the airlines after being a critic of their historical capital destruction, sold his airlines early in the pandemic due to the risk. The government offered support to the industry due to their national strategic importance, which we believe offers protection against another worst-case scenario. We still believe Delta is a better business than the market gives it credit for and one whose prospects will be materially different 18 months from now. As patient investors, you can expect us to hold tight.”
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Disclosure. None. 10 Stocks to Sell Now According to Billionaire Ken Fisher is originally published on Insider Monkey.
