These may not be the hot growth stocks you typically envision.
Many investors keep a close eye on the stocks that billionaire investors are adding to their portfolios. After all, these individuals have risen to billionaires, and they likely have insights on what it takes to succeed in the market.
Professional money managers have various goals and strategies, which makes it impractical for regular investors to mimic an entire billionaire’s portfolio. However, it can be beneficial to draw inspiration from the investment moves of these billionaires, especially if those stocks fit into your individual portfolio needs.
While money managers don’t usually disclose exactly when to buy or sell, they do report their holdings quarterly. Recently, a prominent billionaire has purchased shares in Amazon, Restaurant Brands International, and Whirlpool. Let’s delve into why these could be solid picks for investors.
1. Amazon: AI and More
It’s not hard to understand the appeal of Amazon for billionaires. This e-commerce leader has developed a robust artificial intelligence (AI) segment through Amazon Web Services (AWS), its cloud computing arm.
Despite being the second largest company worldwide in terms of sales, Amazon maintains impressive double-digit growth rates. Sales increased by 13% in the second quarter of the previous year, driven by nearly 18% growth from AWS. E-commerce sales were also higher than expected, rising 11% as consumers rushed to purchase items likely to see price increases due to tariffs. Advertising revenue soared by 23%, marking it as the fastest growing segment.
Moreover, Amazon is quite profitable. Operating profit climbed from $14.7 billion last year to $19.2 billion this year, surpassing expectations.
The current pricing of Amazon adds to its appeal. Traditionally traded at a premium, its price-to-earnings (P/E) ratio is now around 34, significantly lower than the five-year average of 76.
Billionaire Bill Ackman of Pershing Square Capital acquired 5,823,316 shares valued at about $1.2 billion last quarter—joining the ranks of other notable billionaires like Warren Buffett.
It might take a bit of time for Amazon to return to market-leading performance, but many billionaires see a tremendous opportunity here. With a track record of reliable growth, Amazon remains a versatile stock suitable for various portfolios.
2. Restaurant Brands: Strong Models and Dividends
Restaurant Brands International operates several fast food franchises, including Burger King, Tim Hortons, Popeyes, and Firehouse Subs. Among these, Burger King stands out with 19,700 locations worldwide, contributing to over 32,000 locations across all brands.
These restaurants operate as franchises, creating solid cash flow models. The company’s strategy of selling franchises, rather than opening its own restaurants or purchasing food, helps keep capital expenditures low while consistently collecting franchise fees. This model attracts value investors.
Given that they operate in the fast food sector, these restaurants tend to perform well even in challenging economic times. In the last quarter, total restaurant sales increased by 5.3% year-on-year, while revenue surged by 16%.
Investor Stanley Druckenmiller from Duquesne Management bought 751,100 shares of Restaurant Brands for around $41 million last quarter. Bill Ackman also holds a stake in this company, which he has supported since 2012, contributing to its current portfolio significance.
Restaurant Brands is perceived as undervalued, and it offers a generous dividend yield of 3.8%, appealing to those seeking passive income. For value-oriented investors or those on the lookout for robust dividend stocks, Restaurant Brands International is a great match.
3. Whirlpool: A U.S. Manufacturer
Whirlpool is a home appliance manufacturer in the U.S., known for brands like Maytag and KitchenAid. Its performance is closely tied to the housing market, which has faced pressures from rising interest rates.
However, there may be a turnaround on the horizon. In the same way that some billionaires are investing in home builders, Whirlpool is positioned to benefit from a revival in home buying and the demand for new appliances that often accompany it, along with a lucrative $2 billion builder business.
High tariffs on foreign competition also provide Whirlpool with a competitive edge. While the company has encountered some challenges due to tariffs aimed at protecting U.S. manufacturing, it stands to gain in the long run.
Currently, Whirlpool shares are relatively inexpensive, trading at a P/E ratio of 11. Billionaire hedge fund manager David Tepper of Appaloosa purchased 26,092 shares, valued at about $27 million last quarter. Nonetheless, potential investors should be aware of the risks associated with Whirlpool, as it may take time for profit margins to stabilize, particularly after the company cut its dividends in half to conserve cash.
