Before owning the NFL’s Carolina Panthers and MLS’s Charlotte FC, David Tepper made his name (and money) through Appaloosa Management, a global hedge fund he founded. Tepper, whose net worth is approximately $20 billion, is among the top 100 richest people in the world. Needless to say, he has had success in the investment world.
Given Tepper’s success, it makes sense that investors would look to his and his hedge fund’s investments for tips. While the average investor and billionaire hedge fund managers don’t have the same risk tolerance or investment objectives, there’s nothing wrong with looking to them for inspiration.
Tepper’s portfolio is fairly concentrated, with almost a third held in three ‘Magnificent Seven’ stocks. If investors want solid companies with long-term sustainability, they need look no further.
1. Amazon
Amazon (NASDAQ: AMZN) became a household name for its e-commerce activities, but has since grown into a major player in a handful of industries.
For a while, Amazon’s e-commerce business was unprofitable and used primarily as a revenue generator. It is still Amazon’s largest source of revenue, but has recently become profitable. In the fourth quarter, Amazon’s North American segment posted about $6.5 billion in operating profits, an impressive turnaround from the $240 million it lost in the fourth quarter of 2022. The international segment lost $419 million, which isn’t ideal, but it still keeps Amazon profitable in the fourth quarter. are non-Amazon Web Services (AWS) companies.
There is still room for growth in e-commerce, but much of Amazon’s growth will depend on its cloud service AWS. While AWS’s growth has slowed recently, its 13% year-over-year (YOY) growth isn’t too shabby for Amazon’s biggest profit maker. AWS has an impressive market share in global cloud services, but has lost some ground over the past year. Still, its market share is 31%, which is leading Microsoft‘S (NASDAQ: MSFT) Azure (a 24% share) and Alphabet’s Google Cloud (11%).
In the long term, Amazon will benefit from the organic growth of cloud services and e-commerce. However, the company has also shown that it is willing to invest in new industries. Take, for example, the $13.7 billion in Whole Foods purchases and healthcare ambitions. Investors can rest assured that the company will not become complacent.
2.Microsoft
There are several technology companies, and then there is Microsoft, the example for casting a broad network of companies.
Microsoft didn’t become the most valuable publicly traded company in the world by accident; It’s taken years of impressive business growth and a boost from AI mania. The latter can also guide the company through the next growth phases.
Microsoft’s strategic partnership with OpenAI – which gives it exclusive licenses to OpenAI’s large language models (LLMs) – could be just what it needs to further tighten its grip on office software. From Office (Excel, Word, PowerPoint, etc.) to Azure to Teams, Microsoft is almost unavoidable in the business world.
Microsoft’s abundance of enterprise customers gives Microsoft an edge in ensuring longevity and protection against economic and market downturns. When times get tough, consumers can easily forego the latest smartphones or online shopping, and companies can cut back on their advertising. It’s much harder for businesses to stop using Office software, migrate their data from the cloud, or switch from established communications platforms like Teams.
With Microsoft, investors can rest assured that they are investing in a company built for sustainable, long-term growth.
3. Metaplatforms
Facebook creator Metaplatforms (NASDAQ: META) remains one of the top cash cows, with revenues of approximately $36.5 billion in the first quarter, up 27% year over year.
With an average of 3.24 billion daily active household members in March 2024 (up 7% year-over-year), Facebook shows why it remains a favorite for many of the top advertisers worldwide. Meta has taken advantage of this and increased average household income per person from $9.47 in the first quarter of 2023 to $11.20 in the first quarter of 2024.
Despite the growth in key figures, Meta shares plummeted after the latest earnings release, falling as much as 15% on the same day. Much of this is due to the company’s future spending plan, which largely concerns its AI infrastructure. Meta said it plans to spend $35 billion to $40 billion this year, up from its previous estimate of $30 billion to $37 billion.
Investors may not agree with the spending plan, but their reaction seems overreactive. The good news, however, is that the lower valuation makes it a more attractive entry point.
Investors should also like Meta’s new dividend of $0.50 per share. The dividend yield isn’t enough to satisfy most income-seeking investors, but it’s a boost that could encourage investor patience as Meta works on its AI plans.
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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. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Stefon Walters has positions at Microsoft. The Motley Fool holds positions in and recommends Alphabet, Amazon, Meta Platforms and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
A Third of Billionaire David Tepper’s Portfolio Is Made Up of These Three Magnificent Seven Stocks, originally published by The Motley Fool
