Billionaires invest significant resources in researching their investments, which is why it can be beneficial for others to take note of their choices. While the wealthy elite may not always choose the most optimal investments, and your objectives may differ from theirs, it is still a valuable method for discovering well-established companies with fair valuations.
These three stocks are owned by a significant number of billionaires, and they have strong underlying fundamentals to back up their ownership.
1. Amazon
Amazon ( AMZN -0.08% ) It is a favored option among billionaires and hedge fund managers such as Ken Griffin, Daniel Loeb, and Andreas Halvorsen, who hold significant stakes in the company. The stock is valued for its consistent revenue growth, varied business operations, strong cash flow, as well as broad competitive advantage that should safeguard its competitive standing.
Amazon’s revenue over the trailing twelve months. data by YCharts; TTM stands for the past 12 months.
Amazon is encountering rising competition from competitors such as Shopify ( SHOP 2.42% ) The fluctuation in online shopping demand was influenced by the pandemic, but the overall outlook for its main e-commerce operations remains positive.
The company holds a significant market share that has been steadily growing in recent years. The percentage of retail spending allocated to e-commerce is on the rise, and as the current market leader, the company is poised to take advantage of this trend.
Picture credit: Getty Images.
Amazon Web Services (AWS) holds a top position in cloud infrastructure and is known for its Prime membership, which includes a popular media platform. While operating in competitive markets, both services help diversify the company’s revenue streams. Additionally, they could serve as valuable data sources as major tech companies advance and refine their AI software.
While the stock’s price-to-free-cash-flow ratio of 36 may seem high to certain investors, Amazon experienced a significant increase of over 75% in its operating earnings and cash flow in the last quarter. The potential for ongoing earnings growth could validate this valuation for investors with a long-term perspective.
2. Visa
Visa ( V 0.39% ) The payment processing company is a significant investment for prominent figures such as Warren Buffett and hedge fund manager Steven Schonfeld. Despite being a well-established and familiar brand, it may not be widely acknowledged by many investors. fintech stock .
In the past few years, there has been a notable transformation in the payment processing industry. The introduction of creative solutions has enhanced the quickness and effectiveness of transactions, resulting in reduced expenses. While disruptions usually pose a challenge to established companies, Visa has managed to maintain its leading position in the sector. It currently commands around half of the market share, subject to the specific methodology and data references being used.
Visa leverages the advantages of economies of scale, making it challenging for new competitors to enter the market. Its size enables it to invest more in product innovation and strategic acquisitions compared to other players. The company is efficiently managed, leading to consistent growth in revenue and cash flow.
Revenue generated in the last twelve months. data by YCharts.
Rather than avoiding the possibility of causing disturbance or interruption blockchain Visa is actively embracing new technologies by supporting both internal and external projects aimed at improving its payment solutions through the use of innovative software. This initiative has led to advancements in various financial services, including international transactions, account fee simplification, central bank digital currencies, and more. cryptocurrency payment cards that are connected or associated with something.
Identifying a large established company that generates substantial cash flow and stands to gain from industry changes is challenging. This stock has a forward P/E ratio below 25 and offers a modest dividend yield, making it attractive for investors with a long-term perspective.
3. Home Depot
Home Depot ( HD 1.60% ) Dominating the home-improvement retail sector with a market share of almost 30%, this company has attracted the interest of billionaire investors David Shaw and Ken Fisher due to its strong position and promising outlook.
The large size of Home Depot gives it significant competitive benefits. With numerous stores spread across different locations, the company can efficiently manage its supply chain and draw in more customers. Additionally, its scale allows Home Depot to have more bargaining power when dealing with suppliers, enabling them to keep prices low and making it challenging for rivals to offer lower prices.
The home improvement sector is subject to changes based on consumer trust, interest rates, and the real estate market. This can lead to periods of reduced activity for Home Depot, like the current one. Despite this, there is an overall optimistic outlook and identifiable factors that will drive growth in the future.
Free cash flow in high definition data by YCharts.
The rate of homeownership has rebounded since hitting a low point in 2015. worldwide economic downturn, However, the percentage of young adults owning homes is currently at a low level compared to historical trends. This lack of ownership is expected to result in a build-up of demand in the coming years, as a significant number of adults are likely to become homeowners through inheritance or better financial situations. This situation is anticipated to boost the home-improvement industry, and investors in Home Depot are expected to profit from this development.
Similar to Visa, Home Depot has an affordable valuation, with a forward price-to-earnings ratio of under 25. Additionally, it offers a compelling dividend yield of 2.6%, providing investors with a modest cash payout as well as the opportunity for long-term growth in value.
