Investors who follow the right billionaires can find great stocks to help them improve their returns. Chase Coleman of Tiger Global Management, Andreas Halvorsen of Viking Global Investors, and Bill Ackman of Pershing Square have built billionaire fortunes from their talents of picking winners.
All three companies employ a long-term-focused strategy when selecting investments. Here are three stocks from the prestigious Dow Jones Industrial Average (DJINDICES: ^DJI) that each company has been piling into over the last few quarters.
Chase Coleman worked for famed hedge fund manager Julian Robertson, whose firm earned extraordinary returns for investors. Tiger Management earned annualized returns of 31% over 21 years until it closed in 2000, according to the New York Times.
After working for Robertson’s firm, Coleman started his own fund, Tiger Global Management, which prefers to invest in growing companies for the long term that are taking advantage of technological innovations. Coleman’s current net worth is estimated at $6 billion, according to Forbes.
Coleman’s Tiger Global Management has held a position in Amazon (NASDAQ: AMZN) for over five years and continued to buy more shares in the third quarter. Amazon is delivering exceptional financial results, with balanced growth in sales and profits that’s fueling the shares to new highs heading into 2025.
Amazon’s industry-leading cloud services business continues to drive most of the company’s operating profit. Because of this, the stock continues to perform well, with Amazon Web Services posting a year-over-year sales increase of 19% in its latest quarter. It’s clearly still in the early innings of capturing the burgeoning opportunity in cloud computing and artificial intelligence (AI) services.
The company’s core e-commerce business isn’t growing nearly as fast after reporting a sales increase of just 8% year over year in Q3. What’s notable is that the growth in sales dollars is trailing the increase in unit sales, which grew 12% over the year-ago quarter. As Amazon maintains competitive prices, more customers are starting to turn to Amazon for everyday essentials like health, beauty, and personal-care items, which will play to its advantage in the long run.
“We see that when customers purchase these types of items from us, they build bigger baskets, shop more frequently, and spend more on Amazon,” CFO Brian Olsavsky said on the company’s Q3 earnings call.
The company’s massive lead in e-commerce and opportunity in cloud computing explain why Coleman continues to hold the stock. Amazon shares should continue to deliver solid returns for long-term shareholders.
Two billionaire-managed firms were piling into Sherwin-Williams (NYSE: SHW) stock in Q3. Ole Andreas Halvorsen of Viking Global Investors tripled his stake, while Chase Coleman’s firm started a new investment in the company. Halvorsen is another former protege of Julian Robertson who has built a considerable net worth of over $7 billion, according to Forbes. Viking Global was started in 1999 and invests with a long-term focus in opportunities with compelling risk-reward potential.
Sherwin-Williams has an excellent record of delivering returns to shareholders. The shares have nearly doubled the S&P 500‘s return over the last 10 years and could benefit over the next few years from a rebound in home remodeling and lower interest rates.
Sherwin-Williams remains set up for a demand recovery if interest rates and inflation moderate. The company is a leader in paint, coatings, and other products across industrial and residential markets. Sales grew less than 1% year over year in the most recent quarter, which is well below its 10-year average annual growth of 8.5%. Its residential paint segment posted the fifth consecutive quarter of sales growth in a weak market.
“We also chose to invest ahead of the curve in the quarter, given the unprecedented long-term opportunities that continue to emerge from an increasingly uncertain competitive landscape,” CEO Heidi G. Petz said in the company’s Q3 earnings report.
Management expects 2024 adjusted earnings per share to be between $11.10 to $11.40, up 8.7% over 2023 at the midpoint. The stock’s forward price-to-earnings ratio of 34 may look expensive on top of single-digit earnings growth. However, these billionaire investment managers are likely expecting the company’s investments to widen its competitive moat, positioning the company to gain market share in the industry and deliver accelerating growth when real estate recovers.
Bill Ackman is the founder of Pershing Square Capital Management. Over the last two decades, his firm delivered annualized returns of over 15%, outperforming the S&P 500 return of 10%. In Q2, Pershing Square bought a new position in Nike (NYSE: NKE) stock and quadrupled that stake in Q3.
The investment comes amid a challenging year for the iconic sportswear brand, with sales down 10% year over year in the August-ending quarter. This has driven Nike shares to the lowest price in four years.
Buying shares of leading brands when they’re experiencing challenges can usually lead to a big payoff when the business turns around. The important thing is to make sure that the company’s weak sales are, indeed, temporary; otherwise, the stock could be a value trap.
It may not be a quick comeback for Nike, but there are two reasons to believe the stock is a good buy. First, the company is already moving to refocus on sports, which is the heart of Nike’s brand, and accelerating development of new products.
Second, Nike recently hired former company veteran Elliott Hill as its new CEO to replace John Donahoe, who came to Nike after serving as CEO of eBay from 2008 through 2015. Sometimes, a new CEO with fresh ideas is all it takes to reinvigorate a business, and that could certainly play out with Nike.
“Together with our talented teams, I look forward to delivering bold, innovative products that set us apart in the marketplace and captivate consumers for years to come,” Hill said.
As Nike returns to growth, the stock could deliver nice gains. Its price-to-sales ratio is at 2.44, which is the lowest valuation in 10 years.
Just because a professional investment manager has bought a certain stock doesn’t mean it’s going to move higher in the near term. It’s possible that stocks are dependent on certain catalysts, such as Nike’s turnaround plans, and may not play out as expected, which could lead to disappointing results. Billionaires make mistakes, too, so only buy stocks you’re comfortable with.
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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. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Nike. The Motley Fool recommends Sherwin-Williams and eBay. The Motley Fool has a disclosure policy.
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