The Smart Money is Making BIG CHANGES.

What stocks have the smart money been buying and/or selling? That's what we're going to be taking a look at in this video. A couple of weeks back, the 13F filings were released, which means we get to take a look behind the curtain and observe all the market moves the big money was making across Q2. We're talking about the Warren Buffets, the Bill Ackmans, the Michael Burry's, the Seth Klarman's, the big investors in the world. Instead of doing the five most bought stocks across Q2, like I would normally do, this time I'm changing it to simply the five biggest stories to come out of the 13Fs this time around. So with that said, let's get stuck into it.

At number five, we have some really big news that Bill Ackman is buying Nike. Bill Ackman runs the fund Pershing Square, and while he is a little bit of a controversial character, it is worth noting he has made some exceptionally good investments in the past. One of the most famous bets includes a big investment in Chipotle in 2016, but maybe his craziest successful bet was when he bought $27 million of credit protection in early 2020, essentially shorting the market, and that made him a staggering $2.6 billion in just a matter of weeks. So he's made some very impressive bets, but this time around, his bet is on Nike stock.

Nike is a really interesting business to take a look at right now because for a business with such a big brand, they're actually taking quite a beating. They released their most recent earnings report on Thursday, the 27th of June, and it's fair to say it did not impress investors at all. They cut their full-year guidance, which is never a good sign, and beyond that, they also said they expect sales to drop 10% during the current quarter on concerns of sales in China and uneven consumer trends across the globe. AKA consumers around the world are feeling the pinch and are foregoing unnecessary purchasing, and that's hurting their top line.

Beyond this, it's also been well publicized that Nike is also working to reposition their brand with efforts to increase their direct-to-consumer sales and drift away from their wholesale model. But so far, this plan has drawn some criticism from shareholders. On their conference call, their finance chief, Matthew Friend, noted, "Although the next few quarters will be challenging, we are confident that we are repositioning Nike to be more competitive with a more balanced portfolio to drive sustainable, profitable, long-term growth," noting that a comeback at this scale takes time. But of course, shareholders don't want to wait.

And what do you know? The next trading day, the stock fell nearly 20%, and I think that's when Bill Ackman would have pounced. He bought over 3 million Nike shares worth roughly $230 million. But I know what you're thinking: "Hold on, Brandon. This is only 2.2% of his U.S. portfolio. You think this is one of the most notable moves of the last quarter?" Well, quite possibly because if you look at the timing of the stock decline, Ackman had just one trading day before the end of the quarter to make his move, assuming that is when he pulled the trigger. So I think there is a fair chance that the buying would have continued into the next week as well. But of course, with the 13F only going up to just the end of Q2, we don't get that information. But of course, take all that with a pinch of salt. But I do think it'll be one to watch out for, particularly in maybe the next 13Fs.

Okay, but with that said, let's move on to number four. Next up, we have the dynamic duo of Monish Pabrai and Guy Spier investing in coal. Now, coming into the quarter, Monish already had some sizable investments in the coal miners such as Consol Energy, Warrior Met Coal, Arch Resources, and Alpha Metallurgical Resources. Besides Consol Energy, he is adding more and more to these investments. But now we are also seeing his close friend Guy Spier entering into the same play, just dipping his toes into both Arch Resources and Alpha Metallurgical Resources.

So why on Earth would these guys be buying coal miners? It's a dirty industry; demand is falling, stock prices are falling. The writing's on the wall for the coal industry. Well, interestingly, there are actually two different types of coal: there's thermal coal and there's metallurgical coal. Thermal coal is used for electricity generation, whereas metallurgical coal is used predominantly in blast furnaces for the creation of steel. And while the world is transitioning away from coal altogether, I think Monish and Guy are predicting that moving away from metallurgical coal will take a lot longer than the transition away from thermal coal.

The companies they've invested in are all focused on met coal for the production of steel as opposed to the coal that's used for energy production. But it's fair to say this hypothesis hasn't really interested the rest of the institutional investors of the world. If we look at these companies' price-to-earnings ratios, you can see a bit of a trend: they're pretty cheap. Warrior Met Coal has a P/E of 7.4, Consol Energy has a P/E of 7.1, Arch Resources has a P/E of 9, and Alpha Metallurgical Resources has a P/E of 5. And even having a look at their current price to free cash flow multiples, they're still really cheap with the exception of Warrior Met Coal.

But here's the other play as an investor: share repurchases and dividends. All these companies, at least to some extent, are paying dividends and doing share buybacks, which is another huge factor to consider in your returns as an investor. If you hold a stable cash-flowing company that pays dividends, then you're straight up getting a cash return from the business just by holding the shares. In the case of repurchases, by sitting down and literally doing nothing, you, the investor, over time hold a larger percentage of that business. So I don't think Monish and Guy think these businesses are going to invent the next big thing, but provided metallurgical coal sticks around for a little while longer, they should stand to benefit from getting in at these prices.

Okay, moving on. The next big takeaway from the 13F filings this time around is Michael Burry doubling down on his bets in the Chinese tech stocks. Now, we all know what the big short investor is like at this point. He chops and changes the stocks in his portfolio like a day trader. It's very hard to take away anything from his portfolio from quarter to quarter because there's just no long-term trends at all, except for these Chinese tech stocks: Alibaba, JD.com, and more recently, Baidu as well. And even though Burry most times acts like a trader, it is worth remembering that he's still a value investor, right? He's still investing with those rational value investing principles at the forefront of his mind.

So it's interesting seeing him continue to hold the Chinese tech stocks in Alibaba, Baidu, and JD. Now, he did sell down 30% of his JD position in the quarter, but looking at his biggest stock in Alibaba, he added 24%, and he also added 87% to his Baidu position. If you have a look at the history of his portfolio, it's clear that he's not just trading in and out of these companies; he's actually held them since Q4 of 2022. So the question is, well, why? My best guess as to the answer revolves around a few points. Firstly, these companies are all very big and very important to China's economy: the 10 cents, the Alibabas, the JD.coms, the Baidus. These are, as Mohnish Pabrai calls them, the crown jewels of China.

But we know that right now, China's macroeconomic policies and economic struggles stemming from their real estate sector are having a very large impact on consumer spending, which is seriously affecting the growth and profitability of these big Chinese companies. It's not that these businesses suck; it's that the current macroeconomic conditions for them to work in suck, and it's led to a massive sell-off in Chinese businesses. So much so that right now, Alibaba is down 73% from its peak, JD and Baidu are down 75%. But here's the thing: take Alibaba, for example. At their peak in 2021, they were doing $10.67 in free cash flow per share; they're now doing a fair bit less. Well, even looking to their current position, if you take their enterprise value—aka the value of their business after you pay back the debt and take the remaining cash off the market cap—you get around $165 billion. Now, in the last 12 months alone, they produced $20 billion in free cash flow, which gives them a price-to-free cash flow of around eight. So it's pretty cheap, right? And I think that's what Michael Burry sees. He puts the value investing cap on, he sees these businesses that are very strong in the Chinese economy. They're cheap due to the macro landscape, so he's going to hold on to them and potentially benefit from a longer-term recovery.

So that was definitely another big story coming out of the 13F filings. And then the second last one I wanted to cover is Seth Klarman selling down Google. Google has been one of Seth Klarman's biggest stocks for many years now, but in this quarter, he decided to sell 63.4% of his position. This takes Google from number two in his portfolio down to number six at just 5.5%. Now, this could be part of a portfolio rebalancing, but I think what's more likely is Klarman taking profits from a pricey stock that has been swept up in the speculative mania around the Magnificent Seven. Google, despite being a very strong business, was sitting up over 100% from its lows at the start of 2023 to the peak around the end of last quarter. So it doesn't surprise me at all to see some big names selling down the stock before the end of Q2.

Have a look at the trend; there were a lot more super investors selling Google shares than buying. Another investor of note alongside Seth Klarman was again Bill Ackman, who sold 20% of his C shares and 8% of his A shares. Now, to be clear, I do not believe these investors are selling down Google shares because something fundamentally has changed within the business. In fact, in their recent earnings report, they posted really solid year-over-year growth numbers. I do just think with valuations rising a lot in the MAGA stocks, there has been some profit-taking, and Google has not escaped that.

And talking about profit-taking, we get to the biggest move out of the 13F filings this quarter, hands down: we have Warren Buffett selling Apple. Berkshire reduced their Apple stake by 49% in Q2, reducing that position size to 30% of the Berkshire portfolio from what was a staggering 50%. Now, I'm going to talk about this one the least, as I have made a full dedicated video on the topic, which you can probably see coming up on the screen right now if you're interested. But at a high level, Buffett said he is quite happy locking in some of the profits at a low tax rate, now to hold more cash and treasury bonds. With all that's going on in the world at the moment, does he think Apple's business is terrible now and he's getting out for good? I don't think so because he's just so happened to sell down to exactly 400 million shares. Even so, I do think that's no coincidence, and he plans on holding these 400 million shares for the long term. But at the same time, I do think he wouldn't have sold if he really believed in the near-term growth potential of Apple.

So, like a lot of The Magnificent Seven stocks, I think he's seen the valuation really rocket up over recent years. Remember, he bought this stock at a P/E of around 12, and today that multiple has expanded to a whopping 34. So for now, I think he's decided to just take full advantage of a great run while also committing Berkshire to holding at least those 400 million shares for the ultra-long term to benefit from where Apple will be in a decade or two from now.

And with that said, guys, they are my five biggest takeaways from the 13F filings in Q2. Please let me know down in the comments; I’d love your feedback on particularly the new format. What did you think? Do you guys prefer me talking about the biggest stories or just the top five buyers or the top five sells? I'd love it if you guys let me know down in the comments. Also, quick shout-out: if you want to run through the full Warren Buffett stock analysis strategy, including three valuation methods you can use for your own stocks, then definitely check out Introduction to Stock Analysis over on New Money Education. But apart from that, thanks very much for watching, and I'll see you guys in the next video.