7 Stocks the Great Investors Have Bet Big On

Follow the great investors who got that way being smart and careful

great investors

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When regular investors think about which stocks to buy, we often fail to consider the institutions or billionaire investors backing these companies. The great investors often will bet big on a company’s long term prospects.

A recent study by Bain & Company found that most executives running public companies don’t have a process in place to link its investor relations with influential investors so they can provide meaningful feedback to the company.   

Sure, activist investors provide feedback, but it’s not usually welcomed by C-Suites because it tends to come with a loss of control.

Using Nikon Corp (ADR) (OTCMKTS:NINOY) as an example, Harvard Business Review recently illustrated how Nikon CFO Masashi Oka was able to harness the feedback the company received from its influential investors to transform the company.

An ETF like the Global X Guru Index ETF (NYSEARCA:GURU) wouldn’t exist if wealthy hedge-fund investors like Ray Dalio didn’t have good ideas.

Like drafting behind a vehicle when racing cars on a track, some of the best stocks to buy are worth owning because they have great investors.

Here are seven of them. 

Stocks to Buy With Great Investors: Apple (AAPL)

Apple Inc. (AAPL) Has New Opportunities in Emerging Markets
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Not that the gang in Cupertino needed an A-list endorsement from Warren Buffett but the fact that Apple Inc. (NASDAQ:AAPL) is now the largest equity holding of Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B) goes a long way to reassuring investors that the maker of the iPhone still has a trick or two up its sleeve.

“I didn’t go into Apple because it was a tech stock in the least,” Buffett explained at the Berkshire annual meeting. “I went into Apple because I came to certain conclusions about both the intelligence with the capital they deploy, but more important the value of their ecosystem and how permanent that ecosystem could be.”

Like every investor, Buffett’s made some mistakes. However, he’s made a lot more good calls than bad over the years. It’s a big reason why he’s one of the world’s wealthiest people.

When Buffett speaks, people listen.

Stocks to Buy With Great Investors: Vanguard FTSE Emerging Markets ETF (VWO)

Who says a billionaire can’t play it safe?

Take a look at Bridgewater Associates’ latest 13-F and you’ll see that the largest holding in its $10.5 billion portfolio is the Vanguard FTSE Emerging Markets ETF (NYSEARCA:VWO) at $2.4 billion or almost one-quarter of the total.

Investors think they have to be so smart about their stock selection yet here is one of the world’s most successful hedge funds choosing to capture emerging markets by investing in a low-cost ETF.   

Ray Dalio, Bridgewater Associates’ founder, is almost as well known for his book, Principles: Life and Work, as he is for his hedge fund. He’s become a very quotable person since releasing the book in 2017.

Here’s one that applies to VWO. It explains why the hedge fund might have such a big position.

“In trading you have to be defensive and aggressive at the same time,” Dalio writes in Principles: Life and Work. “If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep money.”

Clearly, Bridgewater feels VWO is a smart way to cover emerging markets without losing its shirt.   

Stocks to Buy With Great Investors: Newell Brands (NWL)

This is the riskiest of the stocks to buy mentioned in this article because Newell Brands Inc (NYSE:NWL) is currently in the middle of a transformation that’s put activist investor Carl Icahn in the unusual position of mediator.

In late April, Icahn agreed to give up two of his four board seats in order to appease another activist, Starboard Value LP, an $8 billion hedge fund run by Jeff Smith.

“The company reached out to us and requested that we give up two board seats to avoid a potentially disruptive proxy fight, which could have been especially bad at this important time for the company,” Icahn said in the statement.

As a result of the changes to the board, Starboard dropped its proxy fight with the company.

Newell Brands isn’t Icahn’s biggest holding by any means (he owns 30.3 million shares or nearly 7% of its stock) but it is a company that I’m reasonably familiar with and do think the stock can deliver for investors in the future once it finishes selling off some of its non-core businesses.

Carl Icahn, like Buffett, isn’t perfect, but my sense is that he realizes with the appropriate pressure applied to management, it won’t dilly dally getting Newell’s business turned around.

It’s a huge value play but one I think makes sense given some of its high-profile investors.

Stocks to Buy With Great Investors: United Continental (UAL)

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I’d hardly call United Continental Holdings Inc (NYSE:UAL) my favorite airline stock, but the fact Omega Advisors CEO Leon Cooperman has made UAL his firm’s largest position suggests investors ought to at least consider it.

One thing that’s caught my attention at UAL was that it just appointed former FAA head Jane Garvey as the company’s chairperson. It was a very public recognition that there are women qualified to serve on public company boards. Kudos to them for making Garvey the company’s first female board chair.

Fears that higher oil prices would hurt profits appear to be subsiding and that’s sent airline stocks higher in recent trading. 

Unfortunately for big UAL investors like Cooperman, the airline still suffers from a terrible customer service reputation after several altercations with passengers over the past 18 months.

J.D. Power just released its 2018 North America Airline Satisfaction Study and UAL ranked last.

I’m a glass half full type of guy and Cooperman likely is too or he wouldn’t have made such a big bet. The appointment of Garvey suggests the airline is willing to change and that should be good news for UAL stock in the future.

Stocks to Buy With Great Investors: Lowe’s (LOW)

Bill Ackman has made a lot of bad calls in recent years, a big reason why his investment fund has seen almost $2 billion in client redemptions and its assets under management drop by more than half over the past three years to $8.2 billion.

So, I hope this doesn’t come back to bite me in the butt, but I think the recent news that he’d acquired a $1 billion stake in Lowe’s Companies, Inc. (NYSE:LOW) at precisely the same time that J.C. Penney Company Inc (NYSE:JCP) CEO Marvin Ellison stepped down to become the CEO of Lowe’s is anything but a coincidence.

This is a sign that the veteran investor still has some good moves to make.

Ellison, like pretty much everyone that’s tried to revive JCP in recent years, ran out of patience and answers. Once Lowe’s came calling, it was only a matter of time before he stepped down having spent 12 years in leadership roles at Home Depot Inc (NYSE:HD) before jumping to JCP after being passed over for the CEO job in 2014.

Who better to catch up to Big Orange than someone who knows its playbook inside and out?

Ellison’s hiring is a brilliant move by Lowe’s board because no one will be more motivated to turn up the pressure on Home Depot than someone who might have gotten a raw deal back in 2014.

Stocks to Buy With Great Investors: Berkshire Hathaway (BRK.A,BRK.B)

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It won’t come as a big surprise to anyone who follows Warren Buffett and Berkshire Hathaway that the Bill and Melinda Gates Foundation’s biggest investment is 58.6 million shares in the massive holding company that represents almost half the $24.5 billion portfolio.   

The Gates’ are committed to Berkshire Hathaway’s success. If anyone cares about Buffett’s successor, it would be them.

Buffett continues to transfer his Berkshire Hathaway shares to the foundation. At present, Buffett’s BRK holdings are worth more than $80 billion and all of them are earmarked for the foundation upon his death.

It’s unlikely that the foundation will hold on to all of the shares it receives. In part this is for reasons of diversification, but it also is to put the money into worthwhile causes. It isn’t an overstatement to say the fate of millions of children and adults suffering under terrible conditions depends on the continued success of the company.

The fact that the foundation continues to hold as many shares as it does is a big thumbs up from one of the brightest technological minds (Gates) in modern history.   

Stocks to Buy With Great Investors: Micron (MU)

There isn’t a holding that comes close to the size of Appaloosa Management’s Appaloosa Management’s $1.8 billion stake stake in Micron Technology, Inc. (NASDAQ:MU), which represents almost 20% of its $9.7 billion in assets.

What do they say about betting on your best ideas? MU is clearly Appaloosa founder David Tepper’s best idea.

In March, I discussed which was better to buy, Micron or Western Digital Corp (NASDAQ:WDC).

Although I’ve recommended Micron in the past (last September I suggested that despite being up 58% year to date, MU stock still had plenty of gas in the tank) I came to the conclusion that although I liked MU, WDC was the better value play.

Since then, Micron stock is up 23% compared to WDC being down 4%.

In fairness to myself, here is how I ended my piece:

“Going with my gut, I see value stocks taking over in the second half of 2018. For this reason, Western Digital stock has more upside potential over the next 6-12 months,” I wrote March 28. “That said, if you own Micron stock, I wouldn’t sell. I am merely speaking to those investors considering one or both of these investments.”

While I still see that happening, Micron is on fire and not likely to be slowing down anytime soon having added $20 billion in market cap in May alone.

That’s why David Tepper’s a billionaire and I’m writing about it.

As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2018/05/great-investors-bet-big/.

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