JP Morgan Chase and Co. (JPM) manages ~ $200 bn in equity assets, primarily through its asset management subsidiary, JP Morgan Asset Management. I discussed JP Morgan's Top Buys in a previous article. In addition, it is interesting to look at top stocks in which JP Morgan is selling its holdings and booking profits. The following is a list of its top sells from the last quarter:
Shares Sold Last Quarter
Taiwan Semiconductor Manufacturing Company Limited
Johnson & Johnson
Source: 13F filing
I believe Hewlett Packard and Williams Companies are good sells among the above stock. However, I don't agree with JP Morgan on Taiwan Semiconductor, Abbott, and Johnson & Johnson.
Hewlett Packard is an American multinational that provides products, technologies, software solutions and services to individual consumers and businesses. Its products include PCs, workstations, printers and scanning devices. In addition, it provides consulting, outsourcing and technology services, along with enterprise servers and information management solutions.
Revenue slowdown in the U.S. and macro concerns in Europe are hurting Hewlett Packard's printer business. In addition, PCs and servers are also expected to be areas of weakness for HPQ, as indicated by a difficult demand environment during December. Further, investments in R&D and S&M, and high interest expense are likely to weigh on its earnings.
Hewlett Packard missed consensus expectations last quarter. Although the newly appointed CEO Meg Whitman is trying to turnaround the company's business, there have been no positive signs as yet. Till such time as I see definitive signs of a turnaround in Hewlett Packard's business, it will be difficult for me to be positive on the company.
With a high exposure to the eurozone, secular declines in printers and PCs, and foreign exchange pressures, I believe that HP's stock price could see a further decline going forward.
I also don't like Williams Companies. After the recent spin-off of WPX Energy (WPX), I don't see any more catalysts for the stock in the near term. WMB recently posted lower-than-expected 4Q results. Lower-than-expected Canadian Midstream and Pipeline EBIT were the main reasons for the miss. The company is trading at ~20x forward PE after the E&P split, and I believe it is fully valued at these levels.
Taiwan Semiconductor Manufacturing Company Limited engages in the computer-aided designing, manufacturing, packaging, testing, and selling of integrated circuits and other semiconductor devices, and manufacturing masks. It offers a range of wafer fabrication processes, including processes to manufacture complementary metal oxide silicon logic, mixed-signal, radio frequency, embedded memory, BiCMOS mixed-signal, and other semiconductors.
Taiwan Semiconductor is one of my favorite picks among global semiconductor companies. Last month, it reported better-than-expected Q4 results and provided strong guidance. Going forward, I expect a strong 28 nm ramp-up due to improving mobile device demand. This will improve average fixed costs and lead to better contribution margins. Revenues from 28 nm are expected to account for more than 10% by 1H 2012.
With a growth rate higher than the industry average and 28nm leadership, I believe Taiwan Semiconductor warrants a trading premium over its peers.
Abbott Laboratories is a global diversified pharmaceutical and healthcare product company. It engages in the discovery, development, manufacture and sale of healthcare products worldwide. The company's drug portfolio includes Humira, Norvir, Depakote and Synthroid. Abbott is also a leading player in nutritional supplements and diagnostic systems.
I like Abbott because of the announced spin-off of its pharmaceutical business. This move is likely to create more value for the shareholders through focused execution and better use of capital. The spin-off is expected to occur by the end of this year.
From the fundamental perspective also, Abbott's business is seeing good trends. Abbott reported strong Q4 2011 results ahead of the Street's estimates, and provided a healthy 2012 guidance driven by organic growth and higher gross margins. Going forward, Abbott is expected to continue delivering solid earnings results, as Humira is likely to continue to post strong sales, with market gains in underpenetrated markets and Abbott's recent global expansion in emerging markets. Abbott management also noted that the company will resume share buybacks in 2012, hinting that its stock is currently undervalued.
Johnson & Johnson engages in the research and development, manufacture and sale of various healthcare products worldwide. It operates in three segments: Consumer, Pharmaceutical and Medical Devices and Diagnostics.
J&J's recent earnings results and guidance for 2012 show signs of improving fundamentals across its businesses. On the pharmaceutical front, in 2011, J&J received key product approvals for several of its drugs including Incivo, Zytiga, Edurant and Xarelto. These launches are expected to drive solid growth and improve margins through 2012. There is also sequential improvement on McNeil's situation as J&J works through its Consent Decree with the FDA. Looking at its MD&D business, volume trends seem to be improving, as physician office visits are stabilizing.
Despite FX pressures and a tough environment, J&J has posted good top-line growth in Q4, and is expected to continue to outperform its peers, driven by a robust pipeline of drugs in the near term. I recommend a buy.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.