Analyzing Billionaire Ken Fisher's Top Sells: 3 Potential Shorts, 2 To Buy

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Includes: AMAT, DE, INTC, MSFT, XOM
by: The Analyst Hub

Ken Fisher is a billionaire fund manager managing ~$33 bn worth of equity assets through his investment advisory firm Fisher investments. I discussed Fisher Investments' Top Buys from the last quarter in a previous article. In addition, it is also interesting to look at the top stocks where Ken Fisher is reducing his holdings. In this article, I will be discussing some of the top sells from Fisher Investments, as released in its most recent 13F filing with SEC.

Applied Materials Inc. (NASDAQ:AMAT): My Take - Sell

Fisher Investments sold 39,854,785 shares of Applied Materials last quarter. Applied Materials is a supplier of semiconductor and semiconductor-related fabrication equipment, providing nano manufacturing technology solutions to the global semiconductor, flat panel display, solar, and other industries. AMAT operates in four segments: Silicon, Fab Solutions, Display and Energy and Environment Solutions.

Despite Applied Materials reporting a 1Q 2012 earnings beat, largely driven by foundry growth as with its semiconductor peers, there are few potential concerns going ahead. AMAT guided for market share loss in etch and CMP equipment due to flat capex growth by DRAM customers. Non semi conductor markets are expected to continue to remain weak. Its EES segment reported a decline in its margins for 1Q and going ahead the company has guided for a 40% decline in revenue over the previous quarter for this segment based on the order bookings. Its Display revenue was also weak for the quarter and going forward they are expected to decline by 25% quarter-quarter.

AMAT's 70% of revenue is derived from three customers. Based on the order book, it is expected to remain this way for 2H 2012. Such high customer concentration is another negative for AMAT. Overall the outlook for 2012 is mixed with strong foundry but weak non semi conductor segment. The earnings growth is expected to be slower than pure play semiconductor stocks and AMAT is likely to underperform relative to its pure play peers.

Microsoft Corp. (NASDAQ:MSFT): My Take - Sell

Fisher Investments sold 2,645,284 shares of Microsoft last quarter. I am not too positive on Microsoft's prospects. Although Microsoft's stock has seen a decent run up after a long time in anticipation of the Windows 8 launch, I am not too positive on its prospects. Microsoft is going to launch Windows 8 OS this year, which can be used with tablets. As tablets continue to take market share from tradition PCs and Laptops, it was important for Microsoft to have an OS that works for tablets as well. However, Microsoft has entered this space very late and I believe this delay will prevent Microsoft from gaining a leadership position in the tablet space, which will have an adverse consequence. It might end up being a 3rd player just like what happened in the mobile space. Apple's (NASDAQ:AAPL) iOS and Google's (NASDAQ:GOOG) Android are the main platforms in the smartphone space and they will likely be tough competition for Microsoft in the tablet space as well. After the recent run-up it appears like the market is anticipating a blockbuster launch of Windows 8, which I see as unlikely.

Deere & Company (NYSE:DE): My Take - Sell

Fisher Investments sold 700,749 shares of Deere & Company last quarter. Deere & Co. is an agriculture machinery manufacturer. I am bearish on Deere primarily due to margin concerns going forward due to "Interim Tier IV" regulations. On 1/1/2012, "Interim Tier IV" (IT4) emission rules began applying to engines of 75-174 HP in Western Europe and North America. Deere transitioned almost all of the products it sells in NA and Western Europe to meet these stricter IT4 emissions standards in 2012.

Although Deere is likely to raise prices of some of its products, it is unlikely that the cost incurred in these upgrades will be fully recovered, causing a good amount of margin headwinds in 2012. My other concern with Deere is high inventory levels for North American combines, which will adversely affect sales and margins in 2012.

Please note that although I am bearish on Deere, I am bullish on the agriculture fundamentals going forward. I like other companies in the sector, like Monsanto (NYSE:MON), which is likely to benefit in the short term from its new product launches (RR2Y soybean and reduced-refuge corn) this fall. If one wants to pursue a market neutral strategy; short Deere, long Monsanto can be a good alpha trade in the near term.

Intel Corp. (NASDAQ:INTC): My Take - Buy

Fisher Investments sold 293,794 shares of Intel last quarter. Intel is a good GARP stock. Intel's growth is significantly outperforming the broader PC markets. Going forward, cloud computing and secular growth in servers, and a strong product pipeline, are likely to drive good growth for the company. In addition, it also has a good share growth opportunity in the mobile space. Trading at 10.25x forward earnings, the stock does not look expensive, and there is a good chance of multiple expansion. A 3.5% dividend yield is an added benefit for investors looking to buy the stock. I have discussed Intel's bulls thesis in a previous article. Please refer to it for the details.

Exxon Mobil Corporation (NYSE:XOM): My Take - Buy

Fisher Investments sold 1,541,294 shares of Exxon last quarter. Exxon Mobil Corporation is an American multinational oil and gas company. It is the world's largest publicly traded oil company. It engages in the exploration and production of crude oil and natural gas, and manufacture of petroleum products, as well as transportation and sale of crude oil, natural gas, and petroleum products.

Despite a Q4 2011 earnings miss and disappointing production numbers, I am positive on Exxon Mobil from the long-term perspective, given its history of solid and consistent shareholder returns. Exxon is characterized by world-class assets, strong cash flow generation, low leverage, low earnings volatility and leading cash distribution to its shareholders. Looking forward in 2012, it is expected to generate the highest free cash flow yield among large-cap oil majors and return ~ 7% to the shareholders in the form of dividends and share buybacks.

Looking at its medium-term prospects, there are some major capital projects lined up till 2015 (Kearl, Kashagan Phase I and Gorgon), which are expected to drive growth. Further, with the XTO acquisition and increased natural gas production, Exxon seems to be driving out marginal operators and consolidating the natural gas industry, rationalizing long-term production. Exxon is currently trading at a P/E slightly below its historical average and I would recommend buying the stock from a medium- to long-term perspective.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.