Following the stock picks of billionaire investors can be a good way to find winners in the stock market. After all, these investors achieved their wealth through a successful career of earning above-average returns for their clients.
Three Motley Fool contributors have identified three promising stocks that some of the world’s billionaire-level investors bought in the first quarter of 2024. Here’s why Amazon (NASDAQ: AMZN), Opendoor Technologies (NASDAQ: OPEN), and Sea Limited (NYSE: SE) could be attractive buys right now.
Artificial intelligence is the next growth driver
Jennifer Saibil (Amazon): Amazon stock has generated incredible returns over the past three decades, but there’s so much more still to come from this perennial winner. That’s why it should come as no surprise that it’s owned by several billionaire investors.
Some examples are Israel Englander of Millennium Management, who owns 9.9 million shares as of the end of the first quarter, and Ken Griffin of Citadel Advisors, who owns 6.6 million shares.
Amazon is the second-largest U.S. company when measured by sales and the fifth-largest by market cap. But these billionaires know that there’s a lot more coming.
The latest trend driving interest in Amazon stock is artificial intelligence (AI). Amazon announced major initiatives in generative AI last year, and it’s working with top AI names like Nvidia and Anthropic to develop foundational models (GPT-4 is a famous example) and offer high-level generative AI services.
Most of the talk about Amazon’s generative AI tools is connected to Amazon Web Services (AWS), the company’s cloud computing business. These tools help AWS clients with a broad range of services that make it easier and faster to run their businesses, from building their own large language models (LLMs) to plug-in tools for the technology layman.
Amazon is also using AI in its e-commerce segment — in fact, it has been for decades. The tech titan has collected millions of data points about its shoppers’ habits and can offer targeted product recommendations. It also uses AI throughout its delivery network to get orders packaged and fulfilled in the fastest and most cost-efficient way.
Amazon deploys AI to offer similarly targeted results for advertisers, and third-party clients can use its advertising platform to reach customers who are already looking to buy their products. Amazon recently launched an ad-supported streaming tier for its Prime streaming viewers, and it’s utilizing the power of AI to work with its advertising clients in video channels.
There is plenty of room for Amazon to run, and new ventures present massive high-growth opportunities for the incredibly profitable tech giant.
Can this real estate stock make a comeback?
Jeremy Bowman (Opendoor Technologies): Opendoor Technologies has mostly been a disappointment since it went public in 2020 through a special purpose acquisition company. In fact, that’s probably an understatement.
Opendoor is now down 94% from its peak shortly after it went public as the housing market has ground to a halt in the years since, with mortgage rates soaring and homebuyers sitting on the sidelines waiting for prices and rates to come down.
However, that deep discount might be one reason why billionaires have been eyeing the stock lately. A number of them scooped up shares of the home-flipper in the first quarter, including Steve Cohen’s Point72 Asset Management, which bought 6.2 million shares of Opendoor, and Ken Griffin’s Citadel Capital, which bought more than 5 million shares of the real estate stock.
Those hedge fund managers may be responding to Opendoor’s efforts to cut costs and rightsize the business, which has moved it much closer to profitability, or they could be betting that interest rates will soon come down.
Those hopes seemed to take a blow on Wednesday after the Federal Reserve held interest rates steady and lowered its forecast for interest rate cuts this year to just one down from three in its previous “dot plot” in March. However, interest rates are likely to come down eventually, and when they do, Opendoor should be ready to take advantage, because it’s a natural beneficiary of rising home prices. If the company continues to streamline its business in the meantime, the stock could move a lot higher once housing market conditions become more favorable.
This e-commerce stock is up 83% this year
John Ballard (Sea Limited): Chase Coleman’s Tiger Global Management delivered annualized returns of 21% through its first two decades, according to Forbes. Coleman’s net worth is estimated at $5.7 billion, and in the first quarter, his firm was adding to its position in leading e-commerce and digital entertainment company Sea Limited.
Singapore-based Sea Limited saw its revenue slow significantly in 2022 as competition intensified amid a challenging macroeconomic backdrop. But Sea’s valuable logistics infrastructure and scale will allow the company to weather the storm and keep growing. Its digital entertainment properties, including its leading mobile title Free Fire, have a massive user base of 595 million.
Sea was growing revenue at triple-digit rates just a few years ago, and it’s starting to turn the corner. The stock is up 83% year to date, supported by a strong first-quarter earnings report. Management expects its Shopee business to maintain market share in 2024 — a sign that the competitive environment is stabilizing.
The average Wall Street analyst expects Sea’s earnings per share to reach $5.67 in 2026. If the stock is still trading at the same price-to-earnings ratio, the shares would be worth roughly $210, implying upside of 183%.
Should you invest $1,000 in Amazon right now?
Before you buy stock in Amazon, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $808,105!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of June 10, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has no position in any of the stocks mentioned. Jeremy Bowman has positions in Amazon and Sea Limited. John Ballard has positions in Nvidia. The Motley Fool has positions in and recommends Amazon, Nvidia, Opendoor Technologies, and Sea Limited. The Motley Fool has a disclosure policy.
3 Top Stocks That Billionaires Are Buying was originally published by The Motley Fool
Source link
