Fidelity Management & Research Company is an investment management subsidiary of FMR LLC. The firm caters to investment companies and institutional clients and manages over $600 billion in equity assets. The firm primarily invests following the Growth at Reasonable Price (GARP) approach.
I discussed Fidelity's Top Buys in a previous article. In addition, it is interesting to look at top stocks in which Fidelity is selling its holdings and booking profits. The following is a list of some of the top sells of Fidelity Management & Research Company from the last quarter.
Shares Sold Last Quarter
Boston Scientific Corporation
Wells Fargo & Company
Micron Technology, Inc.
Source: 13F filing
Below, I detail company-specific discussions and my opinion on each of the stocks:
Dell Inc. has garnered a lot of investor attention off late. Its stock saw 25% gains since the beginning of 2012 till February 21, when it announced its financial results for its F4Q2012. The earnings results were mixed. However, the real disappointment came in the form of Dell's revenue guidance for the April quarter, which was down 7% q-q, far below consensus estimates. Further, it was disappointing that Dell did not provide FY2013 revenue guidance, given uncertain demand due to macro uncertainty and continuing revenue pruning in certain segments.
I am bearish on Dell, despite its undemanding valuations. Dell's core PC consumer business is facing secular headwinds from the increasing adoption of tablets. Although Dell is trying to focus on higher margin IT Services, software and data center businesses, it lacks presence and technological expertise when we compare it with other companies in the space.
Boston Scientific is a manufacturer and developer of medical appliances and equipment. Last quarter, Boston Scientific reported poor sales performance primarily due to disappointing CRM and DES sales in all regions. The company is seeing pricing pressure and also losing market in the ICD (Implantable Cardioverter-Defribillators) market in the U.S. Going forward, I expect further CRM market contraction and pricing headwinds, particularly in the ICD and DES markets. Although the company is taking some good steps in terms of cost cutting, the prospect of poor top-line growth makes me negative on the stock.
DirecTV Inc. provides digital television entertainment in the United States and Latin America. Its services include Direct-to-Home digital television, multi channel video programming distribution and video-on-demand. It also offers 160 national high-definition channels and 4 3D channels.
The U.S. pay TV market has reached a mature stage. There is also stiff competition from cable operators. Going forward, DTV is expected to focus less on subscriber growth and more on retention and profitability. In addition, with new players such as AT&T (NYSE:T) and Verizon (NYSE:VZ) entering this saturated market with new offerings, DTV might even see subscriber losses. I believe this will result in a slower growth for the company going forward.
Also, DTV's programming expense and margins outlook is challenging. It is expected that increasing programming costs will have an incremental negative effect on the margins. Further, internet TV may pose a risk in the long term and the multiples for the pay TV industry may fall if the subscriber base declines.
Wells Fargo and Company provides retail, commercial and corporate banking services primarily in the United States. It operates in three segments; Community Banking, Wholesale Baking and Wealth, Brokerage and Retirement.
WFC reported fourth-quarter EPS of $0.73 against the market consensus of $0.72. Revenue of $20.1 billion improved 6% quarter-quarter, driven by mortgage results and the spread income fee. Net Interest Income was also better than expected, and loan growth was positive. A combination of lower funding costs and an increase in non-interest bearing deposits has resulted in better interest margins.
WFC remains one of the safest large-cap banking stocks, with a relatively strong balance sheet. Its business fundamentals are moving in the right direction, with improved core loan growth and healthy deposits growth. WFC's asset quality is stable and NPAs reduced by $879 million last quarter. Its capital ratios also continue to improve: Tier 1 common ratio at the end of Q4 was 7.49% under Basel III standards, up by 9bp quarter-quarter, while under Basel I it was 9.46%, up by 12bp quarter-quarter.
WFC has also entered into an agreement to buy back 5.6 million shares in Q1 2012. While high operating expenses are a concern, the management reiterated that expense improvement is expected to occur in 2012. I recommend going long on the stock from a medium- to long-term perspective.
Micron Technology engages in the manufacture and marketing of semiconductor devices worldwide. It is a leading designer and producer of DRAM memory and NAND flash memory, and offers foundry services for CMOS image sensors.
Micron recently highlighted that DRAM supply in 2012 should remain controlled as DRAM manufacturers cut production levels and decrease capex guidance. After the recent bottoming out of DRAM prices, this should help improve prices. The improving HDD situation bolstering PC demand should also help DRAM prices. Demand for server DRAM also seems positive with improving trends in cloud and Big Data/Fast Data. Further, as the DRAM industry consolidates after Elpida's bankruptcy, Micron would be in a strong position in the DRAM market with more than 25% market share. There is also a good chance that Micron may be able to fetch some good assets of Elpida at reasonable price. There are already some news articles that suggest Micron is bidding for Elpida.
Micron has increased its focus on NAND and SSD and is trying to increases its share in both consumers and the enterprise market with new products and solutions. In addition, MU's partnership with EMC Corporation (NYSE:EMC) for the VFCache offers further growth potential for MU in the enterprise SSD space. With its diversified business model, a string of new opportunities and DRAM recovery, there is enough upside potential in the near term for MU.