Investors are never short of Wall Street numbers. We are currently in the middle of earnings season and economic data is still being reported almost daily. But the most important publication of the quarter will probably take place on Wednesday, May 15. This marks the deadline for institutional money managers to file. Form 13F with the Securities and Exchange Commission.
A 13F provides an over-the-shoulder snapshot of what Wall Street's brightest minds, with at least $100 million in assets under management, bought, sold and held in the most recent quarter – in this case, the quarter ending in March. quarter. It is not unusual for professional and everyday investors to follow in the footsteps of Wall Street's most successful asset managers.
But you don't have to wait until next Wednesday to get a taste of what some of Wall Street's leading money managers have been up to. Thanks to interviews, annual meetings and earnings releases, select billionaire investors revealed selling activity in three ultra-popular stocks during the first quarter.
Stanley Druckenmiller sells Nvidia shares
The first big-time stock to see at least a partial lift during the quarter ending in March is Semiconductor Titan. Nvidia (NASDAQ: NVDA). In a recent interview on CNBC's SquawboxDruckenmiller admitted that his fund, Duquesne Family Office, cut its position in Nvidia “in late March.” For context, Duquesne Family Office owned 617,494 shares of Nvidia stock as of December 31, 2023, along with 489,500 Nvidia call options.
Although Druckenmiller believes the value of artificial intelligence (AI) Since corporate America may be undervalued in five years, he concedes that near-term hype for AI stocks, including Nvidia, may have come to the fore.
Right now, Nvidia's A100 and H100 graphics processing units (GPUs) are the undisputed first choice of companies operating AI-accelerated data centers. In particular, the H100 powers generative AI solutions and helps train large language models.
However, the next twelve months could be particularly challenging for the backbone of the AI revolution.
For starters, competition is coming from all angles at Nvidia. Advanced micro devices And Intel have designed AI accelerators to work with Nvidia's H100 in enterprise data centers.
Meanwhile, Nvidia's four largest customers (about 40% of net revenue), who are members of the “Magnificent Seven,” are all developing their own AI GPUs. Even if these chips are complementary to Nvidia's H100 GPUs, it seems very likely that the Magnificent Seven will be much less dependent on Nvidia's AI infrastructure after 2024.
Last year, AI GPU scarcity was the driving force behind Nvidia's 217% revenue growth in its data center segment. But as AMD, Intel and other Magnificent Seven companies deploy their own chips, Nvidia could struggle to maintain its out-of-this-world pricing power on its GPUs.
The final nail in the coffin is that every subsequent major investment trend of the past three decades has suffered a bubble in the initial phase of expansion. It is incredibly likely that investors will once again overestimate the adoption of a new technology. If history repeats itself and the AI bubble bursts, no company will be hit harder than Nvidia.
Warren Buffett dumps Paramount Global
Another billionaire investor who let the cat out of the bag before releasing a required 13F is Berkshire Hathaway CEO Warren Buffett. During his company's annual shareholder meeting on May 4, the 'Oracle of Omaha' announced that all shares of media giants Big global (NASDAQ: PARA) — 63,322,491 shares, as of December 31, 2023 — were sold at a loss during the first quarter.
Buffett typically approaches his investments outside of the financial sector, with an emphasis on consumer habits. His thesis was likely that a resurgence in advertising for Paramount's TV network segment, combined with a long history of consumers gobbling up traditional and streaming content, would allow Paramount to regain its luster. Unfortunately, this did not get off the ground.
Like most traditional media companies, Paramount has struggled to make its direct-to-consumer segment profitable. The costs associated with building the content library and marketing the streaming network have weighed on the bottom line.
But if there's a silver lining, it's that the global number of DTC subscribers and average revenue per user are rising, indicating that Paramount has been successful in raising subscription prices without scaring off its members. The company noted that annualized operating losses before depreciation and amortization have shrunk in each of the last four quarters for its DTC segment.
The advertising environment was also a challenge. Last year, a number of predictive indicators, such as the first significant decline in the US M2 money supply since the Great Depression, suggested that the US would enter a recession. Advertisers often lead the way in economic weakness by reducing their spending. Weaker ad revenues have undeniably hurt Paramount's legacy TV network.
There are also concerns about Paramount's ability to service its $14.6 billion in long-term debt (net debt of $12.2 billion). Unless the company can substantially reduce its streaming losses, it will be difficult to silence critics.
The 'Oracle of Omaha' also reduced Berkshire's stake in Apple
The Oracle of Omaha sales didn't end with Paramount Global. While we'll have to wait a few more days to hear the full story, Berkshire Hathaway's first-quarter operating results show that a significant portion—about 115 million shares—of the company's stake in technology stocks Apple (NASDAQ: AAPL) got the swell.
In addition to Berkshire's bottom line, Buffett openly admitted at his company's annual shareholder meeting that he and his investment team had trimmed this massive stake in the quarter ending in March. He justified this reduction by pointing to corporate tax rates. Buffett believed that investors would appreciate Berkshire locking in profits at a peak corporate tax rate of 21%, given the likelihood that corporate tax rates will rise in the future.
Despite jettisoning about 13% of his company's stake in Apple, Warren Buffett still considers the company Berkshire's best.
Apple has an exceptionally loyal customer base and is often led by innovation. CEO Tim Cook has successfully overseen the development of iPhones with a large share of the domestic market, as well as Apple's transformation into a platform company.
But if you were to ask Warren Buffett what he likes most about Apple, it could very well be the company's unsurpassed capital returns program. Apple is on track to pay out just over $15.4 billion in dividends to its shareholders this year, and has repurchased $674 billion in common stock since the start of a buyback program in 2013. Buffett likes buybacks because they can incrementally increase Apple's ownership stake. long-term investors.
However, Apple is not immune to headwinds. After a modest revenue decline in fiscal 2023 (Apple's fiscal year ends at the end of September), the second-largest publicly traded company by market cap has seen its net revenue decline less than 1% in the first half of the current fiscal year. While subscription services revenue is strong, sales of physical products remain weak.
While modest cost cuts and an aggressive share buyback program have kept earnings per share (EPS) moving in the right direction, a deeper dive into Apple's net income shows that the company's growth engine has stalled.
Apple was a steal when it delivered sustained double-digit revenue growth and a profit margin of ten to fifteen times full-year earnings per share. But with earnings per share of 27 times over the next few years and sales not going anywhere, this Wall Street darling appears to be losing its luster.
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Sean Williams holds positions at Intel. The Motley Fool holds positions in and recommends Advanced Micro Devices, Apple, Berkshire Hathaway, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 relying on Intel and short May 2024 $47 relying on Intel. The Motley Fool has one disclosure policy.
3 ultra-popular stocks that billionaire investors are selling was originally published by The Motley Fool
