In this article, we will look at the 15 large-cap stocks hedge funds are dumping. If you want to explore similar stocks, you can also take a look at 5 Large-Cap Stocks Hedge Funds Are Dumping.
We are now approaching the end of the first quarter of 2023 and the markets are exhibiting an upward trend. As of March 3, the S&P 500 has gained 5.58% year to date and the Nasdaq has shot up by 12.40% since the beginning of the year. After the disastrous year that 2022 was for the stock market, seeing these upward moves can make one wonder whether these moves are just short-term spikes or if they are the real deal.
Morgan Stanley’s Senior Vice President: “We Think The Bear Market Is Not Over”
On February 27 Morgan Stanley’s senior vice president and portfolio manager, Katerina Simonetti, appeared in an interview on Yahoo Finance Live where she discussed her view of the markets and what she sees moving forward. Simonetti noted that 2022 was centered around “inflation and Fed action, and markets “underestimated inflation” so “now we’re seeing the results of that”. Simonetti further spoke about the Fed’s hiking cycle and said that since “economic data surprised us to the positive”, the central bank is expected to continue its hiking cycle. Here are some comments from Katerina Simonetti of Morgan Stanley:
“As we continue to focus on the Fed, in our view, the focus should be on the earnings revisions. Because that’s where the real story for ’23, in our view, is the fact that it was easier to be profitable during the times of the high inflation and as inflation is coming down, these profit margins are harder to find.”
Simonetti noted that U.S. companies “specifically are going to be revising their earnings and setting them to the more normal level”. The earnings revisions “to the more normal level” are going to be “viewed by the market as a negative, as it should be” said Simonetti, and “this is what is really underestimated by the general investing public”. Simonetti thinks that “there is a lot of risk in this market, and that the risk-reward is just not there”. Katerina Simonetti said that “earnings have a long way to go” and “stocks seem highly overvalued”. Simonetti further said that “another leg down” is necessary “to pivot our way into the next bull market” since “the bear market is not over”.
Katerina Simonetti said she does not think that “there are not opportunities in this market”. Simonetti likes “high-quality dividend-paying stocks” in the healthcare, financials, and utilities sectors and more specifically, she likes the “combination of blue-chip dividend-paying stocks plus higher-yielding bonds” in the current market environment. Finally, Simonetti said that though technology outperformed all other sectors in the last bull market, she thinks “this might not be the leading sector in the next bull market”.
Hedge funds are some of the biggest players in the stock market, with their decisions potentially having a large impact on the market. It can be especially insightful to look where smart money is placing its bets. However, looking at stocks that hedge funds are dumping can potentially save retail investors from short-term volatility and potential losses. We have compiled a list of the 15 large-cap stocks that hedge funds are dumping right now. Some of the top stocks that hedge funds have dumped in Q4 2022 include The Walt Disney Company (NYSE:DIS), The Home Depot, Inc. (NYSE:HD), and Amazon.com, Inc. (NASDAQ:AMZN). Let’s now look at these stocks, among others, in detail below.
Photo by Ruben Sukatendel on Unsplash
Our Methodology
We obtained the list of 100 biggest stocks that are trading in the U.S. and then sorted them by the change in hedge fund sentiment. We sourced the hedge fund sentiment for each stock from Insider Monkey’s database of over 900 elite money managers, as of Q4 2022. We narrowed down our selection to the 15 largest stocks with the most negative hedge fund sentiment on the margin. We have ranked these stocks, primarily by the number of hedge funds that sold their positions in the company in Q4 2022. Where the number of hedge funds that sold was the same, we used the total number of hedge funds that held stakes in the company, in Q4 2022, as the tie-breaker. These stocks are ranked in ascending order of both metrics.
15 Large-Cap Stocks Hedge Funds Are Dumping
15. AT&T Inc. (NYSE:T)
Number of Hedge Fund Holders: 55
Number of Hedge Funds That Sold: 6
At the end of Q4 2022, 55 hedge funds held stakes in the company, down from 61 positions in the preceding quarter. As of December 31, AQR Capital Management is the largest investor in AT&T Inc. (NYSE:T) and has a position worth $333.5 million in the company.
On January 25, AT&T Inc. (NYSE:T) posted earnings for the fiscal fourth quarter of 2022. The company reported an EPS of $0.61 and outperformed EPS estimates by $0.04. The company’s revenue for the quarter amounted to $31.34 billion, down 23.48% year over year and short of expectations by $25.43 million.
Shortly after the company’s earning’s release, Cowen analyst Gregory Williams raised his price target on AT&T Inc. (NYSE:T) to $25 from $24 and maintained a Market Perform rating on the shares.
Some of the largest stocks that hedge funds sold heavily in Q4 2022 include AT&T Inc. (NYSE:T), The Walt Disney Company (NYSE:DIS), The Home Depot, Inc. (NYSE:HD), and Amazon.com, Inc. (NASDAQ:AMZN).
14. Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 56
Number of Hedge Funds That Sold: 6
On January 24, Verizon Communications Inc. (NYSE:VZ) announced earnings for the fourth quarter of fiscal 2022. The company generated a revenue of $35.25 billion, up 3.48% year over year, and outperformed revenue consensus by $107.77 million. The company’s EPS for the quarter was $1.19.
On January 25, RBC Capital analyst Kutgun Maral lowered his price target on Verizon Communications Inc. (NYSE:VZ) to $40 from $42 and reiterated a Sector Perform rating on the shares.
Verizon Communications Inc. (NYSE:VZ) is one of the top large-cap stocks that hedge funds are dumping right now. At the end of Q4 2022, Verizon Communications Inc. (NYSE:VZ) was spotted on 56 investors’ portfolios that disclosed positions worth $1.53 billion in the company. This is compared to 62 positions in the previous quarter worth $1.42 billion.
As of December 31, Diamond Hill Capital is the most prominent shareholder in Verizon Communications Inc. (NYSE:VZ) and owns over 6.7 million shares of the company.
Here is what Matrix Asset Advisors had to say about Verizon Communications Inc. (NYSE:VZ) in its third-quarter 2022 investor letter:
“We sold the entire position in Verizon Communications Inc. (NYSE:VZ), which was a disappointing investment, on concerns that the company is losing market share in a very competitive business and because we believed we had better use for the funds elsewhere.”
13. T-Mobile US, Inc. (NYSE:TMUS)
Number of Hedge Fund Holders: 94
Number of Hedge Funds That Sold: 6
On March 1, T-Mobile US, Inc. (NYSE:TMUS) disclosed in a regulatory filing that CEO Michael Sievert sold $5.75 million worth of shares of the company’s common stock on February 27. This February, MoffettNathanson analyst Craig Moffett downgraded T-Mobile US, Inc. (NYSE:TMUS) to Market Perform from Outperform and reiterated his price target of $174 on the shares.
6 hedge funds dumped their positions in T-Mobile US, Inc. (NYSE:TMUS) in the fourth quarter of 2022. The stock was spotted on 94 investors’ portfolios that held collective stakes worth $3.71 billion in the company. This is compared to 100 hedge funds in the third quarter of 2022 with stakes worth $5.37 billion. The hedge fund sentiment for the stock is negative and the stock is placed thirteenth on our list of large-cap stocks that hedge funds are dumping right now.
As of December 31, Berkshire Hathaway is the largest shareholder in T-Mobile US, Inc. (NYSE:TMUS) and has a position worth $733.8 million in the company.
12. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 73
Number of Hedge Funds That Sold: 7
This February, Wolfe Research analyst Tim Anderson downgraded AbbVie Inc. (NYSE:ABBV) to Peer Perform from Outperform. As of March 2, the stock has declined by 4.51% year to date.
On February 9, AbbVie Inc. (NYSE:ABBV) reported earnings for the fiscal fourth quarter of 2022. The company reported an EPS of $3.60 and outperformed EPS estimates by $0.02. The company’s revenue for the quarter amounted to $15.12 billion and missed expectations by $215.90 million.
AbbVie Inc. (NYSE:ABBV) is one of the top large-cap stocks that hedge funds dumped in Q4 2022. At the end of Q4 2022, 73 hedge funds held stakes in AbbVie Inc. (NYSE:ABBV) worth $1.52 billion. This is compared to 80 hedge funds in the previous quarter with stakes worth $1.86 billion. The hedge fund sentiment for the stock is negative.
As of December 31, AQR Capital Management is the leading investor in AbbVie Inc. (NYSE:ABBV) and has a stake worth $228.9 million in the company.
Here is what Alger Capital had to say about AbbVie Inc. (NYSE:ABBV) in its fourth-quarter 2022 investor letter:
“AbbVie Inc. (NYSE:ABBV) is a global biopharmaceutical company that develops and markets drugs in areas such as immunology. virology and oncology. Recently, the company expanded through the acquisition of Allergan, which added robust growth assets to help offset the loss of U.S. patent protection for Humira, a leading treatment used for rheumatology, dermatology. gastroenterology, and ophthalmology. While AbbVie reported weak third quarter revenues across the board, the U.S. Food and Drug Administration (FDA) approved Vraylar (an antipsychotic treatment) in December. Despite concerns around Humira’s loss of patent protection, we believe AbbVie has significantly diversified its revenue and that its launch of Rinvog for psoriatic arthritis and atopic dermatitis could be promising.”
11. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 139
Number of Hedge Funds That Sold: 7
On January 30, Mizuho analyst Dan Dolev raised his price target on Mastercard Incorporated (NYSE:MA) to $405 from $380 and maintained a Buy rating on the shares.
7 hedge funds exited their positions in Mastercard Incorporated (NYSE:MA) in Q4 2022. The stock was a part of 139 hedge funds’ portfolios, down from 146 hedge funds in Q3 2022. Mastercard Incorporated (NYSE:MA) is placed eleventh among the large-cap stocks that hedge funds are dumping right now.
As of December 31, Akre Capital Management is the largest investor in Mastercard Incorporated (NYSE:MA) and holds a position worth $2 billion in the company.
Here is what Ron Baron’s Baron Funds had to say about Mastercard Incorporated (NYSE:MA) in its Q4 2022 investor letter:
“Shares of global payment network Mastercard Incorporated (NYSE:MA) increased after reporting strong quarterly results, with 15% revenue growth and 13% EPS growth despite significant headwinds from currency movements and the suspension of operations in Russia. Payment volume grew 21% in local currency (excluding Russia) as consumer spending remained resilient and the international travel recovery continued as border restrictions were lifted. We continue to own the stock due to Mastercard’s long runway for growth and significant competitive advantages.”
10. Honeywell International Inc. (NASDAQ:HON)
Number of Hedge Fund Holders: 44
Number of Hedge Funds That Sold: 9
As of March 2, Honeywell International Inc. (NASDAQ:HON) has lost 9.53% year to date. This February, UBS analyst Chris Snyder lowered his price target on Honeywell International Inc. (NASDAQ:HON) to $185 from $193 and reiterated a Sell rating on the shares.
In the fourth quarter of 2022, 9 hedge funds dissolved their positions in Honeywell International Inc. (NASDAQ:HON). The stock was held by 44 hedge funds in Q4 2022. The total stakes of these hedge funds amounted to $697.6 million, down from $1.04 billion in Q3 2022 with 53 positions. The hedge fund sentiment for the stock is negative.
As of December 31, Diamond Hill Capital is the top investor in Honeywell International Inc. (NASDAQ:HON) and owns over 1.1 million shares of the company.
9. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 57
Number of Hedge Funds That Sold: 9
On January 27, Chevron Corporation (NYSE:CVX) reported earnings for the fiscal fourth quarter of 2022. The company reported an EPS of $4.09 and missed EPS estimates by $0.21. As of March 2, the stock has declined by 6.51% year to date.
On February 24, Cowen analyst Charles Ryhee lowered his price target on Chevron Corporation (NYSE:CVX) to $170 from $185 and maintained an Outperform rating on the shares.
At the end of Q4 2022, 57 hedge funds held stakes in Chevron Corporation (NYSE:CVX). This is compared to 66 hedge funds in the previous quarter. As of December 31, Berkshire Hathaway is the most prominent shareholder in the company and has disclosed a position worth $29.25 billion in the company.
Here is what Diamond Hill Capital had to say about Chevron Corporation (NYSE:CVX) in its fourth-quarter 2022 investor letter:
“Most recently in Q4, we increased our energy exposure by reinitiating a position in a company we know well and have owned in the past, integrated oil and gas company Chevron Corporation(NYSE:CVX).
We previously owned Chevron as recently as February 2022. We sold our position at that time due to heightened risk associated with operations in Kazakhstan, which sends oil through a pipeline that runs through Russia out to the Black Sea. When Russia invaded Ukraine, we believed there was real risk that something would happen to inhibit Chevron’s ability to get that oil to the market. We didn’t believe that risk was reflected in the stock price, so we sold our position. Today, 10+ months into the Ukraine crisis, more information has become available regarding the Kazakhstan operations, and the associated risks are now well-known. We believe those risks are fully priced into the current stock valuation. Chevron is one of the best operators in its field, with a diversified portfolio and strong management, and we took the opportunity to reinvest when the stock was trading below our estimate of intrinsic value.”
8. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 100
Number of Hedge Funds That Sold: 10
In Q4 2022, 10 hedge funds dissolved their positions in JPMorgan Chase & Co. (NYSE:JPM). The stock was a part of 100 investors’ portfolios at the close of Q4 2022. These funds held stakes worth $5.17 billion in the company, down from $6.41 billion in the previous quarter with 110 positions. The hedge fund sentiment for JPMorgan Chase & Co. (NYSE:JPM) is negative and the stock is among the top large-cap stocks hedge funds dumped in Q4 2022.
This January, Deutsche Bank analyst Matt O’Connor downgraded JPMorgan Chase & Co. (NYSE:JPM) to Hold from Buy and lowered his price target on the shares to $145 from $155.
As of December 31, Greenhaven Associates is the leading shareholder in JPMorgan Chase & Co. (NYSE:JPM) and has a position worth $643.1 million in the company.
Here is what Vltava Fund had to say about JPMorgan Chase & Co. (NYSE:JPM) in its third-quarter 2022 investor letter:
“We regard JPM to be the strongest and best- managed bank in the world. It is a leader in investment banking, commercial banking, credit cards, and asset management. Its size (the largest bank in the USA, with nearly USD 4,000 billion in assets) and diversification give it a strong competitive advantage that is compounded by its cost advantages and the high costs to clients associated with switching banks. JPM’s management prides itself on running the only large bank to avoid major instability over the long term.
JP Morgan’s quality and strength first became fully evident in 2008 under the leadership of its CEO Jamie Dimon. Not only did JP Morgan help to stabilize the market by taking over the failing Bear Stearns in the spring of that year, but throughout the Great Financial Crisis it was the only big US bank that did not require government assistance and it was highly profitable even in the difficult year of 2008.
A well-functioning and efficient bank can be a very good long-term investment, because the interest compounding effect works well here. JPM’s return on equity (ROE) is well into the double digits and this puts it in a good position to continue producing better long-term returns than does the market. JPM has been very profitable even during years when interest rates were close to zero. The current – and perhaps not temporary – return to somewhat more normal, higher interest rates should have a significantly positive impact on the bank’s interest income and overall profitability.”
7. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 259
Number of Hedge Funds That Sold: 10
On February 24, Wedbush analyst Daniel Ives raised his price target on Microsoft Corporation (NASDAQ:MSFT) to $290 from $280 and maintained an Outperform rating on the shares. As of March 2, the stock has lost 16.74% over the past 12 months.
10 hedge funds dissolved their positions in the company in Q4 2022. The stock was held by 259 hedge funds at the close of Q4 2022. The total stakes of these hedge funds amounted to $58.65 billion, down from $61.17 billion in the preceding quarter with 269 positions.
As of December 31, Bill & Melinda Gates Foundation Trust is the most prominent investor in the company and owns more the 39.2 million shares of the company.
Here is what Polen Capital had to say about Microsoft Corporation (NASDAQ:MSFT) in its fourth-quarter 2022 investor letter:
“In the case of Microsoft Corporation (NASDAQ:MSFT), the company is performing very well. Azure now represents nearly 25% of the total business and continues to compound at a higher rate. Although growth is moderating a bit recently (as it is for AWS and Google Cloud Platform as well), these three platforms collectively generated more than $140 billion in revenue during the last 12 months and are still growing at a healthy rate. Further, Microsoft Cloud, or commercial cloud (which includes Azure and other cloud services, Office 365 Commercial, the commercial portion of LinkedIn, Dynamics 365, and other cloud properties) continues to grow roughly 30% and is now about half the business. Mathematically, commercial cloud could decelerate to 20% growth with all other segments decelerating to zero growth and total company revenue growth would still be at least double digits. We believe Microsoft is positioned to compound underlying earnings per share at a midteens rate over the next five years. At 22x earnings, we felt the valuation was attractive and that it should be a large position.”
6. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 61
Number of Hedge Funds That Sold: 12
On January 25, NextEra Energy, Inc. (NYSE:NEE) reported earnings for the fourth quarter of fiscal 2022. The company generated a revenue of $6.16 billion and missed estimates by $409.74 million. The company’s EPS for the quarter amounted to $0.51 and outperformed EPS expectations by $0.02.
At the close of Q4 2022, NextEra Energy, Inc. (NYSE:NEE) was a part of 61 investors’ portfolios that disclosed collective positions worth $2.15 billion in the company. This is compared to 73 hedge funds in the previous quarter with stakes worth $2.11 billion.
As of December 31, Adage Capital Management is the largest shareholder in NextEra Energy, Inc. (NYSE:NEE) and has disclosed a position worth $168.9 million.
In addition to NextEra Energy, Inc. (NYSE:NEE), other notable stocks that have been dumped by hedge funds in Q4 2022 include The Walt Disney Company (NYSE:DIS), The Home Depot, Inc. (NYSE:HD), and Amazon.com, Inc. (NASDAQ:AMZN).
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Disclosure: None. 15 Large-Cap Stocks Hedge Funds Are Dumping is originally published on Insider Monkey.