Given the unpredictable nature of the stock market, investors are perpetually on the hunt for insights, advice, and direction. A logical source for such information is the portfolios of billionaire asset managers. It’s a sensible approach, provided you conduct your own thorough research as well. After all, your investment strategy and asset allocation will likely differ from that of Warren Buffett.
Among the stocks currently favored by some asset managers, and that might inspire your next significant investment, are Amazon (-0.61%) and PayPal Holdings (1.52%). Here’s why they stand out:
1. Amazon: An obvious choice for growth
Amazon is a staple in the portfolios of many billionaire asset managers, including Warren Buffett, Larry Fink of BlackRock, and Ken Fisher of Fisher Asset Management. Its appeal spans various investing styles due to its potential for growth paired with relatively low risk, supported by its strong brand and assets.
The e-commerce sector remains robust, with Amazon commanding over a third of the U.S. market. In the second quarter, its U.S. business grew by 9%, with international growth at 10%. CEO Andy Jassy highlighted that despite strong loyalty from Prime members, inflation has prompted consumers to opt for cheaper products, affecting overall sales growth. Once inflation eases, these already impressive figures could improve further.
A major buzz surrounds generative artificial intelligence (AI), where Amazon holds a competitive advantage as a leader in cloud computing services, capturing over 30% of the market. Amazon Web Services (AWS) clients seek flexibility, and Amazon provides a spectrum of services catering to both businesses with in-house developers and smaller clients needing user-friendly solutions.
Amazon points out that only a fraction of IT spending currently goes to the cloud, but a significant shift is underway, positioning it to benefit. The company reports that its generative AI business already boasts a “multibillion-dollar revenue run rate.”
In addition to its ventures in advertising and streaming, Amazon’s stock is trading near its lowest valuation in years, making it a growth opportunity that appeals to value investors as well.
2. PayPal: An obvious choice for value
PayPal Holdings has faced significant challenges in recent years, losing its lead in digital payments as new competitors emerged, resulting in a 74% decline in its stock over the past three years.
However, with a new CEO at the helm, PayPal is making strides. The company boasts a strong brand, critical partnerships with millions of merchants and customers, and enormous potential, making it appear more like a bargain than a value trap to billionaire investors.
In the second quarter, PayPal’s revenue rose by 9% on a currency-neutral basis, surpassing the 7% guidance. Its operating margin increased by 1.3 percentage points to 16.8%. Recently, profitability and cash flow have been concerns for PayPal, but it showed improvement in the second quarter with earnings per share (EPS) rising 17% year over year and adjusted free cash flow reaching $1.1 billion.
New CEO Alex Chriss is steering the company toward a sharper focus and innovation. Billionaire hedge fund managers who hold PayPal stock in their portfolios include Ken Griffin of Citadel Advisors, John Overdeck and David Siegel of Two Sigma Investments, and Israel Englander of Millennium Management.
At its current price, PayPal’s stock is valued at 17 times trailing-12-month earnings, which seems like a bargain given its brand strength and opportunities. If you had invested in PayPal when it was even lower, similar to some of the billionaires who own it, you would have already seen a 21% increase in your investment since the second-quarter earnings release. However, it’s not too late to invest; PayPal is currently viewed as a compelling value buy.
