The old investing adage that you can’t beat the market so just buy index funds misses the point. Warren Buffett, Peter Lynch, and a host of other money managers prove you can beat the stock market.
They don’t approach investing in the same way, but almost all of the most successful big-name investors have a common thread running through their stock picks: find good companies at good prices, and hold for the long-term. It’s when you start jumping in and out of stocks trying to time the market where you run into trouble.
So shadowing the investment decisions of the so-called smart money isn’t a bad idea. Don’t blindly follow their lead but use their stock purchases to help narrow the vast universe of stocks down to a more manageable level. Then dive in and do your own analysis.
The three stocks below just got big votes of confidence from some of the best investors in the market. Let’s see why they might have bought the stocks and why you might want to as well.
Key Points About This Article:
- Small investors can beat the market by adopting a long-term, buy-and-hold mindset.
- Following the lead of billionaire investors can help narrow the field of potential investments to some of the top stocks on the market.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
Lyft (LYFT)
Ride-share stock Lyft (NASDAQ:LYFT) recently got a lift from Appaloosa Holdings David Tepper. The billionaire hedge fund operator has $6.2 billion in assets under management (AUM) he bought 7.5 million shares of LYFT stock to bring his total holdings to just under 8 million shares. Notably, he sold almost all of his holdings in Nvidia (NASDAQ:NVDA).
With an average buy price of $16.76 per share, Tepper is actually sitting on a 30% loss in value as Lyft currently trades for less than $11.70 per share. That could be an opportunity for investors to beat the smart money.
The second-largest ride-share outfit reported a solid trend higher in the number of riders and rides in the second quarter. That allowed adjusted EBITDA margin to improve by 120 basis points compared to last year.
While Lyft doesn’t have the same scale as Uber Technologies (NYSE:UBER), it is guiding towards a 14% increase in third-quarter bookings. With unemployment remaining dicey and creating a headwind for the rest of the year and into 2025, at 12 times earnings estimates, a fraction of sales, and less than 13 times free cash flow, Lyft stock is heavily discounted and worth considering.
GE Vernova (GEV)
Renewable energy stock GE Vernova (NYSE:GEV) is new to the market after being spun off from the old General Electric in April. Now called GE Aerospace (NYSE:GE), GE broke itself into three parts with the third leg spun off last year into GE HealthCare Technologies (NASDAQ:GEHC).
GE Vernova focuses on gas, nuclear, hydro, and steam power; wind; and electrification, which offers electric grid solutions. The stock opened at $115 per share on its first day of trading and is up 57% to $180 per share since.
Investment firm behemoth Blackrock (NYSE:BLK) bought 18.1 million shares in the second quarter valued at $3.1 billion. It likely means the firm was an early buyer of shares. But with an average buy-in price of $154 a share, it is sitting on just an 18% gain.
Now that GE Vernova is free of the legacy business, it can concentrate on improving profit margins‘ that match its leadership position in markets such as wind power and gas power. As the ongoing shift to decarbonization continues, GEV stock stands to benefit from the trend.
Apple (AAPL)
Despite Warren Buffett being a big seller of Apple (NASDAQ:AAPL) stock in the second quarter, there were plenty of others to step in and buy the shares. The biggest buyer during the quarter was trading group Jane Street Group, which picked up 15.8 million shares at an average price of around $187 per share. It now owns almost $4.4 billion worth of AAPL stock.
That still pales in comparison to Buffett’s Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B), which still owns 400 million shares worth $90 billion, even after cutting its holdings in half.
Apple, though, still holds tremendous growth potential. The new AI-infused iPhone is due out in another month or so, which ought to launch a new upgrade cycle in the smartphone. The iPhone became the top-selling mobile device worldwide last year after 14 years of playing second fiddle to Samsung. Apple also integrated artificial intelligence capabilities throughout its iOS systems for iPads and Macs that should reinvigorate sales.
Because of its loyal fanbase, AAPL stock at $224 a stub is an intriguing investment opportunity.
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