Hedge fund managers sell certain stocks for a variety of reasons. Those reasons can include changes in the company’s financial performance, shifts in market conditions or investor sentiment, or changes in the fund’s investment strategy. There’s little difference between institutions and individuals in that regard.
And like all other investors, if a company’s financial performance deteriorates, hedge funds may sell their shares to cut losses and reallocate their capital to more promising investments.
Hedge funds may also sell stocks if they believe that the company’s valuation has become overextended or if they need to free up capital for new investments or redemptions.
Overall, hedge funds sell certain stocks for various reasons based on their analysis of the company’s financials, market conditions, and investment objectives. Let’s look at some stocks from this list of most-sold companies by institutional money managers.
JPMorgan Chase (JPM)
JPMorgan Chase (NYSE:JPM) is a multinational investment bank and financial services company. Its leads the list of stocks hedge fund managers are shedding recently. The company offers various services, including investment banking, commercial banking, asset management, and wealth management.
JPMorgan has an entire portion of its website dedicated to shareholder activism. Team members responsible for reacting to shareholders at the firm noted that activism levels in late 2022 were back to pre-pandemic levels. One manager, Alfredo Porretti, indicated that as the end of 2022 approached, activists were directing more emphasis on the return of capital. To shareholders, he also noted that general themes around ESG concerns continued to play out, with activist investors focusing their efforts here, as well as ensuring capital is sufficiently being returned to shareholders.
Even though hedge funds have scrapped JPM stock, it remains a strong performer. In both Q3 and Q4, the company’s earnings exceeded expectations, with Q4’s results coming in particularly strong.
Like JPMorgan Chase, Citigroup (NYSE:C) is a multinational bank. As one of the largest banking institutions in the world, Citigroup offers a wide range of financial products and services to consumers, corporations, and governments. And like all large, multinational banks, Citigroup faces scrutiny from hedge funds that exercise power over its shares’ direction and price.
Data indicates that hedge funds decreased their holdings in C stock by 10.1 million shares last quarter. However, Bridgewater Capital’s Ray Dalio was not among them. He placed large bets on both Citigroup and JPMorgan mentioned above.
However, there’s a fundamental reason why so many investors are growing bearish on Citi. Unlike JPMorgan, which saw profits increase 6% in the most recent quarter, Citigroup saw profits fall 21%. These banks are also increasing their reserve levels to cover potential losses as concerns over a possible recession linger. Investment banking profits dropped precipitously at Citigroup as well, falling 60%. Those losses were somewhat offset by additional interest income from higher-interest loans.
Uber Technologies (UBER)
Hedge funds of all stripes sold stock in ride-hailing platform Uber Technologies (NYSE:UBER) last quarter. They collectively shed 36.5 million shares of the UBER stock. This ride-hailing company, which also offers food delivery and freight transportation services, sustained a significant share price decline throughout 2022, sinking from $42 to $24.
Despite heavy selling, Uber Technologies did report fundamental improvement along several metrics in Q4. The company’s revenue increased 49% to $8.607 billion. Additionally, Uber took passengers on 2.104 billion trips. That was a 19% increase over the same period a year earlier. All of which tends to suggest that demand has returned.
Further, revenue increased across all three of the company’s mobility, delivery, and freight business segments. There’s potential to make substantial returns with UBER stock, given its target price is well above its current trading price.
That said, finding negative opinions of Uber’s business model remains effortless. One only needs to visit an entire website dedicated to hating Uber aptly titled ‘whyeveryonehatesuber.com.’ Allegations of employee mistreatment aren’t challenging to find. Nor claims that Uber increases the commissions it charges drivers while reducing the rates it pays them. Given these claims, it’s not difficult to imagine that Uber will continue galvanizing hedge fund activism.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.