The Nasdaq Composite is up 60% since bottoming in late 2022, but recent buying activity from a select group of billionaires shows there are still plenty of stocks with room to run.
Third Point’s Daniel Loeb, Tiger Global Management’s Chase Coleman, and Appaloosa Management’s David Tepper have created incredible wealth through successful investing careers. These investors see opportunities in e-commerce, cloud services and video games.
Let’s take a look at the three stocks every investor has recently bought, and why they could deliver great returns for you, too.
1. Amazon
Third Point CEO and Chief Investment Officer Daniel Loeb has an estimated net worth of $3.3 billion, according to Forbes. Loeb is an opportunistic investor who looks for undervalued stocks that can rise based on specific catalysts. The company expanded its position in Amazon (NASDAQ: AMZN) in the first quarter, as the e-commerce leader continues to make progress in cutting costs to grow earnings per share (EPS).
Shares are up 47% in the past year and currently trade at nearly 40 times this year’s consensus earnings estimate. This valuation seems expensive, but Amazon’s profits are growing so fast now that the stock could actually look quite cheap in a few years.
Amazon has optimized its inventory in regional fulfillment centers to speed up delivery. It’s on a mission to rein in costs to maximize the company’s profit potential, and it’s working like a charm. The company’s profits tripled year over year in the first quarter and the company could continue to report substantial earnings growth as management is still working to identify areas to improve efficiency.
Loeb clearly likes Amazon’s dominant position in online shopping and its ability to maximize financial results. Wall Street analysts predict that Amazon’s earnings per share will reach $7.39 by 2026, and the company’s latest results indicate that it is on track to meet these estimates.
Amazon has always had a premium valuation due to recurring revenue streams from its loyal Prime members and the long runway for growth it has in its cloud computing business. If the stock is still trading at a price-to-earnings ratio of 39 two years from now, that would put the stock price at $288, implying an upside of 63%.
2. Take-Two interactive
Chase Coleman is the founder of Tiger Global and has an estimated net worth of $5.7 billion, according to Forbes. Tiger Global oversees approximately $50 billion in equity assets and has delivered superior returns for investors over the past two decades. One stock the company bought in the first quarter is a leading video game maker Take-Two interactive (NASDAQ: TTWO).
The video game industry has a long history of growth dating back to the 1970s. This is reflected in Take-Two’s share price performance, which has given investors a market-beating cumulative return of 674% over the past decade. Take-Two stock is on the rise as investors look for another blockbuster release next year.
Take-Twos Grand Theft Auto V has been a huge success and has sold approximately 200 million copies. The game offers players continuous updates and expansions allowing them to play all year round. That’s why investors are high on the company’s prospects as the next release in the long-running series is just around the corner.
Grand Theft Auto (GTA) V launch is scheduled for fall of calendar 2025, and there appears to be huge pent-up demand for the first GTA title in over ten years. The official trailer was released in December and has been viewed 192 million times to date Alphabet‘s YouTube.
Additionally, Take-Two has a number of other releases planned for the coming years, which are expected to boost earnings per share to $9.06 over the next three years, according to Wall Street consensus.
Even if Take-Two’s forward price-to-earnings ratio falls from an expensive 64 to a more reasonable multiple of 30, Wall Street’s forward EPS estimate would imply a stock price of $271, which is an increase of almost 70% from today stock price implies.
3. JD.com
JD.com (NASDAQ: JD) is one of the leading online retail companies in China and has annual revenues of more than $150 billion. The company has maintained steady sales over the past year in a weak economy, but slowing growth has left the stock far from its previous peak.
Billionaire hedge fund manager David Tepper, with a net worth of over $20 billion, is one of the most successful investors of recent decades. He took advantage of the lower stock price to acquire a stake in JD.com worth nearly $100 million in the first quarter. Tepper is clearly making a contrarian bet on one of the leaders in China’s internet sector, which has seen many of the top stocks fall to new 52-week lows over the past year due to increasing competition and sluggish consumer spending.
JD.com stock is already up about 45% from its 52-week low. The share price is responding to positive financial results, with the company’s first quarter revenue growing 7% year-on-year, driven by strong growth in the number of active customers.
The latest results could be the start of a trend. JD.com’s operational efficiency is a solid competitive advantage. The company provides logistics support to other major retailers, such as Walmartand continues to expand same-day delivery to more customers to strengthen its competitive position.
The stock’s price-to-earnings ratio of 9.1 is a bargain. As the company recovers, Wall Street analysts expect corporate earnings to reach $4.08 by 2026. A combination of healthy earnings growth and a higher price-to-earnings could lead to substantial gains from the current share price. The S&P500 the average price/earnings is 27, so JD.com could double in value if the stock’s valuation moves closer to the market average.
Should You Invest $1,000 in Amazon Now?
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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. John Ballard holds positions in JD.com. The Motley Fool holds positions in and recommends Alphabet, Amazon, JD.com, Take-Two Interactive Software, and Walmart. The Motley Fool has a disclosure policy.
3 Stocks to Buy Billionaires in the Wake of the Nasdaq Bull Market was originally published by The Motley Fool
