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Top Institutional Sells
It's a stock market fact that institutional buying and selling - moves by pension funds, mutual funds, endowments and like - account for the vast majority of the movement in equity prices. Collectively, individual investors represent a fraction of the buying and selling power that institutional investors command. Each quarter, large investment funds report their quarterly holdings to the SEC. From these filings, Value Line publishes a list of top institutional sells during the quarter.
IN PICTURES: 8 Signs Of A Doomed Stock
A Contrarian Screen?
With markets looking to end the year on a nice note, value is becoming harder to find across the market. Interestingly, certain names that institutions were selling appear to be some of the better values remaining today. Institutions sold off Microsoft (Nasdaq:MSFT) decreasing holdings by 2.4%, respectively in the third quarter. Trading at 10-times forward earnings and yielding around 2.5%, Microsoft is not expensive. The company has a pile of cash and has been using its balance sheet to reward shareholders via increased dividend payouts. Yet despite the selling, shares are up over 10% so far in fourth quarter, indicated that plenty of buyers were around to absorb the sellers.
With a market in the midst of a fourth-quarter rally thanks to the helping hand of the Fed, its difficult to suggest that institutional sales of attractively priced stocks is an contrarian indicator. Institutions decreased their holdings of home improvement chain Lowe's (NYSE:LOW) by over 7%, but shares are up 15% in the fourth quarter. Considering the weak conditions of the housing industry today, shares in Lowe's are benefiting from the optimism.
Tough Competition
Other major institutional sales included Research in Motion (Nasdaq:RIMM), with the largest percentage decrease in shares held. Institutions shed 9% of their position in RIMM and its not hard to see why. Tough competition in the smartphone market from the iPhone and Andriod are taking market share away from RIMMs Blackberry. Yet shares in RIMM have rallied by 30% in the fourth quarter, suggesting again that many do not share the same worries about RIMM as others.
Other major sales in the quarter included Genzyme (Nasdaq:GENZ) and tech giant Hewlett Packard (NYSE:HPQ). Hewlett Packard, since the loss of CEO Mark Hurd, has yet to find its mojo again. Shares in HP are up slightly for the fourth quarter, broadly under performing its peers and overall market.
The Bottom Line
Knowing what the big money is buying and selling is good information to have. On both sides - buying and selling - I wouldn't be quick to assume the best or worst in any company. Understanding the limitations of such information will help eliminate using it incorrectly. (Learn the technique that Buffett, Lynch and other pros used to make their fortunes. See The Value Investor's Handbook.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: 8 Signs Of A Doomed Stock
A Contrarian Screen?
With markets looking to end the year on a nice note, value is becoming harder to find across the market. Interestingly, certain names that institutions were selling appear to be some of the better values remaining today. Institutions sold off Microsoft (Nasdaq:MSFT) decreasing holdings by 2.4%, respectively in the third quarter. Trading at 10-times forward earnings and yielding around 2.5%, Microsoft is not expensive. The company has a pile of cash and has been using its balance sheet to reward shareholders via increased dividend payouts. Yet despite the selling, shares are up over 10% so far in fourth quarter, indicated that plenty of buyers were around to absorb the sellers.
With a market in the midst of a fourth-quarter rally thanks to the helping hand of the Fed, its difficult to suggest that institutional sales of attractively priced stocks is an contrarian indicator. Institutions decreased their holdings of home improvement chain Lowe's (NYSE:LOW) by over 7%, but shares are up 15% in the fourth quarter. Considering the weak conditions of the housing industry today, shares in Lowe's are benefiting from the optimism.
Other major institutional sales included Research in Motion (Nasdaq:RIMM), with the largest percentage decrease in shares held. Institutions shed 9% of their position in RIMM and its not hard to see why. Tough competition in the smartphone market from the iPhone and Andriod are taking market share away from RIMMs Blackberry. Yet shares in RIMM have rallied by 30% in the fourth quarter, suggesting again that many do not share the same worries about RIMM as others.
Other major sales in the quarter included Genzyme (Nasdaq:GENZ) and tech giant Hewlett Packard (NYSE:HPQ). Hewlett Packard, since the loss of CEO Mark Hurd, has yet to find its mojo again. Shares in HP are up slightly for the fourth quarter, broadly under performing its peers and overall market.
The Bottom Line
Knowing what the big money is buying and selling is good information to have. On both sides - buying and selling - I wouldn't be quick to assume the best or worst in any company. Understanding the limitations of such information will help eliminate using it incorrectly. (Learn the technique that Buffett, Lynch and other pros used to make their fortunes. See The Value Investor's Handbook.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Sham Gad
Sham Gad is the Managing Partner of Gad Partners Fund's, value inspired investment partnerships modeled after the Buffett Partnerships of the 1950's. Previously, Gad ran the Gad Investment Group and delivered annualized returns of 22% from 2002 to 2005. Gad is also the author of "The Business of Value Investing" which will be out in the fall of 2009. Gad earned his MBA at the University of Georgia in May of 2007. Gad runs a value investing blog. He can also be reached by visiting the Gad Partners Funds site. When not writing or analyzing businesses, Gad enjoys hanging out with his wife Maggie, reading, golf, and yoga
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