Goldman Sachs (GS) group manages over $100 billion in equities, primarily through its asset management subsidiary, Goldman Sachs Asset Management. The firm manages the Goldman Sachs series of funds apart from other series of mutual funds, and caters to individuals and institutions.
I discussed Goldman Sachs' Top Buys in a previous article. In addition, it is also interesting to have a look at the stocks where Goldman is selling its holdings. In this article, I will be discussing five stocks where Goldman has significantly reduced its position in the last quarter, according to its latest 13F filing with SEC.
Boston Scientific Corporation (BSX): My Take -Sell
Goldman sold 15,128,515 shares of Boston Scientific last quarter. Boston Scientific develops, manufactures and markets medical appliances and equipment that are used in interventional cardiology, peripheral interventions, vascular surgery, electrophysiology, neurovascular intervention, oncology, endoscopy, urology, gynecology and neuromodulation. It generates almost 50% revenues from Cardiac Rhythm Management devices and Drug-Eluting Stents.
Last month, Boston Scientific reported weak 4Q 2011 results with sales significantly below consensus estimates and management's guidance. This sales performance is attributed to disappointing CRM and DES sales shortfalls in all regions due to market slowdown and pricing pressures. Further, Boston Scientific lost market share in the ICD (Implantable Cardioverter-Defribillators) market in the U.S.
Boston Scientific revenue guidance for 1Q 2012 was also weak. Sales growth range is expected to be -4% to 1%, indicating further CRM market contraction and pricing headwinds. Though pricing trends are improving across a few segments, ICD and DES pricing is expected to be a negative for Boston Scientific in the near term. While management's initiative for improving the cost structure in 2012 is positive, I believe the company has to show improved top line in order to reignite investor interest in the company. Until then, I would recommend avoiding the stock.
Ford Motor Company (F): My Take - Sell
Goldman sold 14,445,849 shares of Ford last quarter. Ford Motor Company engages in the development, manufacture, distribution, and service of vehicles and related parts worldwide. My bearish view on Ford is due to concerns about net pricing deterioration among full-size pickup trucks, U.S. market share loss and rising gasoline prices. Despite February U.S. SAAR numbers exceeding expectations, Ford is expected to face challenges in generating higher earnings due to net pricing pressure and negative product mix. Further, Ford is losing market share in U.S. light vehicles to Korean and European manufacturers. Rising gasoline prices is another concern because of which Ford might have to get more aggressive with incentives and promotions. Also, in a highly competitive full-size pick up truck market, Ford is expected to become more promotional to boost sales. I see a lot of negatives for the company in the near term and recommend a sell.
DISH Network Corp. (DISH): My Take -Sell
Goldman sold 11,204,055 shares of DISH last quarter. DISH Network Corp. is the second largest satellite operator in the US. It has approximately 13.9 million subscribers. On Jan. 1, 2008, the company spun off its set-top box and commercial satellite businesses, now known as EchoStar Corp. DISH also purchased the video rental chain, Blockbuster, out of bankruptcy in April 2011.
Dish is a 'controlled' company with its CEO Ergen owning 53.6% equity stake and 90.6% voting power. Historically it has not been a shareholder friendly company and the risk of surprises has always been high. DISH's core operations in the last couple of years have proven volatile on both subscriber and margin fronts. Going forward, DISH's unclear strategy with Blockbuster asset, as DISH closes more than 1500 stores and unclear capital allocation plan is expected to weigh on its multiple. I expect it to underperform relative to its cable peers which are increasingly focused on returning capital to the shareholders.
One thing to watch out closely for DISH is its progress in Wireless business. DISH wants to be in the competitive wireless business and is currently pending approval for the S-Band spectrum transfer from DBSD, and TerreStar and terrestrial-only waiver from Federal Communications Commission. While this new business provides a considerable upside if approved, a wide range of outcomes are possible including a delay which could weigh negatively on DISH.
Citigroup Inc. (C): My Take- Buy
Goldman sold 10,121,540 shares of Citigroup last quarter. Citigroup is a good long, particularly for aggressive traders. Citigroup is trading at 0.6x tangible book value. I like the company because of its emerging market exposure and ongoing liquidation of Citi Holdings which will help in reducing the earnings and ROE drag. Citi will see better than average loan growth in the longer-term when run-off balances at holdings decline and Citi's emerging market loan growth becomes increasingly visible. In the near term, Citi is all set to benefit from reduced competition in emerging markets as European peers retrench. The biggest positive catalyst for the stock would be eurozone stabilization.
Xilinx Inc. (XLNX): My Take - Buy
Goldman sold 8,381,948 shares of Xilinx last quarter. Xilinx Inc. is the world's leading provider of programmable platforms and programmable logic devices. Its brands include Xilinx, Artix, ISE, Kintex, Spartan, Virtex and Zynq. The company offers its products to equipment manufacturers in markets such as wired and wireless communication, industrial, scientific and medical, aerospace and defense, audio, video and broadcast, consumer, automotive, and data processing.
Xilinx continues to garner market share aggressively in 28nm with 100% design win rates in new Zynq and SSIT integration lines. It is expected that all five 28nm product families will be sampled ahead of its competitor Altera (ALTR) and I believe XLNX has a considerable lead over Altera in mid-range and low-end markets. The company indicated that it is expecting the addressable market for 28nm products to increase by $3 billion on capturing new applications including automotive safety, avionics, defense, industrial automation and data centers.
Looking forward, I believe secular drivers such as transition to FPGA from ASIC/ASSP are expected to help PLD companies to outpace broader semiconductor industry. I am incrementally more positive on XLNX as it gains traction in communication equipment along with new product roll out in 28nm space. I believe the company deserves a premium over its semiconductor peers and recommend buying the stock.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.