Microsoft, Amazon, Apple: which stocks the best managers are selling

Morningstar analytical agency studied the portfolios of the best performing funds and named 10 companies whose shares their managers decided to reduce. Some of these stocks already look overvalued, but getting rid of them could be for other reasons as well. Here are which stocks the best portfolio managers chose to sell:

The tech giant tops the list of stocks that have gone under the knife of managers: a stake in Microsoft has been cut this year by 14 of the 28 funds in Morningstar's sample. At the same time, the company remains the largest position in the portfolios of such investors: 23 funds continue to hold it. According to Morningstar, Microsoft shares are now undervalued relative to the fair value of $600 per paper. It implies a nearly 18% rise in the stock price. Analysts consider it a buy rather than a sell candidate.

Amazon remains one of the most popular stocks in portfolios - 23 managers continue to hold it, but 10 have reduced their positions. Morningstar estimates the fair value of the online retailer's shares at $245 - that's almost 6% above current quotes.

Some investors were disappointed by the results of the company's cloud business AWS amid competitors, but the service still beat Morningstar's forecasts for the first half of the year. The decline in margins relative to the first quarter put pressure on quotes, but the overall profitability of the company remains high, and analysts expect a recovery.

The iPhone maker remains one of the most popular securities with top managers, although 10 funds have reduced positions. Morningstar estimates that the company has a competitive advantage, but its shares look slightly overvalued. Morningstar estimates their fair value at $210 - that's up nearly 11% from the current price.

The main risk for Apple remains the possible loss of the import duty exemption in the U.S.: the introduction of a 25 percent levy on imports from India could reduce the stock price by 15 percent, although some of the loss will be offset by price increases. A redesigned iPhone 17 is expected to be released in September, but only moderate sales growth is forecast for 2026 after demand shifts into 2025, Morningstar notes.

Visa is one of the two financial companies whose shares were shorted by the best managers: positions were reduced by 13 funds. According to Morningstar's estimates, the payment company's securities are trading at a 14% premium to fair value of $306 and look moderately overvalued. An additional risk factor remains the uncertainty associated with duties: the current price, according to analysts, does not reflect the likely decline in consumer spending.

Goldman Sachs is one of the most overvalued securities on the list, with shares trading 30% above fair value, which Morningstar estimates at $570. Two top fund managers have cut positions in them.

U.S. banks are now supported by soft regulatory requirements and strong deal flow in investment banking. However, according to Morningstar, the market is underestimating the risks - tightening trade policy, rising inflation and a slowing economy. Analysts expect the duties to reduce the US GDP growth rate by about 0.3 p.p. annually until 2029.

UnitedHealth Group is the only health care company on the list of stocks that top managers were selling: 10 funds reduced positions in it. Morningstar estimates UnitedHealth's fair value at $400 per share - so the stock is now undervalued by about 24%.

Warren Buffett's Berkshire Hathaway invested $1.6 billion in UnitedHealth in mid-August, spurring the stock to rise more than 10% and bolstering confidence in the company amid challenges in the sector. Analysts forecast that the company's earnings could add more than 20% a year through 2030 by improving margins in its Medicare Advantage health insurance segment, as well as in its own clinics and medical services business.

The home improvement chain remains one of the most overvalued companies on the list, with its stock trading 22% above its fair price of $335, according to Morningstar estimates. Three fund managers have sold the company's securities this year. According to Morningstar, to justify the current price, Home Depot would have to consistently show 5% comparable sales growth and margins above 15%, which is unlikely due to its massive investments.

Google's parent company is one of the most attractive stocks on the list, with the securities trading 12% below Morningstar's fair value of $237. Nine fund managers have reduced their positions in it. Morningstar forecasts capital expenditures to rise to $85 billion (from $75 billion previously), but analysts see the investment as necessary and capable of strong returns. They believe the sustainability of search and the growing monetization of AI will lead to a more positive revaluation of the stock over time.

Caterpillar is the only industrial company on the list. The stock is trading at about a 9% discount to Morningstar's fair price of $477, making it undervalued. Three fund managers have reduced their positions in them.

The hardware maker is emerging as an indirect beneficiary of growing energy demand from data centers and the trend toward AI investments. The company has a strong balance sheet and solid cash flow, which creates a good environment for future growth, Morningstar said.

Paint and coatings maker Sherwin-Williams rounds out the list of stocks that top managers have been selling while being the most overvalued, with the securities trading 42% above Morningstar's fair value of $258. Eight fund managers have reduced their positions in them.

Sherwin-Williams has sustainable pricing power and a strong long-term position, but weak demand in the DIY market and limited volumes in a number of areas could offset the effect of the price increase. In the absence of a rapid recovery in construction activity, pressure on the company may continue next year, the bank's analysts said.

Analysts considered only actively managed funds that fall into one of three Morningstar categories: funds that invest in large undervalued companies (i.e., follow value investing), or invest in large companies with high growth potential ("growth stocks"), or use a mixed strategy.

They then selected funds that had at least one share class that received Morningstar's so-called Medalist Rating of Gold, Silver or Bronze. The final step was to select funds that held no more than 50 stocks in their portfolios at the time of the last report.

As a result, 28 funds were selected. Their current assets were compared to portfolios from three months ago to determine which stocks the managers were selling, Morningstar writes.

The list published by Morningstar should not be viewed as a direct recommendation to sell. Many of the shares sold remain large positions with leading managers, and a reduction in stake does not mean a complete exit from the asset, the agency notes. In addition, investors should not forget that in some cases the sale of an asset will entail additional expenses - for example, for taxes.

This article was AI-translated and verified by a human editor