Stocks to sell

Just as all cheap houses aren’t a good buy, not all cheap stocks provide good value. Houses can have structural issues, such as a leaky roof or a broken HVAC system, or be in flood zones. Value stocks can lose market share, have legal problems, or be in doomed industries. After all, knowing what could cause issues is key to portfolio success. In fact, one way to do that is by following the smart money, especially if it’s headed out the door. That’s because “Institutional investors know more about…stocks to avoid than the public, with better expert access. Therefore, it’s important to know which…stocks major investors are selling and to avoid those names. ” With that in mind, here are seven value stocks to avoid, partly because multiple, huge investors are selling these names.

Value Stocks to Avoid: Disney (DIS)

Source: shutterstock.com/Black Salmon

JPMorgan, one of the world’s largest banks, sold 2.45 million shares of Disney (NYSE:DIS) last quarter, representing 27.7% of its holdings of the name, according to Fintel. Moreover, the Virginia Retirement Systems unloaded 47.39% of its stake in the conglomerate or 154,900 shares. Meanwhile, Japanese insurer Nippon Life Global Investors Americas got rid of 33,410 shares of DIS stock, representing 58% of its stake.

Also notably, Point72 Asset Management, the hedge fund owned by the very well-known investor, Steven Cohen, sold its entire stake of 15,332 shares, And perhaps most ominously, Norway’s central bank, Norges Bank, unloaded its entire 16.5 million stake in DIS last quarter.

On May 19, investment bank Macquarie downgraded Disney to “neutral,” writing that “the near term is clouded with uncertainties” for DIS. Among the conglomerate’s problems cited by the bank are the quick deterioration of tradition TV and the possibility that the company will not meet its goal of moving its streaming business into the black next year.

Value Stocks to Avoid: Procter & Gamble (PG)

Source: shutterstock.com/Leonid Sorokin

French bank Credit Agricole cut its position in Procter & Gamble (NYSE:PG) by 19% or 2,760 shares. Moreover, Point72 Asset Management, the hedge fund owned by the very well-known investor, Steven Cohen, sold 85% of its PG stock or 687,445 shares.

Also dropping some PG stock was Metropolitan Life Insurance Co, which unloaded 21% of its stake or 28,482 shares and Norges Bank, Norway’s central bank, which liquidated all 24.76 million of its shares in Q1. Additionally, Point72 Middle East, a fund that’s affiliated with Steven Cohen, dropped all 22,954 of its shares of PG, while investment bank AllianceBernstein sold 2.1 million shares, representing 22% of its stake.

Austrian “financial services provider” Erste Group cut its rating on PG stock to “hold” from “buy,” citing a lack of catalysts and high inventory levels among its customers.

Frontier Communications Parent (FYBR)

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Trading firm Jane Street sold 39,566 shares of Frontier Communications (NASDAQ:FYBR), or 83.8% of its stake. Point72 Asset Management, the hedge fund owned by the very well-known investor, Steven Cohen, sold all 1.2 million of its shares of FYBR. British bank HSBC got rid of all of its nearly 8,000 shares of Frontier.

The Teachers Retirement System of Texas unloaded 14,851 shares, or 28% of its stake. The very large Swiss bank, UBS, sold 10,541 shares, equal to 20% of its stake. Also selling shares was investment manager Invesco, which dropped 26.59% of its stake, or nearly 239,000 shares. Finally, Citi unloaded 5,186 shares or 17.5% of its stake.

Frontier’s top line fell 0.7% last quarter versus the same period a year earlier, and the company is facing tough competition from Verizon (NYSE:VZ), which began offering very rapid, low-cost broadband service last year.

Frontier’s trailing price-sales ratio is a small 0.69, putting it firmly in value-stock territory based on that metric. However, the company’s problems and its lack of popularity with instiutional investors make it one of the value stocks to avoid.

3M (MMM)

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Jane Street Group sold 49.5% of its stake in 3M (NYSE:MMM) last quarter, equal to nearly 138,500 shares. Meanwhile, Norges, Norway’s central bank, liquidated its entire stake of 3.085 million shares, and investment bank Lazard unloaded 47.8% of its stake, or 70,942 shares.

Also selling much of its stake was Tudor Investment Corp, the hedge fund owned by Paul Tudor Jones, the billionaire investor. Specifically, Tudor Investment liquidated 63% of its stake, or nearly 40,000 shares. Finally, Metropolitan Life Insurance sold 23% of its stake, or 7,347 shares.

Noting that 3M faces ” tens of billions of dollars in potential liability costs,” The Wall Street Journal recently warned that the firm could cut its dividend and take on much more debt as a result of the settlements of these cases. Changing hands at a forward price-earnings ratio of 11.8 times, MMM definitely qualifies as a value stock.

Walgreens (WBA)

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Citadel Advisors, the famous hedge fund controlled by the well-known, billionaire investor, Ken Griffin, parted ways with 89.6% of its stake in Walgreens (NASDAQ:WBA), or 1.35 million shares. Also unloading some Walgreens stock was Metropolitan Life Insurance, which sold 9,500 shares, representing a 23% reduction in its stake.

Another major seller was Norway’s central bank, Norges Bank, which liquidated its entire stake of  1.04 million shares. Meanwhile, Point72 Middle East, a hedge fund affiliated with the well-known, billionaire investor, Steven Cohen, unloaded its entire stake of WBA stock, dropping 185,000 shares.  Also heading for the exits was the large investment company, Brookfield Asset Management, which sold all 134,610 of its shares.

As I noted in a previous column, Walgreens is facing huge financial liabilities for its role in the opioid crisis. WBA stock has a low forward price-earnings ratio of 6.5, definitely making it a value stock.

GameStop (GME)

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Citadel Advisors, the famous hedge fund controlled by the well-known, billionaire investor, Ken Griffin, parted ways with 77.9% of its stake in GameStop (NYSE:GME), or 122,516 shares. Also unloading a great deal of GME was Morgan Stanley, which unloaded 39.5% of its stake, or nearly 305,000 shares.

Nomura, a large Japanese bank, ran for the exits, selling all 129,999 of its shares, while Point72 Asset Management, the hedge fund owned by the very well-known investor, Steven Cohen, also eliminated its entire stake in GME, as it unloaded 605,700 shares.

Royal Bank of Canada sold 30.4% of its stake in GME or 4,266 shares, while the large French bank, BNP Paribas, dropped 49,720 shares, representing 55% of its stake.

As I noted in previous columns, I believe that the decision by GME Chairman Ryan Cohen to buy shares of GME is actually a bearish sign for the name. The stock’s trailing price-sales ratio is a low 1.2, putting it in “value-stock territory.”

Verizon (VZ)

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Norges Bank, Norway’s central bank, headed for the exits on Verizon (NYSE:VZ) last quarter, dropping its entire stake of 46.4 million. Meanwhile, Shell Asset Management unloaded 13.7% of VZ, or 176,504 shares.

Investment bank Lazard dropped 77.7% or 1.4 million shares of VZ,  while Metropolitan Life Insurance unloaded 22.67% of its stake, or 55,000 shares.

Investment manager T. Rowe Price sold 22% of its stake in VZ or 10.6 million shares, while the large Japanese bank, Nomura, headed for the exits, dropping its entire stake of 56,514 shares. Verizon’s top line dropped 1.9% year-over-year in the first quarter, as its total sales to consumers declined 1.7%.

On the date of publication, Larry Ramer held a SHORT position in GME. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

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