In the fourth quarter of 2013, the S&P 500 hit record highs,
while the majority of corporations (95) reported negative EPS
guidance, and 12 issued positive EPS guidance, according to FactSet
Research. The estimated earnings growth rate for all corporations
for the quarter was estimated to be 6.3%, according to FactSet. The
Financial sector led growth, increasing earnings by 24.2%. Energy
lagged all sectors, with an 8% decline in earnings.
Reported after-tax corporate profits also continued to decline in
the quarter. U.S. corporate profits after taxes grew 2% in the
fourth quarter, down from 2.4% in the third quarter and 3.5% in the
In addition to the broad S&P 500 gain in the face of
contracting corporate earnings, GDP data for the quarter gave mixed
signals about the growth of the U.S. economy. The Bureau of
Economic Analysis in January reported that U.S. GDP grew at an
annual rate of 2.6% from the third quarter to the fourth quarter,
compared to 4.1% in the third quarter. GDP grew 1.9% for the full
year, compared to 2.8% for 2012.
Further, a favorite
market valuation indicator
, the ratio of market cap to GDP, indicates weak returns for the
stock market going forward. The historical ratio of total market
cap to GDP is currently 118%, indicating that the market is
significantly overvalued, and likely to return 1.6% annually.
Against this backdrop, some prominent investors began to slough
shares of popular, high-quality, mega-cap companies. According to
the S&P 500 grid, the most-sold stocks of all gurus tracked by
GuruFocus were Google (
), Johnson & Johnson (
) and Microsoft (
). Each trade at or near their respective 10-year high stock price.
Google Inc. (
In the fourth quarter, 12 gurus sold or reduced their position in
Google Inc. The largest current shareholder tracked by GuruFocus is
PRIMECAP Management (Trades, Portfolio), with more than 3 million
shares, followed by Chris Davis (Trades, Portfolio), who holds more
than 2.6 million shares.
in the past year has risen 37% to near a 10-year high at $543.14 a
share on Friday.
For the fourth quarter, Google reported a 17% increase in revenue
year over year to $16.86 billion, and net income increased to $3.38
billion from $2.89 billion.
Google has a P/E ratio of 28.7, P/B ratio of 4.2, and P/S ratio of
6.4, which is close to a three-year high.
Johnson & Johnson (
Twelve gurus also reduced or eliminated their Johnson & Johnson
positions in the fourth quarter. Gurus selling out were Louis Moore
Bacon (Trades, Portfolio), George Soros (Trades, Portfolio),
Vanguard Health Care Fund (Trades, Portfolio), and Joel Greenblatt
(Trades, Portfolio). Prem Watsa (Trades, Portfolio) made the
largest reduction, selling 97.12% of his stake and retaining 84,700
Johnson & Johnson's share price increased 21% over the past
year to near a 10-year high at $98.23 on Friday.
Johnson & Johnson's fourth quarter sales increased 4.5% to
$18.4 billion. Net earnings also increased by 37.1% to $3.52
The company has a P/E ratio of 20.3, close to a one-year low, and a
P/S ratio of 4, close to a 10-year high. Its P/B ratio is 3.8.
Eleven gurus reduced or sold out of their positions in Microsoft in
the fourth quarter. Richard Snow (Trades, Portfolio) and Kyle Bass
(Trades, Portfolio) exited their positions in the company, and
George Soros (Trades, Portfolio) made the most drastic decrease,
selling 79.64% of his stake and keeping 2,560,900 shares.
In the past year, Microsoft's stock climbed 39.4%, to almost a
10-year high at $40.99.
For the fourth quarter, Microsoft reported revenue of $24.51
billion, up from $21.46 billion in the year-ago period. Net income
increased to $6.56 billion from $6.38 billion.
Microsoft has a P/E ratio of 14.7, P/B ratio of 4 and P/S ratio of
4.1, which is near a three-year high.
For more of the most bought and most sold stocks of investing
gurus, visit the S&P 500 Screener here.
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