Susan Dziubinski: I’m Susan Dziubinski with Morningstar. We often take a look at the portfolio holdings of top-rated fund managers to find new stock ideas. But today, we’re doing something a little different: We’re talking about two stocks that some of the best fund managers have been selling.
First, who are these “top managers”? These managers run concentrated strategies, and their funds land in one of Morningstar’s US large-cap stock fund categories. At least one of their fund’s share classes earns Morningstar’s top Medalist Rating of Gold. You can learn more about these managers via the link beneath this video.
2 Popular Stocks That Top Managers Are Selling
The first stock that some of the best fund managers have been selling is Microsoft MSFT. Now, Microsoft remains the most widely held stock among our top managers, and none of these managers has completely sold out of the name. But more than half of them did scale back their positions in the stock as of their most recent portfolios. Microsoft had become an early leader in the AI race, and the stock is up more than 70% since the start of 2023. Microsoft’s latest quarterly results were impressive, and Morningstar’s analyst was most impressed with the company’s strength in AI, Azure, and gaming; a surge in bookings from large Azure deals; and robust margin performance despite downward pressure from the Activision acquisition. In fact, Morningstar raised its fair value estimate on Microsoft to $435 per share after earnings. Yet according to our metrics, the stock looks about fairly valued today. It’s by no means a screaming sell—but it’s no bargain, either.
The second stock that some of the best fund managers have been selling is Meta Platforms META. The company has had its fair share of ups and downs during the past few years: Adverting spending slowed in 2022, which pressured revenue and margins, but then ad spending bounced back in 2023, and the company benefited from enhanced and AI-powered campaign planning and measurement capabilities. And like the company, Meta stock has been on a roller-coaster ride during the past few years, falling 77% between September 2021 and November 2022, and then skyrocketing more than 400%. Morningstar thought the stock looked significantly undervalued in late 2022, but today we think the stock looks pretty overvalued. We think Meta stock is worth $400 per share.
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Morningstar director Mike Hodel and senior analyst Dan Romanoff provided the research behind this segment.
Watch 3 Cheap Dividend Stocks to Buy Yielding 4% or More for more from this series.
