Top 5 Stocks the Super Investors Keep Buying!

Well, here we are back again. It's that time of the year! The first NF filings have been released, so in this video we're going to look at the top 10, top 10, but really the top five stocks the best investors in the world were buying leading into 2023. There's a lot to cover in this video, so to make sure I do actually go into sufficient detail to make this video actually worthwhile, I'm going to very quickly fly through stocks 10 through six just to kind of set the scene. Then we can spend a lot more time on the actual top five stocks. So, with that said, let's get started. Claude, get yourself ready on the Motion Graphics!

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Coming in at number 10, we have Capital One Financial, a big bank and credit card provider operating in the US, Canada, and the UK. Then at nine is Brookfield Asset Management, which was notably bought by the one and only Monish. Although, this one is a bit of a false positive as Brookfield Asset Management was spun out of Brookfield Corporation in Q4, to which Brookfield Corp shareholders got given Brookfield Asset Management shares. However, Data Roma is still registering those as new buyers even when they aren't really, but that's Brookfield.

Going on to number eight, we have Bank of America, of course, the big behemoth American Bank that sits as the second largest position in Warren Buffett's portfolio. Then in number seven, we have Apple, one of the world's largest consumer electronics. And take note, look honestly, if you don't know what Apple does, I suggest you just buy an index fund and be done with it. But yes, Apple had eight super investors buying during Q4 as the stock continued tanking towards the end of last year.

Then coming in at number six, we get to Salesforce, who sell the world's number one customer relationship management platform. Their stock also cratered towards the end of 2022, so not surprising that eight of our super investors were buying it. But now, with that all said, let's take our time to talk about the top five stocks in a bit more detail.

So coming in at number five, we have Disney, with eight super investor buyers for the quarter. Disney's stock fell to a 52-week low of 84 dollars per share towards the end of Q4, which is probably the number one reason that we saw it appear on this list. The biggest piece of news that came out of Disney during Q4 was the announcement that former Disney CEO Bob Iger would be returning to the top position for another two years, replacing Bob Chapek.

This was obviously pretty happy news for most Disney shareholders, as unfortunately, Disney suffered a very turbulent few years under Bob Chapek's leadership. However, in fairness, it wasn't so much him as it was just a very turbulent time to try and manage one of the world's largest entertainment companies. But nonetheless, Bob Iger is back, and he has a very big job to do over the next few years.

While Disney does seem to have put the worst of the COVID blues behind it, they are still faced with a macroeconomic environment that's encouraging consumers to cut back on discretionary spending, which unfortunately is every product and service that Disney offers. To combat this impending doom, Bob Iger recently announced that they'll be lowering costs by cutting over 7,000 jobs.

Also, and I think this is more a plan to restore investor confidence than anything else, they also announced the potential to restore Disney's dividend at some stage in 2023. Bit interesting! So all eyes are now on Bob Iger's plan to restructure the company for the future, which may also include selling off some of Disney's businesses to make it a leaner, slicker machine for the future. For example, there's a lot of speculation that ESPN might actually be up for grabs, as recently Bob Iger announced that Disney's two revenue segments, which are Disney Media Entertainment and Distribution and then Disney Parks, Experiences, and Products, will now become three revenue segments with ESPN forming its own revenue segment.

Why? Yeah, it's a good question. But with all that said, the stock falling a lot in Q4, Bob Iger coming back to clean the place up, and with Disney now over most of those COVID blues, I think that is just a recipe that enticed our super investors to buy during the last quarter. Turning to Simply Wall Street, we can also see that their inbuilt discounted cash flow model shows that Disney is potentially undervalued right now as well. But of course, that doesn't mean you go out and buy it. What it does mean is that maybe Disney is one of those stocks that you spend a little bit more time researching over the next couple of weeks.

I also wanted to take this opportunity to say thank you to Simply Wall Street for sponsoring this video. It's a really, really handy stock analysis tool that helps you look at everything from valuation metrics to future growth expectations to past performance, financial health, and a whole lot more. Also, if you wanted to check out my Discover collection analyzing the top five super investor buyers for 2023 that we're talking about in this video, make sure you check out the link down in the description. Also, if you wanted to sign up, you'll also get an extended 14-day free trial and 40% off if you do decide to buy the Premium plan that I use in all my videos, and you use that link down below.

So thank you very much to Simply Wall Street on that one. So that was Disney in at number five. But then coming in at number four, we have Microsoft. Microsoft was bought by 11 of our 79 super investors last quarter. Why? Well, again, I think it's because as the broader market sell-off was dragging these technology stocks down, our long-term-minded super investors, well, they just see that as an opportunity. You know, if they think that Microsoft trades below intrinsic value, then they're going to buy it. They're not traders; they just want to buy it because it's a solid business and hold it for a long period of time.

But beyond the share price movement, of course, there was some big news for Microsoft in Q4. That was, of course, the release of OpenAI's ChatGPT on the 30th of November, which Microsoft has a decent stake in. Microsoft invested a billion dollars in OpenAI back in 2019 and have just recently announced a further 10 billion investment. Their investment in OpenAI is a strategic partnership aimed at advancing the development and deployment of artificial intelligence technologies.

Through its investment in OpenAI, Microsoft gains access to some of the most advanced AI research and development capabilities in the world, and the partnership allows Microsoft to leverage OpenAI's expertise in AI research and development to improve its own products and services, as well as develop new AI-powered products and services that can benefit its customers. As a demonstration of ChatGPT's potential, you probably might have guessed that last paragraph was indeed entirely written by ChatGPT.

So there's no doubt that this has absolutely captured the world's attention, and Microsoft is in a very strong strategic position to work with OpenAI to bring this next big technology to market properly and also to monetize it. ChatGPT's functionality has already been integrated into Bing, which has seen a noticeable increase in its popularity since that release. There are already plans to create ChatGPT Plus, which looks as though it'll cost around 20 per month. So that's the hype around Microsoft at the moment.

But beyond the AI side of things, it's also just a great business with many software-based switching modes. However, having said that, Simply Wall Street does note that it's not on a fire sale right now. But in my opinion, it's still a really cool business, and it's definitely worth at least reading up on. Okay, now coming in at number three, we have a very controversial name, and that is of course Meta. So Meta was bought by 13 of our super investors leading up to 2023, including Seth Klarman, who increased his holdings by 150%.

So where, oh where, do we start with Meta? Well, firstly, it did sink like a stone in Q4; it was down to a 52-week low of 88 per share. So it goes without saying if our super investors were buying it heavily in November, they are already sitting very pretty now; they're still currently at 170 dollars just a few months later. But even with that, the story with Meta is still very much the same. They are facing a lot of headwinds right now. Of course, Mark Zuckerberg is still committed to the metaverse VR/AR project, which isn't too good for investors at the current moment.

Meta's losses from Reality Labs hit 3.7 billion in Q3 last year and in Q4 rose up to 4.3 billion. Beyond that, looking at their annual capital expenditures in 2022, total capex hit 32 billion, up from 19.2 billion the year before. So a lot of money is being invested right now but with nothing to show for it yet. On top of that, we're also seeing the macroeconomic environment hit Meta pretty hard. No, they aren't struggling to pay back their debts or anything like that, but what is happening right now is that advertisers are pulling back on their marketing budgets, which reduces Meta's revenue.

Their 2022 revenue only grew four percent on a constant currency basis versus 2021. While they saw an 18-year-over-year increase in ad impressions, the cost per ad fell 16. This is due to two main factors: less advertisers spending less money, and then also the shift in content consumption towards short-term video, which is a lot more difficult for Meta to monetize. So there's a lot of short-term headwinds, but that obviously hasn't scared our long-term-focused super investors who clearly bought up a lot in Q4.

I'm not surprised, because if we turn to Simply Wall Street, they have fair value estimated at around 200. So if the super investors were looking at, you know, 88 per share in Q4, obviously it reflects a very steep discount. Of course, you'd never buy based on what any website says, but it does seem to suggest that there was a pretty decent discrepancy between price and value.

Okay, now moving on to the second most bought stock by super investors in Q4, it was Amazon. And the theme continues! Like many other technology stocks at the end of last year, Amazon's stock crashed, and it crashed back down to levels not seen since 2020. So why? Well, the thing you have to appreciate with Amazon is that their business is very much dependent on the spending appetite of the average consumer.

You know, when lockdown started and stimulus checks were being handed out, Amazon really thrived. You can see that big uptick in their revenue. But when disposable income drops, you know, inflation spikes, and costs rise, Amazon doesn't do so well. What we've seen over the past few years is Amazon really invests quite heavily in their business to try and expand to accommodate for that 2020-2021 level demand. So they've gone from 16.9 billion in capex in 2019 to now over 60 billion dollars in the last year.

But with all that spending has occurred, what we've seen is a real drop-off in consumer spending, which makes things a bit more difficult. So the retail side of their business is in a bit of a tough spot. However, one growth engine that is saving them right now is AWS. While their North America and international retail segments both suffered lower operating income in 2022, their AWS segment reported 23% growth.

So there are definitely still some positives for Amazon, even in this environment. Plus, Simply Wall Street still shows them relatively undervalued at the current time, so this stock might be one that warrants a little bit of further investigation. And with that said, we finally hit the top spot! The number one most bought stock by our super investors leading into 2023 was drumroll please... it was Google!

Google also saw their stock decline across Q4, and interestingly, it hasn't actually recovered all that much, even sitting here now at the start of March. Google, despite juggling many various businesses, of course derives most of its profit from advertising. And like Facebook right now, they're being hit with the headwind of advertisers pulling back on their advertising budgets. As you can see in Q4, advertising revenue actually shrunk year over year, and that's pretty rare.

So revenue didn't grow at the 20 to 30 percent we're used to, but from that same chart, one thing that did grow was headcount, up from 156,000 in 2021 to 190,000 by the end of 2022. It really is a similar story across the board. The macroeconomic environment causes less spending by consumers. This leads to less revenue for Corporate America, which in the case of Google leads to businesses spending less on marketing, which then impacts Google's advertising revenue.

So lower revenue, but at the same time, expenses are up because all these businesses look to expand after a huge 2021. That's why at the moment a lot of companies, you'll see them increasing headcount a lot year over year, but then at the same time, you're seeing media reports of basically every company under the sun just doing layoffs.

The lucky thing for Google, however, is that they're not really in a stressful financial situation at all, which is because of their rock-solid moat and what that's done to their balance sheet over time. For example, Google has 113 billion dollars worth of cash or short-term marketable securities on their books right now, and while that is 26 billion dollars less than what they had last year, it's still 113 billion dollars!

Compare that to the 13 billion they have in long-term debt, and actually, they only have 109 billion in total liabilities. You can start to get a sense of just how much of a financial fortress Google really is. So that's the story with Google, and turning to Simply Wall Street, that discounted cash flow does hint at potentially discounted valuation. And with Lee Lou dumping a lot of his cash into the stock in Q4, I know this is one that I'll certainly be revisiting over the next few weeks.

But anyway, guys, with that said, they are the top five super investor buyers for Q4 2022. I hope you guys enjoyed. Leave a like on the video if you did, subscribe if you'd like to see more. With that said, I'll see you guys in the next video.