Studying the kind of assets that billionaires put their own capital into is always a worthwhile endeavor. And while you don’t need to track every trading decision of the world’s richest investors, it’s never a bad idea to see where the general flow of money is going. In this article we’ll look at 25 top stocks that billionaires own to see what types of patterns emerge.
Stocks That Billionaire Warren Buffett Owns
Apple
Warren Buffett’s stake in iPhone manufacturer Apple Inc. (AAPL) is the largest holding in Berkshire Hathaway’s stock portfolio. And while most investors were quick to see the value in the multinational technology company many years ago, it wasn’t until 2016 that Buffett first took the plunge and began buying up the firm’s shares.
It’s not really surprising that it’s taken so long for Buffett to make his mind up about AAPL; the Oracle of Omaha was never reticent about his dislike for tech stocks, but that seems to be changing now.
Apple makes up 40.07% of his total investment capital, and he’s no longer averse to purchasing other leading technology companies either; Berkshire now owns shares in Amazon (AMZN) and Snowflake (SNOW), two leading lights in the rapidly innovating tech space.
Indeed, Buffett has so much faith in Apple that his stake in the Los Altos electronics giant is worth more than the next four largest holdings in his portfolio combined.
To date, Berkshire Hathaway’s gamble on Apple has seemed to pay off. Having loaded-up more than 1 billion shares between 2016 and 2018 – with just an initial investment of around $36 billion – the stock’s now worth about $130 billion to Buffett and his fellow partners.
That said, it would have been worth even more had Berkshire not decided to sell 12% of its stock in 2020 – a decision that Warren Buffett now concedes was a mistake.
With a 5.4% stake in Apple, Berkshire (BRK.A) is one of the tech company’s largest shareholders; second only, in fact, to the index fund megalith Vanguard.
In one of his recent shareholder letters, Buffett described the company as a “family jewel”, while also lauding Apple’s CEO Tim Cook as one of the best managers in the world.
Given that AAPL pays Berkshire around $780 million in dividend returns per year, Warren Buffett has every right to be pleased with the performance of his most favored stock.
Bank of America
Berkshire Hathaway’s second most valuable stock pick – with a total holding of over 1.01 billion shares – is the Bank of America Corporation (BAC).
Buffett began his investment relationship with BAC at the height of the US sovereign-debt crisis in 2011, reaching out to the beleaguered banking brand to offer an injection of cash to the company to see it through its troubled times.
Fast forward 10 years, and not only is Bank of America Berkshire’s biggest banking bet, but Berkshire’s position in the business also makes its BAC’s largest stakeholder too.
A big reason for Buffett’s confidence in the banking giant is the presence of CEO Brian Moynihan, who Buffett considered vital to the company’s ability to clean up after the mistakes of previous management.
Indeed, the admiration between the two men meant that the pair signed off on a deal within 24 hours of first speaking to one another.
And that deal was good to both parties, too. Bank of America got to stock up on its much needed cash reserves – $5 billion to be precise – and Berkshire got the same amount in preferred shares, callable at a 5% premium with dividends attached.
And, just like with his later Apple play, Buffett’s bet on BAC has also paid back plenty more than he initially risked. From that first $5 billion, Berkshire’s Bank of America stock is valued at over $46 billion.
In addition, Buffet’s investment vehicle took hold of stock warrants giving BRK.A the right to purchase a further 700 million BAC common shares at just $7.14 per share, which can be exercised any time in the next 10 years.
American Express
Warren Buffett and American Express (AXP) have a long history going back as far as 1963.
But when the Oracle of Omaha bought his first AXP stock nearly five decades ago, it wasn’t out of kindness or a nod to his altruistic side. American Express’ share price was distressed after a fraud scandal involving salad oil and some dodgy accounting practices, which ultimately threatened to ruin most of the businesses caught up in the scam.
Buffett, however, made a calculation that time proved to be correct – that AmEx retained enough fundamental value to weather the crisis and come out on top.
Having bought the stock at a massive discount, American Express would go on to deliver huge returns for Berkshire. At its current market price of roughly $177, AXP is worth $27 billion to Buffett’s portfolio – this after purchasing the firm’s stock at an average cost basis of $8.49 a share.
The company also pays an annual dividend of $1.72 too, adding another $260 million to Berkshire’s yearly income. It’s easy to see why American Express makes up 7.93% of Berkshire’s entire asset holdings, and why Buffett has been so loyal to the company for so long.
Source: Unsplash
Coca-Cola
There’s an old piece of investing advice that says “like the product, buy the shop”.
This sentiment couldn’t be more true with Warren Buffett and his infatuation with The Coca-Cola Company (KO) – which might also explain why KO was once Berkshire Hathaway’s largest investment, and why it still today retains its place as its fourth largest holding with a valuation of $21.6 billion.
But there’s more to Buffett’s desire for Coca-Cola than just its tightly-guarded secret recipe. Dividend investing has always been a key hallmark of Buffett’s stock picking philosophy, and one of the main reason’s why Berkshire Hathaway is Coca-Cola’s largest shareholder too.
The firm’s S&P 500 busting dividend yield of 3.11% generates $670 million for the Nebraska-based company, and while it might not be highest yielding stock in Buffett’s portfolio, it’s certainly one of the biggest paying.
Coca-Cola is also another example of Warren Buffett’s knack for buying a good business at a cheap price; it was in the aftermath of the 1987 financial crash that the savvy investor saw an opportunity to get a household name brand at a hefty discount. And he’s never looked back since.
Kraft Heinz
As his experience with the Kraft Heinz merger of 2015 just goes to show, even Warren Buffett is merely human…and it’s not always possible to get every decision right.
Despite the calamity that struck the company in 2019 – when KHC announced a raft of bad news that resulted in a dividend cut and a tumbling share price for the firm – the deal that brought The Kraft Heinz Company (KHC) into being still might have a positive outcome.
Under the leadership of new CEO Miguel Patricio, the consumer staples business is slowly reversing the effects of previous bad management, and looks set for a new, successful era after having divested the worst performing parts of the company.
For Buffett – who once said that he would have cut his losses with Kraft Heinz if he were able to – his persistence with the brand, if somewhat forced, looks to have been worthwhile: KHC’s present dividend yields a very good 4.34%, its shares are up nearly 15% for the year-to-date, and net sales are now favorable against those in 2019.
Perhaps the deal wasn’t that bad after all.
Stocks That Billionaires Owns: Seth Klarman
Liberty Global
The largest holding in Seth Klarman’s Baupost Group investment portfolio is the British-Dutch-American telecommunications firm Liberty Global plc (LBTYK).
The company recently finalized the merger of its U.K.-based Virgin Media division with Telefónica’s O2, creating one of Britain’s biggest telecommunications and media enterprises, second-only behind the former government-owned BT Group PLC.
In addition to its telecoms business, Liberty also has a successful track record of purchasing, developing and selling-on a number of companies – both private and public – within Europe through its venture portfolio operations.
A notable deal involved the mobile video game platform Skillz (SKLZ), which LBTYK first invested in during 2017, and which was recently sold for $3.5 billion, netting, all told, a ten-fold return for the business on its original investment.
Seth Klarman began investing in Liberty Global in the third quarter of 2018, when his hedge fund made an initial purchase of 11 million of the company’s Class C common stock.
He continued adding to this position over the subsequent years, and now owns a total of 62 million shares as of May 14, 2021. LBTY is Baupost’s biggest investment and represents 12.66% of its total value.
Liberty Global’s business is renowned for its ability to generate solid cash flows while at the same time maintaining comparatively low capital expenditures. The firm has, in the past, kept its capital intensity under 20%, and with synergies from the O2 deal expected to be worth around $12 billion, that value proposition looks ever more enticing.
If LBTYK is able to unlock the potential of these promised cost savings, it could radically strengthen its already admirable cash reserves, and be in a position to return excess liquidity to investors in the form of dividend payments or further share buyback programs.
Liberty only recently announced a $1 billion share repurchase scheme, and already spent about 50% of that in just the first four months of 2021 – a sure sign that more re-acquisitions are on their way.
Intel
It’s known from Seth Klarman’s 1991 book Margin of Safety that his investment strategy is heavily based around the idea of finding deep value in an asset with a well-mitigated risk profile.
In the years since the book was first published, Klarman’s status in the investment world has seen him elevated to the level of “guru”, and the now out-of-print tome regularly changes hands among keen acolytes for hundreds, sometimes thousands of dollars.
But one of the Oracle of Boston’s early oversights is claimed to be his missing out on the tech stock boom – a mistake he seems determined to make right, especially with his relatively recent purchase of Intel shares this last February.
Although the Intel Corporation (INTC) is one of, if not the, most important chip manufacturers in the world, it is facing down some fairly serious headwinds right now.
The business enjoyed a boost during the pandemic when the work-from-home trend saw customers upgrade their computer hardware, but the global semiconductor crisis and the improving technological sophistication of rivals like AMD (AMD) and Nvidia (NVDA) are threatening INTC’s dominance.
However, from a value investing perspective, Intel is just the kind of stock that Baupost goes in for; a low forward earnings multiple of 12 puts fellow IT sector companies to shame at nearly double that.
Add to that a “high-ish” gross profit margin of 56% and it’s easy to figure out what Klarman sees in this mega-corporation – so it comes as no surprise that Intel is Baupost’s second largest investment at 11.88% of its full portfolio.
eBay
Baupost’s eye for spotting over-performing yet undervalued companies obviously sees a winner in the e-commerce multinational eBay Inc. (EBAY).
While eBay’s revenues have remained flat for almost a decade, at around $11 billion per annum, the online sales platform has compensated by increasing its profitability over the years.
The company’s financial position wasn’t overly affected during the ongoing Covid crisis, helping to keep the business stable and Wall Street happy.
EBAY also makes a dividend payout to investors, although the yield is rather low at 0.95%. However, as Seth Klarman says in Margin of Safety, chasing high yields is futile, as often poorly performing companies will sport premium dividends simply because their share price has fallen.
Ultimately, Klarman and Baupost chose to increase their stake in EBAY by 40% in 2019 because they reckoned on the company delivering returns, but have had cold feet lately after offloading a sizeable chunk of their holdings in the business.
But it remains an important piece of the hedge fund’s portfolio as much for its core business as it does for its subsidiary investments, which involves a 44% stake in popular classified ad website Adevinta, an enterprise that garners large amounts of traffic in Europe, Canada, Australia and elsewhere.
This diverse revenue mix should ensure EBAY’s cash flows stay strong regardless of how the e-commerce space evolves.
Source: Unsplash
Qorvo
Seth Klarman’s association with the Baupost Group goes back to its very beginning in 1982, when he and fellow founders William Poorvu and Howard Stevenson created what would become one the most successful hedge funds in the world.
And staying true to the precepts of the value investor’s philosophy, the inclusion of American semiconductor firm Qorvo (QRVO) on this list shouldn’t be any mystery; the company is decidedly under-appreciated by the wider market, making it a perfect candidate for Klarman’s portfolio.
Qorvo isn’t an expensive stock by any of Wall Street’s many valuation metrics.
Its operating profit margin of 26% is highly attractive for an Information Technology company, especially since other firms in the sector normally post median return on sales of just 9%. Nor is its non-GAAP year-on-year revenue growth of 38% bad when compared to other businesses in the space either.
However, it is true to say that QRVO’s share price has lagged behind the broader semiconductor market players, with its stock having only appreciated 1.5% over the course of this calendar year.
And it’s precisely this “missing buyers” phenomenon that Baupost is exploiting by getting into Qorvo now; Klarman sees the massive potential of 5G – an opportunity that QRVO is ready to capitalize on through its expertise in manufacturing components that undergird the wireless and broadband communications industry – as being a prime growth driver for pretty much the entire economy in the coming years.
It’s also why Baupost has bet over 7.6% of its investment portfolio capital on this under-the-radar stock.
Viasat
Viasat (VSAT) is Baupost’s longest held asset to figure in its top-5 holdings, having been a fixture of Seth Klarman’s investment plans since 2008.
Growing his initial purchase of 1.1 million shares to more than 16 million today, Klarman has shown resolute loyalty to a company whose price action over the last few years has been, to say the least, poor.
From highs of $94 in mid-2019, Viasat now trades at around the $50 region, at one point dropping as low as $28 in 2020.
One of the pressing issues for Viasat is that it’s coming up against fierce competition in the form of Elon Musk’s space transportation and aerospace manufacturer outfit SpaceX.
And where Viasat’s expertise lies in secure networking systems and satellite broadband services, many investors and industry-watchers believe that the often-outspoken Tesla (TSLA) boss is the owner of the superior product.
But there’s no reason to write off VSAT just yet; the demand for communications and data is only going to grow, and there’s still lots of room for multiple parties to deliver these services to the market. Viasat currently runs its own constellation of geostationary satellites, and enjoys a kind of first-mover advantage in the space, which will see it remain a player for a considerable amount of time.
Stocks That Billionaires Own: Joel Greenblatt
Microsoft
Joel Greenblatt’s equity management firm, Gotham Asset Management, LLC, is a highly diversified investment fund, trading almost 1,000 managed securities, with a value of around $2.36 billion.
Given that the company’s top-10 assets only make up a portfolio concentration of 13.17%, it’s not so unusual that his biggest single investment, the Microsoft Corporation (MSFT), accounts for just 2.04% of that.
However, Gotham’s position in MSFT reflects Greenblatt’s fundamental belief in value investing. Having first purchased the tech corporation’s stock in late-2010 – when it was changing hands for around $24 – the investment manager now holds more than 191,000 shares, trading today at prices over $300.
With that said, Gotham Management has been divesting its Microsoft asset’s lately, selling 125,000 shares over the last four quarters.
But whatever the short-term trends in MIcrosoft’s stock value might be, Gotham Management has still made a hefty 443% weighted average increase on its investment over the years. That doesn’t seem to be in danger though, with MSFT currently firing on all cylinders.
The company just announced a $60 billion extension to its share buyback scheme, and additionally raised its annual dividend from $2.24 to $2.48. For large shareholders like Joel Greenblatt, that is music to their ears.
Amazon
Other than Microsoft, the remaining stocks to feature in Joel Greenblatt’s top-5 portfolio picks all belong to the so-called FAANG companies, of which Amazon.com, Inc. (AMZN) takes second place.
Amazon is one of Greenblatt’s more recent acquisitions, having only opened a position in the firm in 2016. The company is interesting in being the only business on this list that Gotham Management has added shares to in the last quarter.
Before this, the investment fund had been selling fairly aggressively, offloading 9,100 units of stock between July 2020 and March 2021, bringing Greenblatt’s total holdings in the e-commerce and digital services company to 12,600 shares.
The recent about-turn in sentiment may have had a lot to do with the fact that Amazon is now beginning to appear as the dominant force in a multitude of high-margin business enterprises.
Already recognized as the main player in the online retail space, the Bellevue, Washington-based company is also leveraging its successful cloud computing wing to great effect, while its logistics segment, with its next day delivery capability, is building an even bigger moat around what previously was a pretty resilient business model to start with. Opportunities in the international market seem poised to grow too.
And while Amazon’s valuation is high right now – its forward non-GAAP earnings ratio is a staggering 63 – Joel Greenblatt obviously sees something in the brand that makes it worth the premium today for bigger returns tomorrow.
Apple
Shares in consumer electronics company Apple Inc. (AAPL) are up almost 150% the last 24 months – which might make you question why Joel Greenblatt has been selling stock in the firm for the past nine quarters.
Despite Gotham Asset Management first buying Apple over a decade ago in 2011, the author of The Little Book That Beats The Market has been dropping his stake in the company just when it seems like it’s headed for the moon.
Perhaps a deeper look at Greenblatt’s investing philosophy might give us some clue here, because, while Gotham’s typical strategy is to seek value not unlike many other value investors, it’s also known for its event-driven trading too.
Always seeking that important catalyst that triggers either share price growth or decline, Greenblatt is attuned to the signs that might suggest a well-performing stock – such as Apple – might be about to tank.
And he could be right. Apple actually took a dip recently, possibly on the news of a rise in bond yields helping stymie the growth of stock valuations.
But the business also faces some strong near-term headwinds, notably in its services segment, where increased competition from the likes of Amazon especially have weighed down Apple’s ability to attract subscribers to its video, gaming and music offerings.
With AAPL making up 1.6% of Gotham’s portfolio at a total of 275,000 shares, maybe Greenblatt is correct to take value from his Apple investment while he still can. Apple is seen as a bellwether stock, so keep keen tabs on what happens to its share price in the coming months.
Another stock that Gotham has been selling hard lately is Facebook, Inc. (FB), with the investment fund having ditched a full 14.4% of its stake in the company thus far in 2021 alone.
And it’s easy to see why – Facebook might be up over 16% for the year-to-date, but the tech company and social media platform has lost 15% in the just the last couple of months.
With no indication that things are about to change in FB’s favor anytime soon, Greenblatt’s lack of confidence in the company appears justified.
In fact, Gotham Asset Management has only added to its position in Facebook once in the last previous nine quarters, buying 88,000 shares in April 2020.
To put things into perspective, over that same time frame, Joel Greenblatt signed off on the sale of 218,000 Facebook shares, giving the fourth placed company in Gotham’s portfolio a holding of just 95,500 of FB’s common stock.
While Facebook is still hugely profitable – it boasts a gross profit margin of 81%, easily eclipsing its other sector rivals’ median of 51% – the company always has that feel that it’s battling political and secular foes that are often on the brink of bringing it down, with former-President Donald Trump the latest in a long line to open another broadside against the Zuckerberg-run enterprise.
Perhaps it’s these negative catalysts that Greenblatt hopes to steer clear of?
Alphabet
Greenblatt’s fifth most favorite stock is Alphabet Inc. (GOOG)(GOOGL), a position comprising 1.5% of Gotham’s holdings at 14,500 shares.
As has been the case with many other tech stocks lately, Google’s share price flattened out recently after an extended period of inflation.
However, that’s not stopped Gotham from making a 183% weighted average profit on its Alphabet investment since it first began buying in 2016.
Similar to Greenblatt’s other trading decisions with regard to his top portfolio holdings, the stock guru has been dumping more of GOOG than he’s been purchasing over the last 10 quarters. Again, this might seem like a mistake; Google is up 71% the last 12 months – a period which has seen nothing but selling from the Gotham Management mastermind.
And this might really be one of Joel Greenblatt’s rare mistakes. Alphabet had a cracking second-quarter 2021 report card, and analysts are predicting the same for the third-quarter too.
Google Cloud has emerged as a significant revenue driver for Alphabet, garnering $4.6 billion in top-line cash for the firm in the previous quarter, making up 7.5% of the business’s total revenues and seeing year-on-year growth of 53.9%.
As we’ve seen before, even gurus get it wrong sometimes.
Stocks That Billionaire David Tepper Owns
Micron
David Tepper has had an on-off relationship with Micron over the years. Through his American hedge fund company, Appaloosa Management, Tepper first made a foray into the semiconductor manufacturer Micron Technology, Inc. (MU) in 2006, but would go on to divest almost all his position in 2019 when he sold 95.3% of the fund’s shares in the firm.
For some time before this, Micron happened to be Appaloosa’s largest holding, but the risks associated with the China-US trade war – which Micron was especially exposed to – meant that Tepper ultimately lost faith in the business.
But the break-up didn’t last long; Appaloosa made an abrupt about-turn later that same year, repurchasing 6 million more shares in the company. And while it was still a far cry from the 40.5 million peak allocation previously held by Tepper, it signals a return to favor for the Boise, Idaho-based memory giant.
Today, MU is Appaloosa Management’s number one stock pick again, with a total of 5.65 million shares and a 9.94% portfolio weighting.
However, considering the business is Tepper’s biggest position right now, Micron’s price action hasn’t been particularly positive recently, having delivered a loss of more than 10% over the course of 2021 so far.
The company’s guidance doesn’t provide much succor going forward either; its latest revenue and earnings beat was overshadowed by pessimistic predictions of increased capital expenditures for FY22. Perhaps Tepper’s instincts were correct in 2019, and we might again see another sell-off in the near future.
T-Mobile
Appaloosa Management has been selling a lot of stock lately.
In fact, it’s been off-loading shares in all its top-10 holdings for quite a while now. David Tepper went some way to explaining this situation recently when, in a series of news media interviews, he painted a pretty bearish outlook for the stock market’s future, threw some shade on the crypto-currency “tulip bubble” craze, and denigrated the bond market for good measure.
Indeed, Tepper reckons there’s no good asset classes right now, and thinks it best to just hold any current investments for the long-term.
That sentiment shouldn’t surprise too many people; Tepper is a value investor at heart, and this kind of approach lines up nicely with much of his wider trading philosophy. And it’s this thinking that probably informs the reasons behind his stake in T-Mobile US, Inc. (TMUS), Appaloosa’s fifth largest position with a total portfolio value of $365 million.
T-Mobile is a big player in the communications services sector, and boasts the financial metrics that tend to make value investors smile. Its revenue growth for the industry is superb, at 53% year-on-year, and its gross profit margin of 58% also outperforms the competition.
Admittedly, TMUS’s earnings ratio is high at the moment at 28, which might explain why Tepper just sold 40% of its T-Mobile shares in the second-quarter of 2021. But overall, Appaloosa Management’s investment in the company has been a success, generating a 47% return on the hedge funds outlay over the last four years.
Source: Unsplash
PG&E
When it raised its investment stake in utilities company PG&E Corporation (PCG) by 803% in 2020, it seemed like a big gamble for Appaloosa – a gamble that today looks like one that hasn’t come off.
David Tepper is known as a distressed-debt specialist, and when his hedge fund decided to buy PG&E last year, the gas and electric provider had recently been operating under bankruptcy court protection.
The stage appeared set for Appaloosa and other investors to sweep in and reorganize the company by restructuring its capital position and appointing a new CEO.
But things didn’t quite work out like that. The move was always risky, and Tepper would end up losing over 7% of his investment with the company.
Indeed, having first opened a position in PCG in 2018, Appaloosa Management spent a weighted average of $12.81 per share buying stock in the Pacific Gas and Electric Company when today’s share price stands at just $11.66.
As we know, investing gurus sometimes miss; but as the saying goes, it’s never over until it’s over. PG&E is actually a pretty well-run business now, and has the figures to prove it. Its forward earnings multiple is low at just 12 times, and for a utility sector company its revenue growth of 9% leaves its industry rivals in its wake. Tepper might be wise to hold off cutting his losses with PCG just yet.
Alibaba
Alibaba Group Holding Limited (BABA) is David Tepper’s eighth largest holding, making up 2.75% of the value of his entire portfolio. BABA is another profitable investment decision for Appaloosa Management, appreciating 23% since the hedge fund began buying shares in the Chinese e-commerce giant.
That said, Tepper has been aggressively trimming his position in the company the last two quarters, selling 40% of his BABA stake in the first-quarter 2021, and 49% of the remaining stock in the second-quarter too.
Like many of his other holdings, Alibaba’s share price has declined significantly this year, dropping nearly 42% since January, but rising 17% this last month.
However, much of BABA’s problems can be traced back to domestic political intrigue, and with the embarrassment of the Evergrande debacle weighing heavily on China’s ruling government, some observers are hoping that a lighter-touch regulatory environment might emerge in the aftermath, possibly benefiting Alibaba going forward.
Still, Appaloosa now only holds 17% of the BABA stake it owned four quarters ago, suggesting it was right to sell so much of this poorly performing business. But if things are about to turn around for the company, it’s very possible Tepper might be tempted to start buying Alibaba again.
Occidental Petroleum
When he wants to be, David Tepper can be quite the contrarian investor. His investment in Occidental Petroleum Corporation (OXY) is a perfect example of this.
Speaking at the Robin Hood Investors Conference, Tepper said that oil stocks, such as OXY, were cheap this year because everybody hates them.
And as one of the world’s top performing hedge fund managers of the past quarter century, when Tepper talks, it’s time to listen: Appaloosa’s average annualized return of 25% beats both the S&P 500 and famed rival guru Warren Buffett, and Occidental’s return for Tepper’s hedge fund of 16% is nothing to blink at either.
Even so, OXY is another stock that Appaloosa sold in the last quarter, ditching 2.69 million shares before April, or 32% of the fund’s total stake. But Occidental Petroleum is on the rise again, gaining 96% in price during 2021 and 233% over the last year.
That sale might have been a little premature, and with the energy sector company posting EBITDA margins of 43%, Appaloosa might soon be rethinking the wisdom of that decision.
Stocks That Billionaires Own:Steven Cohen
SPY
The hedge fund industry’s reputation has come under some scrutiny this last decade, after the inability of its largest and best well-known investment brands to keep up with, let alone beat, the unhedged returns of the stock market’s most popular traded indices. But one investor to buck this trend is Steven A. Cohen, founder of Point72 Asset Management, the successor of Cohen’s previous investment vehicle S.A.C. Capital Advisors.
Since its inception seven years ago, Point72 has increased its overall holdings value 43%, from $15.6 billion in June 2014, to its current total worth of $22.3 billion. The fund also outperformed the S&P 500 over the last five years too, growing its asset price by 238% compared to the SPY’s 115%.
However, Steven Cohen’s fortunes this year haven’t been quite as stellar. Since October 2020, Point72 has just managed to outpace the S&P 500 by 44% vs. Standard and Poor’s 39%.
One explanation for this apparent regression to the mean could be the fact that Cohen’s largest portfolio holding just happens to be the SPDR S&P 500 trust (SPY), the tracking ETF that mirrors the weighting and stock composition of the S&P 500 market index itself.
At 4.3% of Point72 Asset Management’s total portfolio worth, and accounting for a full $962 million of investment cash, SPY is the clear winner when it comes to Cohen’s favorite stock picks, eclipsing by some way his second biggest position, Amazon, worth just a relative $559 million.
Uber
Steven Cohen can’t get enough of the presently undervalued ride-hailing firm Uber (UBER), adding to his initial investment almost continuously since he first opened a stake in the company in the fourth-quarter of 2020.
The company’s current sales multiple of 5.6 suggests there’s still plenty of upside the San Francisco-based mobility-as-a-service provider, and it will be interesting to see whether Cohen – who was previously known for his rapid turnover of trading positions, sometimes buying or selling tens of millions of shares every day – will stick with the business and extract as much value from the the company as possible.
And it seems likely he will. Uber didn’t have a good time during the beginning stages of the coronavirus crisis, as the nature of the firm’s core business was vulnerable to the shutdowns and general restrictions put on most forms of travel. But the firm is getting itself back on the right track again, and its share price is starting to reflect this.
The company’s stock has bounced back from its worst period where it was trading for less than $30, and today commands prices 50% plus higher.
The business is also performing well again, growing its gross bookings in the second-quarter 2021 by 104% year-on-year, and now has a real path to profitability, which Uber management predicts will be reached by Q4 of this year.
Western Digital Corp
Data storage company and hard disk drive manufacturer Western Digital Corporation (WDC) cancelled its dividend in 2020 due to pandemic-induced issues over its capital expenditure, with the company putting a priority on debt reduction over shareholder returns. However, it hasn’t stopped Point72 Asset Management from loading up on the stock, purchasing bigger stakes in the company since its dividend was suspended in April last year.
It’s surprising that WDC has run into so many headwinds lately; the company operates in a high-growth, high-margin sector, and runs multiple segments in areas as diverse as Cloud Storage Services, Data Center Devices, and a Technology wing that develops and manufactures Rotating Magnetic Storage solutions.
It has a 13,500-strong patent portfolio, easily rivaling its storage industry competition anywhere in the world.
That said, Steven Cohen likes the business enough to make it his fourth largest holding with 5.81 million shares.
Perhaps it’s the prospect of Western Digital reinstating its dividend that spurred the Stamford, Connecticut-based Point72 hedge fund into ploughing $414 million of its capital into the company.
After all, WDC did have one of the highest yielding dividends in the space at close to 4.5% before it abruptly pulled the plug on its payout. But given that the firm’s year-on-year revenue growth stands at a paltry 1.1%, it could be a while before Cohen – or any shareholders for that matter – see an income from this much beleaguered stock.
Baidu
Baidu, Inc. (BIDU) is another relatively cheap company making it onto Steven Cohen’s list of top quality stock picks. The Chinese internet search engine business has seen its share price drop over 20% in 2021, falling from February highs of around $340 to $170 today.
But for a company operating in the communications services sector, its forward revenue growth of 14% should please investors, and with a price-to-earnings ratio of 16, the company looks too good to pass up.
However, Cohen and Point72 Asset Management don’t necessarily agree. Having a total stake of 1.6 million shares at the end of the first-quarter 2021, the hedge fund ditched half its position in the second-quarter to leave it with just 834,000 shares today.
Concerns surrounding regulatory risk may have played a part in Cohen’s pessimistic outlook for the company – and yet BIDU is showing all the signs of having turned a significant corner.
The firm is forging new business opportunities in the electric-vehicle and smart devices space, as well as in the AI and cloud services arena. Indeed, its cloud segment top-line is up 71% year-on-year, driven especially by a boom in Chinese cloud infrastructure growth.
Point72 retains a $170 million stake in Baidu, and at 0.85% of Cohen’s total portfolio weighting it is still the twelfth largest holding on the hedge fund’s books. Should favorable headwinds persist for BIDU, it seems likely that the investment group might reconsider its position vis-à-vis this high potential tech stock.
Visa
In terms of total market capitalization, payments technology provider Visa Inc. (V) is one of Steven Cohen’s “big beast” stocks.
The famous credit card brand is currently valued at $497 billion, and is Point72 Asset Management’s sixth biggest investment at $291 million. The hedge fund sold a small number of Visa stock in the second-quarter, but continues to hold onto 1.24 million shares, occupying 1.45% of Cohen’s entire portfolio.
Competition in the fintech world is hotting up. Comparatively recent incursions into the space include PayPal and Square, and old legacy names like Visa and Mastercard – who have between them a combined 118 years of history – are now having to fight tooth and nail for market share of the industry real estate. This necessarily causes pressure on their share prices, and it’s noteworthy that in 2021 Visa (V) is up just 6% where Square (SQ), for instance, is up 21%.
Come what may, Steven Cohen is staying loyal to Visa – for now. However, the company is only one of a few top ten stocks that Point72 sold in the last quarter; and if Visa doesn’t start performing soon, that loyalty could be sorely tested.
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