Almost everyone loves a bargain. That’s true no matter how much money you have. Even billionaires sometimes go on a bargain hunt.
We saw an example of this in the first quarter of 2024. Billionaire Ken Griffin bought several stocks for his Citadel hedge fund – and you can bet he expected a good return on his investments. Here are three stocks that Griffin bought in the first quarter that are among Citadel’s biggest holdings.
1. Hess
Hes (NYSE: HES) ranked as Citadel’s third largest holding company at the end of the first quarter. This high ranking was due to Griffin’s aggressive purchase of oil stocks. During the first quarter, he bought more than 8.8 million shares of Hess, increasing Citadel’s stake by nearly 18x.
Griffin probably liked Hess’s appreciation. The stock currently trades at 15.3 times forward earnings. Future profit figures were at a similar level during the first quarter.
However, I suspect that the billionaire’s biggest reason for buying more Hess stock was that he was betting on the company’s impending takeover by Chevron Get on. Hess shareholders recently approved the deal. If the transaction closes, Citadel and other Hess shareholders will receive a premium of nearly 17% to the current share price.
2. Amazon
Amazon (NASDAQ: AMZN) was already a top position for Citadel going into the first quarter. It was the hedge fund’s fifth-largest position at the end of the quarter, thanks to Griffin’s purchase of more than 352,000 additional shares.
Based on many commonly used valuation metrics, Amazon doesn’t seem like much of a bargain. For example, the shares trade at more than 38 times forward earnings and almost 8.6 times book value.
However, the company is notoriously difficult to value on earnings-based measures because it has invested heavily to drive future growth. Now, however, Amazon is focused on increasing its profitability. The stock also has a lower price-to-earnings ratio than it has had for much of the past decade.
3. Bank of America
bank of America (NYSE: BAC) ranked behind Amazon as Citadel’s sixth-largest holding at the end of the first quarter. Shares of the big banks fell to this spot after Griffin increased his hedge fund’s stake in BofA by nearly 390% in the first quarter.
After falling significantly through the first three quarters of 2023, Bank of America shares have rebounded strongly. It’s beating the S&P500 so far this year handy with a gain of over 17%.
However, the share is still attractively valued. The forward price-to-earnings ratio of less than 12.3 is well below the S&P 500’s forward earnings multiple of 21.1 and the average of 15.5 for the S&P 500 financial sector.
Are these stocks still a good choice?
We won’t know if Griffin continued to buy these shares in the second quarter until Citadel’s 13F filing in August. However, I think all three are still good choices.
There’s still a chance that Chevron’s acquisition of Hess could be derailed. However, Chevron is confident the deal will close later in 2024. I expect the transaction will close and that investors who buy Hess stock at the current price will have the opportunity to make a profit relatively quickly.
I like Amazon’s growth prospects. Amazon Web Services (AWS) should benefit greatly as organizations build generative AI applications in the cloud. Advertising has emerged as a major new growth driver for Amazon. I predict the company’s profits will continue to grow.
As mentioned earlier, Bank of America’s valuation is a big plus. I consider the company one of the most important technological innovators in the banking sector. BofA’s forward dividend yield of over 2.4% should also boost the stock’s total return.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Amazon, Bank of America and Chevron. The Motley Fool holds positions in and recommends Amazon, Bank of America and Chevron. The Motley Fool has a disclosure policy.
Billionaire Ken Griffin Goes Bargain Hunting: 3 Stocks He Just Bought was originally published by The Motley Fool
