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US Mega-Caps Fall to Begin 4th Quarter on Weak Manufacturing Data

Several U.S. mega-caps, including Apple Inc. (NASDAQ:AAPL), a top holding of Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B), plunged during the first two days of October on the heels of weak manufacturing data for the month of September. Despite this, the U.S. stock markets remain significantly overvalued to begin the fourth quarter.


Dow tumbles 800 points to begin the fourth quarter as manufacturing data disappoints investors

The Dow Jones Industrial Average closed at 26,078.62 on Wednesday, down 494.42 points from Tuesday's close of 26,573.04 and 838.21 points from Monday's close of 26,916.83. The selloff accelerated on the heels of the Institute of Supply Management reporting a September purchasing manager's index reading of 47.8%, down 1.3% from the August reading of 49.1%. ISM Chair Timothy Fiore said contraction in the New Orders Index and New Export Orders Index hindered demand, which led to a contraction in consumption.

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You can view the top mega-caps using our Screener

The GuruFocus All-in-One Screener, one of our most-popular Premium features, allows you to view stocks meeting your investing strategy. Figure 1 illustrates a sample screen shot with the Mega Caps filter highlighted.

Figure 1

Since this article focuses on U.S. market valuations, we probably want to set the regions and exchanges so that the Screener only displays stocks trading on the New York Stock Exchange and the Nasdaq. Additionally, we should also set the "Country (Headquarter)" filter to USA. Figure 2 illustrates the "Regions" section with the aforementioned settings.

Figure 2

If you do not see the desired minimum market cap, you can simply enter the desired market cap into the cell. For example, if you wish to set the minimum market cap to $500 billion, enter 500000 in the first cell. Figure 3 illustrates the "Country (Headquarter)" and market cap filters set based on our criteria.

Figure 3

If you wish to sort the table by market cap, click on the "Market Cap ($M)" header so that it displays a down arrow in that column. According to Figure 4, the top NYSE and Nasdaq companies based on market cap are Microsoft Corp. (NASDAQ:MSFT), Apple, Amazon.com Inc. (NASDAQ:AMZN) and Google parent Alphabet Inc. (NASDAQ:GOOGL)(NASDAQ:GOOG).

Figure 4

Microsoft

Microsoft closed at $134.65, down 1.77% from the previous close.

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Founded by Bill Gates (Trades, Portfolio), Microsoft provides software, hardware and services through three business segments: productivity and business processes, intelligent cloud and more personal computing. GuruFocus ranks Microsoft's profitability 9 out of 10 on several positive investing signs, which include a strong Piotroski F-score of 8 and operating margins that are increasing approximately 1.40% per year on average over the past five years and are outperforming 96.03% of global competitors. Additionally, Microsoft's business predictability ranks four stars out of five on consistent revenue and earnings growth over the past 10 years.

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Gurus with large holdings in Microsoft include PRIMECAP Management (Trades, Portfolio), Dodge & Cox and Ken Fisher (Trades, Portfolio).

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Apple

Apple closed at $218.96, down 2.51% from the previous close.

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The Cupertino, California-based tech giant designs a wide range of consumer electronic products. In September, Apple launched new products like the iPhone 11 Pro Max and the Apple Watch Series 5.

GuruFocus ranks Apple's profitability 9 out of 10 on several positive investing signs, which include a strong Piotroski F-score of 7, a solid Altman Z-score of 4.62 and operating margins that are outperforming 96.90% of global competitors despite languishing near a 10-year low of 24.87%. Additionally, Apple's business predictability ranks 4.5 stars out of five, suggesting good business quality.

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Berkshire has not released its third-quarter portfolio as the deadline is 45 days after the quarter ends. As of second-quarter-end, Buffett's conglomerate owns 249,589,329 shares of Apple, dedicating 23.74% of the equity portfolio to the stake.

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Amazon.com

Amazon.com closed at $1,713.23, down 1.29% from the previous close.

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The Seattle-based retail giant operates several e-commerce and online services, including third-party seller services and Amazon Web Services. GuruFocus ranks the company's profitability 8 out of 10 on several positive indicators, which include expanding profit margins and a return on equity that outperforms 91.72% of global competitors. Additionally, Amazon.com's business predictability ranks four stars out of five.

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Alphabet

Class A shares of Alphabet closed at $1,177.92, down 2.33% from the previous close, while Class C shares of Alphabet closed at $1,176.63, down 2.36% from Tuesday's close.

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The Mountain View, California-based online media giant operates several platforms, including Google, YouTube and Android. GuruFocus ranks Alphabet's financial strength and profitability 9 out of 10 on several positive investing signs, which include robust interest coverage, a 3.5-star business predictability rank and operating margins that are outperforming 87.31% of global competitors despite contracting approximately 2.3% per year on average over the past five years.

Disclosure: No positions.

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This article first appeared on GuruFocus.