Following the stock picks of billionaire investors can be a good way to find winners in the stock market. After all, these investors acquired their wealth through a successful career in which they achieved above-average returns for their clients.
Three Motley Fool contributors have identified three promising stocks that some of the world’s billionaires are buying in the first quarter of 2024. This is why Amazon (NASDAQ: AMZN), Opendoor technologies (NASDAQ: OPEN)And Sea limited (NYSE:SE) could be attractive buys right now.
Artificial intelligence is the next growth engine
Jennifer Saibil (Amazon): Amazon stock has generated incredible returns over the past thirty years, but there’s still so much more to come from this perennial winner. Therefore, it should come as no surprise that it is owned by several billionaire investors.
Some examples include Israel Englander of Millennium Management, who owns 9.9 million shares at the end of the first quarter, and Ken Griffin of Citadel Advisors, who owns 6.6 million shares.
Amazon is the second-largest US company by revenue and the fifth-largest by market capitalization. But these billionaires know there’s much more to come.
The latest trend driving interest in Amazon stock is artificial intelligence (AI). Amazon announced major initiatives in generative AI last year and is working with top names in AI such as Nvidia and Anthropic to develop fundamental models (GPT-4 is a famous example) and provide high-level generative AI services.
Most of the talk about Amazon’s generative AI tools relates to Amazon Web Services (AWS), the company’s cloud computing business. These tools help AWS customers with a wide range of services that make it easier and faster to run their business, from building their own large language models (LLMs) to plug-in tools for the technology layman.
Amazon also uses AI in its e-commerce segment – in fact, it has been doing so for decades. The tech titan has collected millions of data points about its customers’ habits and can make targeted product recommendations. It also uses AI across its delivery network to package and fulfill orders in the fastest and most cost-efficient way.
Amazon uses AI to provide similar targeted results for advertisers, and third-party customers can use its advertising platform to reach customers already searching for their products. Amazon recently launched an ad-supported streaming tier for its Prime streaming viewers, using the power of AI to collaborate with its ad clients across video channels.
There is plenty of room for Amazon to operate, and new ventures offer huge growth opportunities for the incredibly profitable tech giant.
Can this real estate stock make a comeback?
Jeremy Bowman (Opendoor Technologies): Opendoor Technologies has largely been a disappointment since going public via a special purpose acquisition company in 2020. In fact, that’s probably an understatement.
Opendoor is now down 94% from its peak shortly after it went public as the housing market has stalled in the years since, with mortgage rates soaring and homebuyers sitting on the sidelines waiting for prices and rates drop.
However, that deep discount could be one reason why billionaires have been eyeing the stock lately. A number of them picked up shares of the home flipper in the first quarter, including Steve Cohen’s Point72 Asset Management, which bought 6.2 million shares of Opendoor, and Ken Griffin’s Citadel Capital, which bought more than 5 million shares of the real estate stock . .
These hedge fund managers may be responding to Opendoor’s efforts to cut costs and value the company, bringing it much closer to profitability, or they may be betting that interest rates will soon fall.
Those hopes appeared to be dented on Wednesday after the Federal Reserve held rates steady and lowered its forecast for rate cuts this year from three in its previous dot plot in March. However, it’s likely that interest rates will eventually fall, and if that happens, Opendoor should be poised to benefit as it is a natural beneficiary of rising home prices. In the meantime, if the company continues to streamline its operations, share prices could soar once housing market conditions improve.
This e-commerce share is up 83% this year
John Ballard (Sea Limited): According to Forbes, Chase Coleman’s Tiger Global Management has achieved an annualized return of 21% during its first twenty years. Coleman’s net worth is estimated at $5.7 billion, and in the first quarter his company increased its position in leading e-commerce and digital entertainment company Sea Limited.
Singapore-based Sea Limited saw its revenue decline significantly in 2022 as competition increased in a challenging macroeconomic environment. But Sea’s valuable logistics infrastructure and scale will enable the company to weather the storm and continue to grow. The digital entertainment properties, including the leading mobile title Free firehave a huge user base of 595 million.
Just a few years ago, Sea was growing triple-digit revenues, and that’s starting to turn the corner. The stock is up 83% year to date, buoyed by a strong first-quarter earnings report. Management expects its Shopee business to maintain market share through 2024 – a sign that the competitive environment is stabilizing.
The average Wall Street analyst expects Sea’s earnings per share to reach $5.67 in 2026. If the stock were still trading at the same price-to-earnings ratio, the shares would be worth around $210, implying an upside of 183%.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has no positions in any of the stocks mentioned. Jeremy Bowman has positions in Amazon and Sea Limited. John Ballard has positions at Nvidia. The Motley Fool holds positions in and recommends Amazon, Nvidia, Opendoor Technologies, and Sea Limited. The Motley Fool has a disclosure policy.
3 Top Stocks Billionaires Are Buying was originally published by The Motley Fool
