Top 5 Stocks the Smart Money is Buying for 2022

Wouldn't it be great to know the five stocks the world's biggest and best super investors have been buying for 2022? People like Warren Buffett, Charlie Munger, Ray Dalio, Bill Ackman, Guy Spier, Monash Prebride, Bill Gates, Seth Klarman, Lee Liu, Michael Burry, the list goes on. Well, guess what? We can actually look at what stocks these super investors have been buying, and that's exactly what we're going to be doing in this video, thanks to the power of the 13F filing. I'm literally going to show you the five most popular stocks for 2022 amongst these great super investors. So, with that said, let's get started.

Now, before we get started, I just wanted to touch on the fact that just because the super investors have bought these five stocks doesn’t mean that they're going to be great stocks for you. Each of these investors has different goals, different investing time frames, different risk profiles, different strategies; and because of this, that means, no, you should not just go out and buy these stocks just because the big investors are buying them. But what it does give you is it gives you a bit of an ideas list that you can then take away and research for yourself. But with that said, let's start at number five.

So, the fifth most bought stock by our super investors leading into 2022 was Comcast. Comcast is a very large, mature, U.S.-based global media company. They have three core business segments: that is Comcast Cable, NBC Universal, and Sky. In 2021, cable made up 53% of their revenue, NBC Universal made up 31% through media studios and theme parks, and then Sky accounted for the remaining 16% of their revenue. So, the cable communications business provides broadband, video, and wireless services to residential customers in the U.S. under the Xfinity brand, and it also provides these services to businesses as well. As of the end of 2021, this business had 31.7 million residential customers and 2.5 million business customers.

Then, NBC Universal is broken up into the three business segments: Media consists of TV and streaming platforms, including all their cable networks, broadcast networks, local television stations, and of course, Peacock, which is their streaming service with 24.5 million active accounts. Then, Studios is their television and film studio production and distribution operations. Finally, Theme Parks includes Universal-branded theme parks in Orlando, Hollywood, Osaka, and Beijing.

Then, finally, Sky, their third major business segment, is a big entertainment company in Europe known for the Sky News broadcast network and Sky Sports networks. So, Comcast is obviously big, it's mature, it's diversified, and the financials show this. Revenue is just growing at an average of 12% per year over the past 10 years. Earnings per share is growing at 16%. Free cash flow is growing at about 11% per year. But you know, honestly, I don't think the super investors are looking at this one being the next Tesla. Comcast is already a very big, profitable business that knows what they do works. They have a stable broadband and cable business, they have very well-known media assets and theme parks, and they own Sky.

So, they make a lot of money just doing the same stuff year after year, and they consistently repurchase stock and pay out about 30% of their net income as a dividend. So, they seem to have transitioned from that growth phase to the returning capital to shareholders phase. And with the stock having fallen 24% since last September, to give it a P/E of just 15, I think that that has enticed a lot of super investors to take a position and enjoy the cash flows.

So then, from there, the fourth most purchased stock by our super investors going into 2022 was Meta Platforms, so Facebook. And I am not surprised in the slightest with this one. So, of course, Meta is the owner of Facebook, Instagram, WhatsApp, and Messenger, and they make 97% of their revenue simply selling ads. Meta is an incredibly powerful business; they have an incredibly strong network effect with each one of their apps, and this has led 2.82 billion people—yes, 36% of the Earth's population—to log onto one of Facebook's apps every single day. Because that's where all the people are, it's also where the advertisers are. So much so that Meta has been able to grow their revenue an average of 41.3% per year over the past 10 years.

They've also maintained a 10-year compound annual growth rate of 46% for earnings per share and 45% for free cash flow. So, it's an amazing business: no debt, $16 billion in cash, 10-year median return on invested capital of 19.3%. It's just a really solid business. But have a look at the stock, down 38% since their latest earnings release on the 2nd of February. So, what's so different now?

Well, here's the thing: their business is still the same; it's not 38% worse than where it was three weeks ago. The internet didn't blow up. It still has a big fat moat, it still has a very skillful management team, and it still has a rock-solid balance sheet. The reason the business is now valued 37% or 38% less than a few weeks ago is simply what Facebook said in that earnings release.

So, firstly, their user growth stagnated. A bit of a rough thing to judge them on, considering what we're just talking about before. But beyond that, they also guided in Q1 that they expect $27 to $29 billion in revenue, which is a little bit lower than the $30.15 billion that the analysts were expecting. It also indicates 3% to 11% year-over-year growth instead of the huge, you know, 20% to 30% year-over-year growth numbers that Facebook shareholders have become used to. Facebook said the reasons for this reduction are mainly due to advertisers shrinking their advertising budgets to hold onto more cash as they navigate supply chain issues. There's also a shift in user trends more towards reels, which aren't as profitable, and then they also cited Apple's new iOS privacy changes.

But you know, I think what a lot of these super investors would be thinking right now is, you know, even if there are headwinds, this business is still very, very strong, and it's now literally 38% cheaper than what it was a month ago. So, in their eyes, they're probably still seeing pretty solid long-term returns even by buying into it now. So, overall, that's Meta.

Then, coming in at number three is Mastercard, and interestingly, the number two most bought stock is Visa. So, both of these stocks had 11 super investor buys in the quarter, and that was probably because both of these stocks had slumps in the fourth quarter. But honestly, it never surprises me to see these two businesses amongst the most bought stocks by the super investors, and the reason for that is quite simply because these businesses have huge competitive advantages.

So, let me explain. So, Visa and Mastercard are both payment facilitators. So, when you go to buy something with your Visa or Mastercard-branded payment card, it's Visa and Mastercard's job to connect the acquirer with the issuer—so, aka, connect the grocery store's bank account with your bank account—and facilitate the transfer of money across to complete the transaction. So, they have the technology to facilitate these payments accurately, quickly, and safely, and they charge a very, very, very small fee for every transaction that they facilitate.

But this tiny fee definitely adds up because, in 2021, Visa alone saw 232 billion payments and cash transactions, equating to an average of 637 million transactions per day. So, as you can tell, these companies don't need to take much of a cut per transaction to make a lot of money. And here's the other thing: because they are the facilitator and not the actual bank, they also don't bear any of the credit risk from all these transactions, which is a big plus.

Over time, this very helpful service of payment facilitation from both the merchant's point of view and also the consumer's point of view has helped Visa and Mastercard gain a very strong network effect. Because these companies were the first in this space originally with Bancomer Card and MasterCharge Card, this has meant that their network effects have always kept them far ahead of all the competitors in their industry. In 2020, Visa enjoyed a whopping 52% market share, with Mastercard at 22% and with American Express, the next largest, at 9%. You can see that it's just not even close.

With Visa stock declining as much as 18% in Q4 and Mastercard's general decline towards the start of December, it doesn't really surprise me that some of the super investors bought into both of these businesses—a move that so far would have already seen pretty good returns.

With that said, let's now move on to the most bought stock by our super investors last quarter, and that was Amazon. Twelve super investors bought Amazon last quarter, and I'd definitely bet lunch that if they were buying at the end of last year when the stock was fairly flat, they would definitely be buying after what happened to the stock in January. The stock went down about 18% right at the start of the year and is still down about 12% year-to-date.

Honestly, with Amazon, this one I have a little bit of mixed opinion on. You know, on one hand, it's expensive. It is less expensive than it has been previously, but it's still as expensive; it's got a P/E of about 50. But then on the other hand, you know, I've got a monitor voice in the back of my head saying, you know, it's all about the long-term compounding.

If you look at Amazon, Amazon is definitely one of the best examples of long-term compounders that exist out there. You know, if you had passed on Amazon 20 years ago because it had a P/E of 50 or 100 or 200, you would be kicking yourself now. They've been the ultimate example of make some money, reinvest that money, and just keep the business compounding internally.

This has led them to a 10-year compound annual growth rate of 25.6% for revenue, 47.1% for earnings per share—so, very impressive numbers. But interestingly, their ROIC actually isn't that high, and that's because, unlike a business like Alibaba, Amazon made the strategic decision to have complete control over their entire user experience from end to end.

When you make big investments in, say, distribution and delivery—the delivery side of online shopping and e-commerce—that's much lower margin than just, say, running an app or running Amazon Web Services. But also, they may find that those investments will pay off in the long run, as perhaps a fantastic end-to-end experience will encourage much more people to start using Amazon, which could potentially lead to higher profitability. So, time will tell on that decision; but yes, when it comes to investing in Amazon, you are definitely in it for the long-term compounding ability, and clearly, a lot of super investors like what they see.

We also can't forget that a lot of investors are now looking beyond the e-commerce side of Amazon and increasingly seeing it as a big player in cloud services, and that's what they see out into the future. But overall, guys, with that said, they are the top five buyers from our super investors for Q4 2021.

So, thanks very much for watching the video. Make sure you leave a like on it if you enjoyed it, and leave a comment as well. I'd love to hear what's your take on each of these five businesses. Do any of them already sit in your portfolio? Do you feel like the super investors are on the money, or do you feel like they're missing something about any of these businesses? Let me know; I'd be really interested to hear your thoughts and opinions down in the comments section below.

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