When choosing stocks, investors sometimes like to follow the example of billionaires – often despite not knowing the motivations behind such investments. But these investment titans may have bought shares at a lower valuation. In other cases, they can count on years of dividend profits that are less meaningful to an investor today.
Ultimately, billionaires have their own reasons for buying and holding specific stocks. However, some of the investments – especially if purchased recently – could be suitable for smaller investors. Now let’s look at three such stocks.
Alphabet
Amid the increasing interest in AI, Google is its parent company Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) has attracted the interest of billionaires such as Bill Ackman of Pershing Square Capital.
Recent public interest in AI has been driven mainly by other companies. When the public saw the potential of OpenAI’s ChatGPT, investors turned to Alphabet, thinking the longtime AI leader had fallen behind its competitors.
However, Alphabet has responded with its own generative AI product in Gemini. Moreover, it has long been at the forefront of AI, having first introduced AI to its search engine in 2001. In 2016, it became an AI-first company and today drives AI innovation through Google DeepMind.
Additionally, the $108 billion in liquidity gives the company the resources it needs to stay on top. With a price-to-earnings (P/E) ratio of 27, the stock also has the lowest earnings multiple among tech megacaps, a feature that likely caught Ackman’s attention and could deliver higher returns as it catches up to its peers.
Alibaba.com
Another intriguing share is Alibaba.com (NYSE: BABA), which attracted the interest of billionaire David Tepper’s Appaloosa Management. Although it is the largest e-commerce conglomerate in China, its stock has suffered from the political turmoil. Alibaba is an American Depositary Receipt and has no actual interest in Alibaba.
Such arrangements are only a cause for concern if the home country has deteriorating relations with the US. Unfortunately, this is the case with Alibaba, and as a result it has lost value since its IPO in 2014.
Still, the US and China have a lot to lose if such a settlement fails, making it more likely that Alibaba shares will survive.
Alibaba’s revenue increased nearly eighteenfold between fiscal 2014 and 2024. Moreover, the stock has traded within a range over the past two years. With rising profits and a price-to-earnings ratio of just 17, it sells at a huge discount to similar companies in other countries, such as Amazon.
Ultimately, Alibaba is not suitable for risk-averse investors. But if you can tolerate the political risk, stocks can become a great opportunity to buy an e-commerce conglomerate at a huge discount.
Snowflake
Snowflake (NYSE: SNOW) may be one of billionaire Warren Buffett’s more surprising choices Berkshire Hathaway as Buffett has historically avoided IPO investments.
Nevertheless, investors should keep an eye on Snowflake for its leadership in the data cloud market. This product allows organizations to manage, store and secure data in one central, cloud-based repository. The software is so compelling that Amazon has offered it to some of its cloud customers, despite selling its own data cloud product.
Granted, investors had already valued the stock highly before earnings fell, and a sudden change at the CEO level left investors confused. However, in the first three months of fiscal 2025 (ending April 30), its net retention rate – a measure of recurring revenue from existing customers – was an impressive 128%, as Snowflake’s usage-based revenue model sometimes forces customers to cash out spend more money on the platform.
Furthermore, amid a declining share price, its price-to-sales ratio (P/S) is at a record low of 14. So buying during this period of relative struggle could pay off for investors as more customers take advantage of the data cloud. Product.
Should you invest €1,000 in Alphabet now?
Before you buy shares in Alphabet, consider the following:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Alphabet wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $723,729!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns June 24, 2024
Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Will Healy has positions in Berkshire Hathaway and Snowflake. The Motley Fool holds positions in and recommends Alphabet, Amazon, Berkshire Hathaway, and Snowflake. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
3 No-Brainer Billionaire Stocks to Buy Now was originally published by The Motley Fool
