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Investing Specialists

Should You Sell These Five Ultimate Stock-Picker Stocks?

A deeper look at Berkowitz's sale of Pfizer and other big sales by our managers.

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By Drew Woodbury | Stock Analyst

As you may recall from our last article, we firmly believe that portfolio managers send signals about how they feel about a particular stock by the amount of money they're willing to commit to it at any given time, which is why we focus on not only the holdings of our Ultimate Stock-Pickers, but on their purchases and sales as well. Generally, we assess the relative attractiveness of an individual security by how many funds are currently holding it, by the percentage that each stock makes up of each manager's portfolio, and by whether or not our Ultimate Stock-Pickers have been adding to or subtracting from their positions. However, we also like to look at new money purchases and outright sales, which we feel offer additional insight into the thinking of our top managers about their holdings.

Having focused primarily on stocks our Ultimate Stock-Pickers have been actively buying in most of our articles, we figured it was time for us to dedicate a piece to companies that our managers have been selling. We think this is appropriate, especially given that the markets, as represented by the S&P 500 Index (SPX), are up more than 60% since they bottomed out in early March of last year. When looking at the sales made by our Ultimate Stock-Pickers, we tend to pay particularly close attention to situations where a manager has sold a significant portion of a particular holding during a short time period--especially outright sales (where a manager has completely eliminated a stake in a security). We view cases like these as particularly important, as they signal that a manager has a high degree of conviction behind their decision to sell the stock, as opposed to sales where they are simply trimming a holding that has become fully valued, or exceeds their estimate of its value.

The Morningstar Ultimate Stock-Pickers Team does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.