AMZN - 2 Stocks Billionaires Are Buying Again and Again
2024-06-11 21:30:00 ET
Billionaire investors are billionaires for a reason. These investors use their funds properly to find the best investments that can turn their millions into billions. And while the average Canadian investor isn’t likely to suddenly become a billionaire by investing there, they could have the potential to make you a millionaire.
Today, let’s look at the strategies used by billionaires and, of course, three stocks that billionaires keep buying over and over again.
The strategy
While we certainly cannot speak for every billionaire, there are strategies that billionaires, on average, like to use. Billionaire investors typically seek several key qualities when identifying good investments. Firstly, they look for businesses with a strong competitive advantage, often referred to as a “moat.” This could be a unique product, a powerful brand, proprietary technology, or exclusive access to resources that set the company apart from its competitors and protect its market share.
From there, financial health is another critical factor. Billionaire investors meticulously analyze a company’s financial statements, focusing on metrics such as revenue growth, profit margins, return on equity, and cash flow. They prefer companies with a track record of consistent earnings and strong balance sheets, which indicate the ability to withstand economic downturns and invest in future growth.
But it goes beyond finances. Management quality is also a pivotal consideration. Successful investors often seek companies led by experienced and capable management teams with a clear vision and a proven ability to execute their strategies. They believe that competent leadership is essential for navigating challenges, driving innovation, and sustaining growth. So, without further ado, here are two to consider.
Apple stock
Of course, one of the favourite investments that billionaires gravitate towards is Apple ( NASDAQ:AAPL ). But why? Apple stock has long been a favourite of Warren Buffett, the “Oracle of Omaha.” Through his investment firm Berkshire Hathaway , Buffett has accumulated a significant stake in Apple over the years. Apple’s strong brand loyalty, innovative products, and robust ecosystem provide it with a formidable competitive advantage. Its consistent revenue growth, high profit margins, and substantial cash reserves make it a financially healthy company.
Apple consistently generates substantial revenue, driven primarily by its iPhone sales but also bolstered by its services segment, which includes the App Store, Apple Music, and Apple Pay. In recent years, Apple has achieved annual revenues exceeding US$365 billion, with a net income of over US$90 billion, reflecting its profitability.
As to management, Apple stock’s management strategy is deeply rooted in innovation and creating high-quality products that deliver a seamless user experience. Under the leadership of Chief Executive Officer (CEO) Tim Cook, Apple has continued to innovate within its existing product lines (iPhone, iPad, Mac) while also expanding into new areas like wearables (Apple Watch), services (Apple Music, Apple TV+), and health technology. The company invests heavily in research and development, ensuring a steady pipeline of new products and features. Altogether, billionaires are likely to continue investing in this top stock.
Amazon
Amazon ( NASDAQ:AMZN ) is another stock frequently favoured by billionaire investors, including Jeff Bezos (its founder) and institutional investors like Bill Gates through the Bill and Melinda Gates Foundation. Amazon’s dominance in e-commerce, its expansive logistics network, and its leadership in cloud computing through Amazon Web Services (AWS) create a significant competitive edge.
Furthermore, Amazon stock’s revenue has been growing rapidly, with annual revenues surpassing US$470 billion. The company operates on thin profit margins compared to Apple, with net income typically around US$20 billion. However, Amazon’s focus on reinvestment and expansion often prioritizes growth over immediate profitability.
Finally, under the leadership of founder Jeff Bezos and now CEO Andy Jassy, Amazon has consistently innovated and diversified its business model. The company has expanded beyond e-commerce into areas such as cloud computing (Amazon Web Services), entertainment (Amazon Prime Video), and smart home technology (Alexa and Echo devices). This diversification reduces reliance on any single revenue stream and drives growth across multiple sectors. So, again, these two stocks may already be up in share price, but Canadian investors can still get in on the action.
The post 2 Stocks Billionaires Are Buying Again and Again appeared first on The Motley Fool Canada .
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Amazon, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy .
2024