25 Top Stock Picks That Billionaires Love
Billionaire investors were busy during the third quarter of 2021. Here are 25 companies, of various shapes and sizes, that were some of their most recent top stock picks.
You can't get rich simply by copying their every move, but there's still something irresistible about knowing what billionaire investors are doing with their money.
Consider that the billionaires, hedge funds and big-time advisories listed below have a great deal at stake. And their resources for research, as well as their intimate connections to insiders and others, can give them unique insight into their stock picks.
Studying which stocks they're chasing with their capital (or which stocks the billionaires are selling off, for that matter) can be an edifying exercise for retail investors.
After all, there's a reason the rich get richer.
Here are 25 of the most recent top stock picks from the billionaire class. In each case, at least one billionaire — be it a person, hedge fund or advisory — has a substantial stake and/or added to its holdings. In most cases, these stocks are owned by multiple billionaire investors and billionaire investor firms. And while several of these investments are popular blue chips, others keep a much lower profile.
Either way, the smart money isn't kidding around when it comes to these stock picks.
Prices are as of Dec. 22. Data is courtesy of S&P Global Market Intelligence, YCharts, WhaleWisdom.com and regulatory filings made with the Securities and Exchange Commission, unless otherwise noted. Stocks are ranked in reverse order of their weight in the selected billionaire investor's equity portfolio.
25. IHS Markit
- Market value: $284.8 million
- Billionaire investor: George Soros (Soros Fund Management)
- Percent of portfolio: 5.2%
Shares in IHS Markit (INFO, $132.75), a London-based provider of information and analytics to more than 50,000 business and government customers, are up 48.9% so far this year, and at least one prominent billionaire has gone along for the ride.
George Soros, with an estimated net worth of $8.6 billion, per Forbes, is best known for his infamous 1992 bet against the British pound, which reportedly reaped him $1 billion in profit. Today, the former hedge fund tycoon conducts his investments through Soros Fund Management, a family office (essentially a private hedge fund).
Soros Fund Management, with $5.4 billion in managed securities, initiated a position in IHS Markit in the second quarter of 2021. But the billionaire really got serious in Q3, when he upped his INFO stake by 80%, or nearly 1.1 million shares. With a total of 2.4 million shares worth $284.8 million as of Sept. 30, IHS Markit now accounts for 5.2% of the fund's portfolio.
In November, regulators approved the proposed $44 billion merger between IHS Markit and S&P Global (SPGI).
Wall Street is similarly bullish on Soros' fifth-largest holding. Analysts' consensus recommendation on INFO stock comes to Buy, according to S&P Global Market Intelligence, with five Strong Buy calls, one Buy rating and three Holds.
24. CVS Health
- Market value: $946.4 million
- Billionaire investor: Veritas Asset Management
- Percent of portfolio: 5.4%
Veritas Asset Management sees something in healthcare company CVS Health (CVS, $100.90).
Although the London-based hedge fund with $33.1 billion in assets under management (AUM) has held a stake in CVS since late 2011, it made a major move on the stock over the summer. Veritas increased its position in Q3 by 36%, or more than 2.9 million shares. The fund now owns 11.2 million shares in CVS, worth $946.4 million as of Sept. 30. At 5.4% of Veritas' portfolio, CVS is the hedge fund's seventh largest investment.
Shares in CVS Health — whose operations include health insurer Aetna, its eponymous drugstore chain and CVS Caremark, a pharmacy benefits manager — are up by more than half in 2021, beating the broader market by more than 25 percentage points. Analysts expect even more outperformance ahead.
The Street gives CVS a consensus recommendation of Buy, with high conviction. Of the 28 analysts issuing opinions on the stock tracked by S&P Global Market Intelligence, 14 rate it at Strong Buy, seven say Buy and seven call it a Hold.
"Our expectation is that the tapering or normalization of COVID factors in 2022 will provide investors better visibility into CVS's fundamentals and its compelling long-term outlook," writes Jefferies analyst Brian Tanquilut, who rates the stock at Buy.
- Market value: $94.9 million
- Billionaire investor: Honeycomb Asset Management
- Percent of portfolio: 5.8%
Honeycomb Asset Management built on its new position in Salesforce.com (CRM, $252.80) in a big way in Q3. The New York-based hedge fund ($1.8 billion AUM) upped its stake by 250%, or 250,000 shares, after initiating the investment in Q2.
Honeycomb now owns 350,000 shares in CRM worth $94.9 million as of Sept. 30. The holding now accounts for 5.8% of the hedge fund's portfolio, up from 1.6% in Q2.
Honeycomb's bullishness on CRM, its third-largest investment, is not unique. Salesforce.com, which was added to the Dow Jones Industrial Average in 2020, is one of the Street's top-rated stocks in the blue-chip barometer.
Indeed, CRM is one of only three Dow stocks to score a Strong Buy consensus recommendation. Thirty-one analysts call it a Strong Buy, 12 say Buy and six have it at Hold.
Bulls say Salesforce.com's early mover advantage gives it an edge when it comes to capturing accelerating corporate spending on cloud-based services.
"Larger and more strategic digital transformation projects are getting the green light within many enterprises," writes Wedbush analyst Daniel Ives, who rates CRM at Outperform (the equivalent of Buy). "[This] is a major tailwind for Salesforce given its stalwart positioning and expanded product footprint."
22. Kodiak Sciences
- Market value: $1.4 billion
- Billionaire investor: Felix and Julian Baker (Baker Bros. Advisors)
- Percent of portfolio: 6.2%
Kodiak Sciences (KOD, $94.15), a biopharmaceutical company developing medicines to prevent and treat blindness, got a vote of confidence from its largest shareholder in Q3.
Baker Bros. Advisors raised its stake in KOD by 3%, or 543,423 shares. The New York-based hedge fund ($35.8 billion AUM) is led by billionaire biotech investors Julian and Felix Baker. The brothers may keep a low profile, but they're plenty famous in the biopharmaceutical sector. A series of successful investments have allowed them to amass a combined fortune of nearly $4 billion, according to Forbes.
Baker Bros. Advisors now holds 14.7 million KOD shares, worth $1.4 billion as of Sept. 30. At 6.2% of the portfolio, Kodiak Sciences is the hedge fund's fourth-largest position. Meanwhile, Baker Bros. Advisors is the biopharma's largest stockholder by a wide margin, with 28.6% of KOD's shares outstanding.
The Street gives Kodiak stock a consensus recommendation of Buy, albeit with middling conviction. Four analysts rate KOD at Strong Buy, one says Buy, four have it at Hold and one rates it at Sell.
KOD is down about 36% for the year-to-date, but springloaded for a rebound, according to the Street. Analysts' average 12-month price target of $126.10 gives shares implied upside of around 34%.
21. Vista Outdoor
- Market value: $224.3 million
- Billionaire investor: Gates Capital Management
- Percent of portfolio: 6.2%
Vista Outdoor (VSTO, $40.98) stock has been a winner as a COVID-19 play, and Gates Capital Management sees more outperformance ahead.
The New York hedge fund ($3 billion AUM) increased its stake in the maker of gear for outdoor and shooting sports by a third in Q3, or 1.4 million shares. Gates' total position of 5.6 million shares was worth $224.3 million as of Sept. 30. The purchases make VSTO the hedge fund's top holding.
Vista Outdoor, whose brands include CamelBak, Bushnell and Remington ammunition and accessories, makes everything from cycling helmets to handgun holsters. Shares are up about 72% for the year-to-date, boosted by the increased popularity of outdoor sports amid the pandemic, among other factors.
Happily for Gates, analysts remain bullish on VSTO stock even after its hot run.
"Given our expectation that the increased industry participation numbers for both outdoor products and shooting sports during the pandemic will represent an incremental tailwind for VSTO in the coming years beyond the impressive production visibility that has been created by depleted channel ammo inventory, we continue to see an attractive setup for baseline growth," writes B. Riley analyst Eric Wold (Buy).
Wold speaks for the majority on the Street, which gives VSTO a consensus recommendation of Strong Buy. Seven analysts rate shares at Strong Buy and two say Buy.
20. Sea Ltd.
- Market value: $3.3 billion
- Billionaire investor: Chase Coleman III (Tiger Global Management)
- Percent of portfolio: 6.3%
Hedge-fund legend Chase Coleman III, with a net worth of $10.3 billion, according to Forbes, once again raised his bet on Sea Ltd. (SE, $222.88).
Coleman's Tiger Global Management ($79.1 billion AUM) increased its stake in Sea by 2%, or 265,400 shares, in Q3. That followed a 6% increase to the position in Q2. The fund owned a total of 10.4 million shares worth $3.3 billion as of Sept. 30. SE comprises 6.3% of the fund's portfolio, up from 5.2% at the end of the previous quarter.
Sea, which provides digital gaming, e-commerce and digital financial services primarily in Southeast Asia and Latin America, is the hedge fund's third-largest holding after Microsoft (MSFT) and JD.com (JD).
Tiger first bought SE in the first quarter of 2018, and it has been a massive outperformer. Shares are up 1,880% since the end of March 2018, vs. a gain of 78% for the S&P 500.
Coleman clearly sees even more upside ahead, and analysts agree. Their consensus recommendation stands at Strong Buy, and with high conviction at that. Of the 26 analysts issuing opinions on Sea – which trades on the New York Stock Exchange via American depositary receipts (ADRs) – 19 rate it at Strong Buy.
- Market value: $3.8 billion
- Billionaire investor: Polen Capital Management
- Percent of portfolio: 7.0%
Polen Capital Management's top five stock picks are a who's who of hot-growth, mega-cap tech stocks: Facebook parent Meta Platforms (FB), Google parent Alphabet Class C shares (GOOG), Amazon.com (AMZN, $3,420.74), Adobe (ADBE) and Microsoft (MSFT).
But the Boca Raton, Florida-based hedge fund ($46 billion AUM) was particularly bullish on AMZN in Q3. Indeed, it upped its stake by 65%, or 456,024 shares, vaulting the e-commerce giant into its third-largest position. AMZN now accounts for 7% of Polen's portfolio, up from 4.6% in Q2.
Amazon's appeal is easy to understand. Past performance may not be indicative of future returns, but as the third best global stock of the past 30 years, the company certainly inspires confidence.
It also helps that few stocks are as popular with the Street, which gives AMZN a consensus recommendation of Strong Buy. Thirty-six analysts rate shares at Strong Buy, 13 say Buy and one calls them a Hold.
Speaking for the bulls, Stifel analyst Scott Devitt (Buy) notes that Amazon is the "leader in two large and rapidly growing sectors (e-commerce and cloud), with an emerging high-margin marketing business."
Perhaps more importantly, the pandemic "sparked online adoption of grocery and consumables, categories Amazon has struggled to penetrate for many years and should support the next leg of retail growth," adds Devitt.
18. T-Mobile US
- Market value: $325.1 million
- Billionaire investor: David Tepper (Appaloosa Management)
- Percent of portfolio: 7.7%
Billionaire hedge fund manager David Tepper's Appaloosa Management ($13.5 billion AUM) topped off its stake in T-Mobile US (TMUS, $120.56) in the most recent quarter.
The Short Hills, New Jersey-based hedge fund added 25,000 shares, or an increase of less than 1%, to its position in the wireless carrier. Appaloosa, which has owned TMUS since the fourth quarter of 2017, now holds a total of 2.5 million shares worth $325.1 million as of Sept. 30. At 7.7% of the portfolio — up from 7.6% in Q2 — TMUS is third largest among the hedge fund's top stock picks.
With a net worth of $15.8 billion, per Forbes, Tepper is arguably the greatest hedge fund manager of his generation. His incremental purchase of TMUS stock — small and marginal though it may be — can still be seen as a vote of confidence.
And the Street would certainly approve of Tepper's move. Analysts consensus recommendation comes to Buy. They expect the nation's third-largest wireless carrier to generate average annual EPS growth of 48.6% over the next three to five years.
"We view 2020's T-Mobile/Sprint merger as a long-term positive and believe that it will strengthen the company's competitive position relative to Verizon and AT&T," writes Argus Research analyst Joseph Bonner (Buy).
- Market value: $156.5 million
- Billionaire investor: Cryder Capital Partners
- Percent of portfolio: 7.8%
Alibaba (BABA, $117.81) stock has been hammered all year, hurt by Chinese policymakers' crackdown on the country's tech sector. For Cryder Capital Partners, however, the drawdown affords an opportunity to buy a great stock on the cheap.
The London-based hedge fund ($1.8 billion AUM) maintains a highly concentrated portfolio of just 10 stocks, so when it upped its BABA stake by 45% in Q3, well… the move certainly stood out.
Cryder bought an additional 331,557 shares in BABA, bringing its position up to 1.1 million shares worth $156.5 million as of Sept. 30. At 7.8% of the portfolio, BABA is the hedge fund's eighth-largest holding. Cryder initiated its stake in the e-commerce giant in the fourth quarter of 2020.
Alibaba is often called the Amazon.com (AMZN) of China. Although there are important differences between the two, Alibaba – just like Amazon – has never shied away from investing heavily in itself. As a result, BABA has spread beyond its core e-commerce business into cloud computing, digital payments and much, much more.
Those efforts have paid off and then some. Alibaba is one of the 30 best stocks of the past 30 years. Looking ahead, the Street rates BABA stock at Strong Buy.
16. Penn National Gaming
- Market value: $350.5 million
- Billionaire investor: Atreides Management
- Percent of portfolio: 8.3%
Atreides Management started a position in Penn National Gaming (PENN, $50.87) in the most recent quarter. Shares in the casino and racetrack operator are off more than 40% so far in 2021, and bulls say that has them poised to deliver outsized returns as part of a broader COVID-19 recovery trade.
Atreides, a Boston-based hedge fund with $2.2 billion AUM, initiated a stake in Penn National Gaming in Q3, buying 4.8 million shares worth $350.5 million as of Sept. 30. At 8.3% of the portfolio, PENN stock is now Atreides' second-largest holding.
And with 2.9% ownership of PENN's shares outstanding, per S&P Global Market Intelligence, Atreides Management is now the casino company's sixth-largest stockholder.
The Street gives PENN stock a consensus recommendation of Buy, with middling conviction. Six analysts rate it at Strong Buy, five say Buy, six have it at Hold and one calls it a Strong Sell.
Longer term, the investment case with PENN rests in large part on its strategy of expansion into digital content and sports betting. The company holds a large and growing stake in Barstool Sports and acquired Score Media & Gaming for $2 billion earlier in 2021.
"Sports betting is a developing story, with the company positioned to take meaningful market share, have higher profitability than peers," writes Jefferies analyst David Katz (Hold).
15. World Wrestling Entertainment
- Market value: $630.8 million
- Billionaire investor: Lindsell Train
- Percent of portfolio: 8.8%
Lindsell Train remains upbeat on World Wrestling Entertainment (WWE, $47.75), its seventh-largest holding. The London hedge fund ($34 billion AUM) increased its stake in the entertainment company by 110,000 shares, or less than 1%, in Q3.
The hedge fund now holds a total of 11.2 million shares worth almost $631 million as of Sept. 30. With 14.8% of WWE's shares outstanding, Lindsell Train is the company's second-largest stockholder after Vincent McMahon. The fund has owned WWE since the fourth quarter of 2009.
Lindsell Train and other WWE bulls can point to the company's unique strategic position.
"WWE dominates the wrestling category, with deep customer affinities for characters created across decades," writes Needham analyst Laura Martin (Buy). "It owns all the characters it creates in perpetuity, making it difficult for wrestlers to leave. It pays its wrestlers as independent contractors, which makes it easier to substitute talent to maximize economics. Finally, it scripts fight outcomes, so it can balance audience affinity with economic upside to WWE. We can not think of another media property that has been so dominant in its genre over so many decades."
The Street gives WWE a consensus recommendation of Buy, albeit with tempered conviction. Five analysts call the stock a Strong Buy, one says Buy, five have it at Hold and one rates WWE at Strong Sell.
- Market value: $273.3 million
- Billionaire investor: Canyon Capital Advisors
- Percent of portfolio: 9.8%
Canyon Capital Advisors ($20.9 billion AUM) has propelled risk-taking founders Joshua Friedman and Mitchell Julis to Forbes' list of highest-earning hedge fund millionaires.
But whether their increasingly large bet on chipmaker Xilinx (XLNX, $215.00) adds to their respective fortunes is now in the hands of Chinese regulators.
Advanced Micro Devices (AMD) and Xilinx announced a deal in October 2020 in which AMD would acquire the latter in an all-stock transaction valued at $35 billion. The proposed merger has already passed muster with U.S., U.K. and E.U. antitrust authorities.
So it's understandable if Canyon Capital is getting a bit antsy waiting for the green light from China's review process. After all, the Los Angeles hedge fund has been betting on this merger since the beginning.
Canyon first bought shares in Xilinx in the fourth quarter of 2020, at which point the stake accounted for 4.6% of the fund's portfolio value. Canyon then upped its XLNX position in each of the following three quarters — the most recent being a 3% increase in Q3.
The hedge fund now owns 1.8 million XLNX shares worth $273.3 million as of Sept. 30. At 9.8% of the portfolio, XLNX is second among Canyon's top stock picks. Only Dell Technologies (DELL), at 11.0% of the fund, is larger.
- Market value: $156.5 million
- Billionaire investor: Quinn Opportunity Partners
- Percent of portfolio: 9.9%
Quinn Opportunity Partners boosted its Verizon (VZ, $52.77) stake by 11% in Q3 to ensure the telecommunications giant remained its top holding.
The Charlottesville, North Carolina-based hedge fund ($1.6 billion AUM) bought another 297,000 VZ shares, raising its total to almost 2.9 million. The position was worth $156.5 million as of Sept. 30.
The fund's Verizon investment dates back to the first quarter of 2018, and while we don't know Quinn Opportunity's original cost basis, VZ's chart since then is underwhelming. Including dividends, from March 30, 2018 through Dec. 20, 2021, VZ's total return comes to 31%. By comparison, the S&P 500 generated a total return of 85% over the same span.
Verizon, of course, is a defensive dividend machine, having increased its payout annually for 17 consecutive years. The Street is less than enamored with the stock in the shorter and more intermediate term, however, giving VZ a consensus recommendation of Hold.
Although Verizon is the largest wireless carrier in the U.S. by subscriber count — and also boasts the highest margins — it continues to be dogged by worries about the threat posed by T-Mobile US (TMUS) following its 2020 merger with Sprint, notes William Blair analyst Jim Breen, who rates shares at Market Perform (the equivalent of Hold).
Breen does however recommend VZ as an "attractive defensive stock for investors seeking income and capital preservation."
- Market value: $1.9 billion
- Billionaire investor: Daniel Sundheim (D1 Capital Partners)
- Percent of portfolio: 10.4%
Daniel Sundheim's D1 Capital Partners ($34 billion AUM) boosted its stake in Expedia (EXPE, $182.42) by 52% in the third quarter.
The New York hedge fund now owns 11.5 million shares in the online travel company, worth nearly $2 billion, as of Sept. 30. At 10.4% of the portfolio — up from 8.1% as of the end of Q2 — Expedia is D1 Capital Partners' largest holding. And with 7.6% of EXPE's shares outstanding, D1 Capital Partners is Expedia's second-largest stockholder after Vanguard.
As the former chief investment officer at hedge fund Viking Global Investors, Sundheim was well-known on the Street when he launched D1 Capital in 2018. An estimated net worth of $2.5 billion has since added to Sundheim's reputation.
Analysts as a group embrace the hedge fund manager's bullish outlook on EXPE stock, giving it a consensus recommendation of Buy. Be forewarned, however, that a majority of them remain on the sidelines. Of the 31 analysts covering EXPE tracked by S&P Global Market Intelligence, nine rate it at Strong Buy, three say Buy and 19 call it a Hold.
Analysts who remain cautious on the name cite the uncertain path of the pandemic and its potential impact on travel and leisure industries.
- Market value: $4.4 billion
- Billionaire investor: Chris Hohn (TCI Fund Management)
- Percent of portfolio: 10.6%
Activist investor Chris Hohn has made quite a name for himself with The Children's Investment Fund Management – more commonly known as TCI Fund Management. Indeed, the London-based investor has parlayed his many stock picks into a personal net worth of $5.9 billion, per Forbes.
TCI, with more than $41.6 billion in managed securities, made a handful of buys during the third quarter, and none was more significant than upping its Visa (V, $217.96) stake by 41%, or 5.9 million shares. TCI now holds a total of 19.9 million shares in the Dow stock, worth $4.4 billion as of Sept. 30. At 10.6% of the portfolio, up from 8.2% a quarter ago, Visa is TCI's fifth-largest holding.
Visa's appeal is easy to understand. Analysts' consensus recommendation stands at Strong Buy. As the world's largest payments network, Visa has unique advantages amid the explosive growth in cashless transactions, bulls say.
"We are highly attracted to Visa's powerful brand, vast global acceptance network and strong business model," writes Oppenheimer analyst Dominick Gabriele, who rates V at Outperform (the equivalent of Buy). "The company is well positioned to benefit from the long-term secular shift from paper currency to electronic payments, consumer spending growth and increased globalization."
It also helps that Visa is one of the 30 best stocks of the past 30 years, as well as one of hedge funds' favorite stocks. The blue chip also rates as a pick of Warren Buffett's Berkshire Hathaway (BRK.B), which owns 9.6 million shares.
10. Taiwan Semiconductor Manufacturing
- Market value: $5.2 billion
- Billionaire investor: Sanders Capital
- Percent of portfolio: 10.7%
Taiwan Semiconductor Manufacturing (TSM, $121.30) stock is lagging the broader market for the year-to-date, hampered by the global chip shortage. Sanders Capital, however, has taken TSM's disappointing performance as an opportunity to buy on weakness.
The New York hedge fund ($54.2 billion AUM) raised its TSM stake by 3%, or 1.5 million shares, in Q3. Sanders now owns a total of 41.9 million shares in the semiconductor giant, worth $5.2 billion as of Sept. 30. At 10.7% of the portfolio, down from 11.1% in Q2, TSM is the hedge fund's largest position.
The second-largest semiconductor manufacturer by market value (after Nvidia) and revenue (after Intel), TSM is perhaps the single-most important source of chips in the world. Indeed, TSM claims a total global foundry market share of 53%.
TSM, which happens to be one of the 30 best stocks of the past 30 years, gets a consensus recommendation of Buy, according to S&P Global Market Intelligence. Five analysts rate shares at Strong Buy, three say Buy and three have them at Hold.
Part of the bull case on TSM rests on the valuation. Shares trade at less than 22 times the Street's 2022 EPS estimate — even as analysts forecast the company to generate average annual EPS growth of more than 16% over the next three to five years.
9. Berkshire Hathaway
- Market value: $182.7 million
- Billionaire investor: Metropolis Capital
- Percent of portfolio: 10.8%
After all, BRK.B's chairman and CEO is perhaps the greatest long-term investor of all time. A stake in Berkshire Hathaway essentially offloads some of a billionaire investor's work onto Buffett.
Metropolis Capital, for one, likes to follow Buffett's lead. The Amersham, England-based hedge fund ($1.4 billion AUM) increased its BRK.B position by 8%, or 49,709 shares, in Q3. With 669,348 shares worth $182.7 million as of Sept. 30, BRK.B is the fund's third-largest holding – behind Google parent Alphabet (GOOGL) and Visa (V).
Metropolis has owned BRK.B since the fourth quarter of 2018, but it has proven to be a disappointment. Shares in Buffett's holding company are up 53% over the past three years, vs. a gain of 94% for the S&P 500.
Judging Warren Buffett over a period of time as short as three years is pointless, of course. His stockpicking acumen reveals itself over the long haul. That's why BRK.B ranks as the 12th best global stock of the past three decades.
Analysts have faith in Uncle Warren too, giving BRK.B a consensus recommendation of Buy.
8. Bausch Health Companies
- Market value: $260.2 million
- Billionaire investor: Steven Tananbaum (Goldentree Asset Management)
- Percent of portfolio: 11.0%
Steven Tananbaum, who founded Goldentree Asset Management ($40.5 billion AUM) in 2000, is perhaps best known for investing in distressed debt. But the famed hedge fund manager has a keen eye for value in equities, as well, and he sees plenty on offer in Bausch Health Companies (BHC, $27.60).
Tananbaum first bought BHC stock in the first quarter of 2018, telling Barron's the company formerly known as Valeant Pharmaceuticals was so widely hated by investors that they were missing some of its underlying jewels of assets.
The hedge fund upped its BHC stake by 14%, or 1.2 million shares, in Q3, bringing its total holdings up to 9.3 million shares worth $260.2 million as of Sept. 30. At 11% of the portfolio, up from 6.4% the prior quarter, BHC is Goldentree's second-largest position after California Resources (CRC).
The Street gives shares in the pharmaceutical company a consensus recommendation of Buy. Of the 13 analysts covering BHC tracked by S&P Global Market Intelligence, five say Strong Buy, three call it a Buy, four have it at Hold and one rates it at Sell.
As for the valuation, the stock trades at just 9.7 times the Street's 2022 EPS estimate. Analysts forecast average annual EPS growth of 4.1% over the next three to five years.
- Market value: $1.2 billion
- Billionaire investor: Eric Mandelblatt and Gaurav Kapadia (Soroban Capital Partners)
- Percent of portfolio: 11.0%
Eric Mandelblatt and Gaurav Kapadia of Soroban Capital Partners ($11.9 billion AUM) must feel good about the economic outlook. After all, few sectors offer as much direct exposure to an uptick in activity across the economy than railroads — and Soroban just raised its bet on one of the biggest ones in the U.S.
The New York hedge fund increased its stake in CSX (CSX, $36.08) by 22%, or 7.3 million shares, in Q3. At 11% of the portfolio, up from 8.7% the prior quarter, CSX is Soroban's second-largest position after Microsoft (MSFT). The fund's 39.6 million shares in CSX were worth $1.2 billion as of Sept. 30.
Moreover, Soroban owns 1.8% of CSX's shares outstanding, making it the transportation company's fifth-largest investor.
The Street gives CSX a consensus recommendation of Buy, albeit with mixed conviction. Thirteen analysts rate shares at Strong Buy, five say Buy, seven have them at Hold, one says Sell and one says Strong Sell.
However, thanks in part to easy comparisons, EPS are forecast to grow at an average annual rate of 17% over the next three to five years. Meanwhile, shares trade at a reasonable 20.1 times analysts' 2022 EPS estimate.
- Market value: $649.9 million
- Billionaire investor: Rothschild & Company Wealth Management UK
- Percent of portfolio: 11.0%
Rothschild & Company Wealth Management UK ($16.4 billion AUM) is increasingly bullish on Moody's (MCO, $394.97). The London-based hedge fund first bought shares in early 2019 and has gradually built up its stake ever since.
Moody's also happens to be one of Warren Buffett's favorite stocks. Berkshire Hathaway, of which Buffett is chairman and CEO, has held a stake in the credit ratings and risk analytics company for more than 20 years.
Rothschild in Q3 increased its MCO stake by 1%, or 24,281 shares, to bring its total position up to 1.8 million shares worth nearly $650 million as of Sept. 30. At 11% of the portfolio, down from 11.2% in Q2, MCO is third among the hedge fund's top stock picks.
By the way, Rothschild appears to keep tabs on what Warren Buffett is up to. Its top two holdings ahead of Moody's are American Express (AXP), which Buffett has owned since 1963, and Berkshire Hathaway (BRK.B) itself.
Analysts are likewise bullish on MCO, giving it a consensus recommendation of Buy, per S&P Global Market Intelligence.
"The company has an impressive track record, with historical compound annual growth rates for sales and EPS in the low double-digit range," writes Argus Research analyst John Eade (Buy). "We expect Moody's to benefit over the long run from the secular trends of global GDP growth and debt market disintermediation."
- Market value: $148 million
- Billionaire investor: Dorsey Asset Management
- Percent of portfolio: 13.0%
Digital mobile payments are one of the hottest areas of growth in financial tech. Although the sector offers no shortage of promising new names, old-timer PayPal (PYPL, $191.68) still gets plenty of analyst — and billionaire investor — love.
Explosive growth in cashless transactions, the monetization of its Venmo property and incremental revenue growth in its Xoom business all help make for a compelling bull case on PYPL, analysts say.
True, third-quarter results were "lackluster," in the words of Raymond James analyst John Davis (Outperform), but both he and the Street remain steadfast in the long-term case for PYPL stock.
"Simply put, PayPal should continue to benefit from the secular shift to e-commerce that should drive a roughly 20% revenue compound annual growth rate (CAGR)," Davis writes.
Dorsey Asset Management ($1.3 billion AUM), is embracing the bull case on PYPL in a big way. The Chicago-based hedge fund increased its stake in PayPal by another 3%, or 19,865 shares, in Q3. That followed an increase of 17%, or 83,614 shares, in Q2, and an 81% increase, or 209,025 shares, in the first quarter.
Dorsey now holds 568,745 shares in PYPL worth $148 million as of Sept 30. At 13.0% of the portfolio, up from 12.1% last quarter, the venerable payments firm is Dorsey's fourth-largest holding.
The Street gives PYPL — one of hedge funds' favorite stocks to buy — a consensus recommendation of Buy.
- Market value: $138 million
- Billionaire investor: Andrew Law (Caxton Associates)
- Percent of portfolio: 15.3%
Bruce Kovner, with an estimated net worth of $6.2 billion, retired from the hedge fund he founded a decade ago, but Caxton Associates still benefits from its close association with his legendary name.
Meanwhile, Kovner's successor Andrew Law is hardly a pauper himself. His own net worth is estimated at around $1 billion, thanks to his major ownership stake in Caxton ($25.7 billion AUM).
As for Law's interest in Tesla (TSLA, $1,008.87), perhaps it's an example of billionaire "game knows game." Elon Musk, the electric vehicle maker's founder and CEO, is worth something like $260 billion, according to Forbes. Apparently Law expects that figure to keep going up.
Caxton, with offices in London, New York, Singapore and Princeton, New Jersey, first bought stock in the electric vehicle maker in the second quarter of 2021, picking up 82,468 shares worth $56 million. The investment immediately became the fund's fifth-largest position, accounting for 6.2% of its portfolio value.
But Caxton hardly stopped there. In Q3, the hedge fund more than doubled its stake, buying another 95,522 shares, or an increase of 115%. With 177,990 shares worth more than $138 million as of Sept. 30, TSLA is now the hedge fund's largest position by a wide margin.
The Street's consensus recommendation on TSLA stands at Hold, however, as analysts debate valuation and other issues.
- Market value: $793.2 million
- Billionaire investor: Windacre Partnership
- Percent of portfolio: 16.8%
Windacre Partnership ($5.8 billion AUM) runs a concentrated portfolio of just 12 stocks, so a 7% increase to its stake in Google parent Alphabet (GOOGL, $2,928.30) really tends to stick out.
The Houston hedge fund bought another 20,200 shares in the tech giant in Q3, bringing its total position up to 296,700 shares, worth more than $793 million as of Sept. 30. GOOGL is Windacre's largest investment at 16.8% of the portfolio, up from 14.9% in Q2.
The bull case on Alphabet is pretty easy to sum up. Thanks to its domination in search and other web services, Google forms a triopoly with Meta Platforms' (FB) Facebook and Amazon.com (AMZN) in the relentlessly growing market for digital advertising. Digital ad spending in the U.S. alone is forecast to rise 38% this year to $211 billion, according to market research firm eMarketer.
"While Alphabet has often been criticized as a 'Johnny One Note' for its dependence on digital advertising, the powerful ramp-up in digital advertising as economies have reopened, combined with Google's dominant position, has certainly been a financial plus that shows little sign of weakening," writes Argus Research analyst Joseph Bonner (Buy).
Bonner is in the majority on the Street, which gives GOOGL a consensus recommendation of Strong Buy. And while past performance is not indicative of future returns, it's worth knowing that Alphabet routinely makes the list of hedge funds' favorite stocks to buy, and also counts as one of the 30 best stocks of the past 30 years.
2. Ginkgo Bioworks
- Market value: $778.3 million
- Billionaire investor: Anchorage Capital Group
- Percent of portfolio: 20.2%
Biotechnology company Ginkgo Bioworks (DNA, $11.07) went public in September after completing a SPAC merger, and some billionaires couldn't wait to get a hold of shares.
Anchorage Capital Group ($30.6 billion AUM) initiated a position of 67,151,368 shares in Q3, worth $778.3 million as of Sept. 30. The purchases made DNA the New York hedge fund's second-largest holding.
Jefferies analyst Laurence Alexander initiated coverage of DNA in late November at Buy, citing the company's competitive advantages in a fast-growing field.
"With $1.7 billion of cash on hand and a unique platform for scaling the biological engineering of microorganisms for industrial, consumer and pharma applications, Ginkgo should be able to leverage secular trends in favor of synthetic biology into a $1 billion sales platform in 2025 coupled with equity stakes worth more than $1 billion," Alexander writes.
Only four analysts cover DNA, but they are similarly bullish, giving it a consensus recommendation of Strong Buy. Three analysts rate shares at Strong Buy and one says Buy. Their average target price of $14.17 gives DNA stock implied upside of 28% in the next 12 months or so.
- Market value: $2.1 billion
- Billionaire investor: Bill Ackman (Pershing Square Capital Management)
- Percent of portfolio: 21.9%
Pershing Square Capital Management ($9.5 billion in managed securities) first took a position in Lowe's (LOW, $249.70) in the second quarter of 2018. Bill Ackman, the hedge fund's billionaire manager, has been outspoken in his LOW bullishness ever since, and it's been paying off.
Shares in the nation's second-largest home improvement retailer — a continuing beneficiary of the pandemic and hot housing market — are up 55% for the year-to-date. That's more than double the performance of the S&P 500.
Ackman has been going along for the ride, buying another 95,951 LOW shares in Q3. Although that was less than a 1% increase to the stake, which now stands at 10.2 million shares, the $2.1 billion position is Ackman's largest. LOW accounts for 21.9% of Pershing Square's portfolio, up from 18.4% in Q2.
The Street shares Ackman's vision for Lowe's, giving the stock a consensus recommendation of Buy.
"We believe the investment case on LOW remains compelling," writes UBS Global Research analyst Michael Lasser (Buy). "LOW is able to drive market share gains in any macro backdrop and has several levers to expand operating margins independent of the sales backdrop."
Of the 31 analysts covering LOW tracked by S&P Global Market Intelligence, 17 rate it at Strong Buy, five say Buy, eight call it a Hold and one says Strong Sell.