The best selling guru stocks of t

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In the second quarter of 2022, the US Federal Reserve continued to raise interest rates as inflation remained very high. Unless companies can increase their profits by more than 9% year over year to outpace inflation, they effectively see their profits shrink on an inflation-adjusted basis, which is not exactly the recipe for a bull market.

As investors anticipated lackluster earnings reports, the S&P 500 fell 17% in the three months to the end of June, while the Nasdaq lost 22% and the Dow Jones Industrial Average fell 5% .

Seeing stock prices fall doesn’t always mean a stock is doomed, but if investors believe a company’s outlook has fundamentally changed, it’s best to pull back before the stock falls further. According to GuruFocus’ Hot Picks, a feature that allows investors to select stocks that have had the most guru buys or sells based on the most recent regulatory filings, here are the five stocks the gurus have on were the most bearish in the second quarter, as determined by net buying.

Investors should be aware that the data in this article is based on 13F filings for investment firms and portfolio updates for mutual funds, which do not provide a complete picture of a guru’s holdings. . 13Fs only include US common stocks, while mutual fund updates generally include both US and foreign common stocks. Also do not include other assets or investments such as bonds, credit, etc. All figures are at the end of the quarter only; it is possible that the gurus have already made changes to the positions after the end of the quarter. However, even this limited data can provide valuable information.

UnitedHealth Group

UnitedHealth Group Inc. (A H, Financial) was sold by 28 gurus during the second quarter while only five gurus bought the stock, resulting in 23 net sales. It’s the third quarter in a row that gurus are fleeing the stock in droves.

UnitedHealth is the largest managed care company in the United States by revenue. It offers a variety of health care products and insurance services through its numerous subsidiaries. It is headquartered in Minnetonka, Minnesota.

UnitedHealth posted strong growth numbers and forecasts. As the United States has an aging population, national health spending and Medicare enrollment are both expected to increase. However, the US health care system in general is very poorly designed and investors fear that this will lead to reduced health care spending, even for necessary care.

One thing that was expected to improve short-term results was elective procedures which were delayed due to Covid-19, but this turned out not to be as much of a boon as hoped, likely due to increased expenses and the inaccessibility of health care.

Elevance Health

There were 18 gurus selling shares of Elevance Health Inc. (ELV, Financial) during the quarter while six gurus bought the stock resulting in 12 net sales. Guru sentiment was mostly neutral on the stock until a spike in selling in the last quarter.

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Like UnitedHealth, Elevance is also primarily active in the health insurance business. It offers medical, pharmaceutical, dental, behavioral health, long-term care and disability insurance plans. He is based in Indianapolis.

Elevance aims to transform itself from a traditional healthcare delivery organization into what it calls a “Lifetime Trusted Healthcare Partner”. This approach involves integrating not only physical health, but also behavioral health, social health and long-term care for elderly and disabled patients.

The company faces the same industry situation as UnitedHealth, but is growing at a faster rate, has higher analyst expectations and trades at a lower price-to-earnings ratio. It’s possible that given Elevance’s enthusiastic rebranding, gurus will shun the stock due to an issue that has unfortunately become quite prevalent in the healthcare industry: the problem of companies buying up practices. medical and other health care institutions, reduce costs and undermine the quality of care for short-term profits (which comes at the expense of long-term growth).

TE connectivity

TE Connectivity Ltd. (PHONE, Financial) was sold by 14 gurus in the second quarter while three gurus bought the stock resulting in 11 net sales. TE Connectivity has been a clean sell among gurus over the past couple of years.

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TE Connectivity is a Swiss-American designer and manufacturer of connectors and sensors for multiple industries including automotive, industrial equipment, data communications systems, aerospace, defense, medical, oil and gas , consumer electronics and energy.

This company has an excellent and rapidly growing total addressable market owing to the increasing electrification and digitalization of automobiles and other forms of transportation and machinery. It also trades with a reasonable P/E ratio of 17.03.

The keystone in its workings comes from the fact that growth has stagnated despite a favorable market. The company has a three-year revenue per share growth rate of 4.2% and a three-year earnings per share growth rate of -2.6%, suggesting that TE Connectivity is not does not position itself favorably against the competition.

Raytheon Technologies

There were 15 gurus selling Raytheon Technologies Corp. (RTX, Financial) during the quarter while five gurus bought the stock resulting in 10 net sales. The title has really seen gurus heading for releases over the past couple of quarters.

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Raytheon Technologies is a global aerospace, defense and intelligence company formed from the merger of Raytheon Co. and United Technologies in April 2020. Its headquarters are located in Waltham, Massachusetts.

It may seem surprising that gurus are selling Raytheon, a major US defense stock, amid rising geopolitical tensions, particularly the war in Ukraine. The United States produces far more weapons than any country in the world, accounting for 39% of global arms exports, and is a long-established war profiteer.

However, supply chain issues have arisen for Raytheon. Demand for raw materials exceeds supply, and the company struggles to find enough skilled workers, especially welders. With a price-to-earnings ratio of over 30, the dividend yield also fell to an unimpressive 2.31%, which is remarkable as dividends have historically been an important source of yield for defense stocks.

CVS Health Corp

CVS Health Corp. (SVC, Financial) had 16 guru sellers in the quarter versus seven guru buyers, resulting in nine net sales. Guru sales have picked up for CVS over the past three quarters after a few years of neutral sentiment.

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CVS Health is a healthcare company that owns the retail pharmacy chain CVS Pharmacy, as well as Aetna (a health insurance provider), CVS Caremark (a pharmacy benefits manager) and several smaller operations. Its headquarters are in Woonsocket, Rhode Island.

The company plans to leverage its proximity to the consumer market to expand into the primary care market by the end of this year, which is a bold move. It has already rolled out a virtual primary care service and aims to enter the in-person primary care market through acquisitions. CVS seems confident that its move into primary care will increase Americans’ access to high-quality care while simultaneously reducing costs.

Due to the incentive structure of this model, however, it seems unlikely that things will go as planned. Since CVS would become a health care provider and a health insurance provider under the same umbrella, it would have a strong incentive to limit the quality of recommended care and monitoring procedures that would be costly for the insurer. The telehealth-first model supports this finding because, in reality, very little care can be obtained through a telehealth visit. Add to that CVS’s struggling balance sheet with a 0.2 leverage ratio and the company’s prospects as an investment don’t look rosy.

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