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6 Stocks the Smart Money is Buying for 2024!


12m read
·Nov 7, 2024

In this video, we're going to reveal the six stocks that the world's greatest investors are spending billions of dollars buying. According to Warren Buffet, the single best way to find great investment ideas is to follow the investment decisions of elite investors. By understanding why investors like Warren Buffett, Bill Amman, Michael Bur, and Seth Claran make certain investment decisions, we, in turn, improve our own investing skills and knowledge.

Thankfully for us, our list of super investors here have given us a lot of content to work with. These kings of finance have been on quite the buying spree as of late. So, in this video, we're going to look at different investors and their biggest recent purchases to understand why these stocks are getting bought.

Make sure to stick around to the end of this video because who knows, you may just find your next great investment idea.

First up, we have super investor Carl Icahn and his purchase of JetBlue Airways, ticker symbol JBLU. For those of you who may not be familiar, JetBlue is a U.S.-based airline. The airline industry in the United States is dominated by a handful of big players: Delta, American, Southwest, and United. Collectively, these airlines control a whopping nearly 70% of the domestic U.S. airline market.

Instead of trying to compete against these big players in every airport in the country, JetBlue has taken a more focused approach. JetBlue has centered their operations in just six U.S. cities: New York, Boston, Orlando, Fort Lauderdale, Los Angeles, and San Juan, Puerto Rico. This concentrated strategy gives JetBlue the necessary scale in these cities to compete against the biggest players in the industry. In fact, JetBlue operates the most flights of any airline out of New York City's JFK airport and Boston's Logan Airport.

Carl Icahn made his name as what is known as an activist investor. Activist investors look for a company that is being potentially mismanaged or has made some very significant mistakes. These investors then buy up a significant amount of shares in that company and press management to make changes to make the business more profitable. This is exactly what Carl Icahn is doing with JetBlue. Icahn bought nearly 10% of JetBlue shares outstanding. He then successfully got two representatives of his investment fund elected to the airline's board, with the hope being that they will help turn the struggling airline around.

JetBlue has been unprofitable since 2020 and its stock has gotten hammered as a result. As of the making of this video, the stock trades at just $7 per share. This is down from $21 in the spring of 2021. This purchase is not Icahn's first investment in the airline industry. In one of his more infamous activist campaigns, he took airline TWA private in the late 1980s. The airline continued to struggle, eventually resulting in it being forced to file for bankruptcy. Hopefully for Icahn, this investment in JetBlue will have a more positive ending, but only time will tell.

Our next super investor on this list is the legend himself, the Oracle of Omaha, Warren Buffett. Buffett's most bought stock as of late has been oil company Chevron, ticker symbol CVX. Buffett has been spending billions buying up shares in Chevron over the past few years, and that trend continues. Buffett's company, Berkshire Hathaway, now owns a staggering nearly 7% of Chevron shares outstanding, which makes Buffett and Berkshire the largest non-index fund owner of the business.

Chevron is a so-called super major oil company, the term used to describe the largest oil companies in the world. These super majors are vertically integrated, meaning they have operations throughout the different segments of the oil and gas industry. You see, the oil and gas industry is broken up into three main segments based on where a particular oil company is located in the supply chain.

On one side of the industry, you have what is referred to as upstream. These are the companies that are involved in the exploration and production of crude oil and natural gas. Put another way, these are the companies that find where oil is located and do the work of extracting it from the earth. On the other side of the spectrum, you have the so-called downstream companies. These are the companies that are responsible for refining and distributing oil and gas products. One example of a type of company that is considered downstream are the gas stations where people purchase gasoline for their vehicles.

Sitting between upstream and downstream is the third segment called midstream. These are the operations that link the two sides of the spectrum and provide services such as transportation and storage. What makes Chevron so unique in the industry is that it has operations across all three of these segments, making it one of the largest and most powerful oil and gas companies in the world. This is also reflected in the sheer size and breadth of Chevron's business.

Chevron has a market cap of a whopping $280 billion. As of the making of this video in 2022, which was a great year for the oil industry, Chevron had $235 billion in revenue and generated a truly astounding $38 billion in cash flow. Just to put that cash flow number in perspective, that same year retailer Walmart generated $11 billion in cash and automaker Tesla did $7.5 billion. Whether Chevron continues to generate these impressive numbers will depend in large part on what happens with the price of oil. Given Buffett's large stake in the company, he appears to think these strong numbers will continue.

Our next stock on the list comes from the portfolio of super investor Seth Claran. Claran's investment fund's most recent large stock purchase has been in a company called Jacob Solutions, ticker symbol J. Jacob Solutions provides technical professional services. The company offers engineering and construction services, as well as scientific and specialty consulting for a broad range of clients, including corporations, organizations, and government agencies. Without spending too much time going into the specifics, the best way to sum up Jacob Solutions' business is that it is essentially a consulting company. It provides specialized advice to customers in exchange for a fee.

Generally speaking, consulting companies don't really have what is referred to in value investing as a moat. A moat is what separates the company from its competition and allows it to be a strong, highly profitable business. This raises the question about why Claran, universally regarded as one of the greatest value investors ever, would invest in Jacob Solutions if it doesn't possess a wide moat. The reason is because Claran's investment in Jacob Solutions isn't a normal investment; instead, it is a type of investment known as a special situation investment.

These special situation investments occur when there is an unusual event happening to a company that has the potential to change the future course of a business, materially impacting the company's value. This is what is happening with Jacob Solutions. The company is separating a portion of its business and combining it with a different company in the same industry. This transaction Jacob Solutions is engaging in is relatively complicated and involves a lot of moving pieces.

Here's how Claran describes special situation investments: "The attraction of some value investments is simple and straightforward—ongoing profitable and growing businesses with share prices considerably below conservatively appraised underlying value. Ordinarily, however, the simpler the analysis and steeper the discount, the more obvious the bargain becomes to other investors. The securities of high return businesses therefore reach compelling levels of undervaluation only infrequently. Usually, investors have to work harder and dig deeper to find undervalued companies, either by finding out hidden value or by comprehending a complex situation," as Claran just described.

The stock market likes simple, easy-to-understand stories. Special situation investments provide potentially attractive investment opportunities. This is because their complexity creates opportunity for investors willing to analyze and truly understand what is happening. Claran has made a career from these types of unique opportunities. Odds are Jacob Solutions could be added to Claran's list of big wins.

Next up on our list is super investor Bill Amman and his investment in Google, ticker symbol GOOG. Google is the most recent new stock to get added to Amman's highly concentrated investment fund. His portfolio consists of just seven companies, with Google now being the largest position at nearly 20% of the entire portfolio. One of Amman's favorite types of business models are what he refers to as royalty streams. These are businesses that get a percentage of an industry’s sales without having to invest significant amounts of money on physical assets.

Two businesses that demonstrate this business model in Amman's portfolio are franchise hotel chain Hilton and restaurant franchiser Restaurant Brands International, which owns popular brands Tim Hortons, Burger King, and Popeyes. Both Hilton and Restaurant Brands International make most of their money from franchises. This means that local small businesses put up all the money to open the restaurant or hotel and give the franchiser, in this case Hilton or RBI, a percentage of revenue. This is a beautiful and highly profitable business model for Hilton and RBI. They essentially get a royalty-like revenue stream on the fast food and hotel industry without having to spend money building out restaurants or hotels.

Google essentially has this on the internet. To demonstrate what I mean, just imagine you typed in the word "computers" in the Google search engine. Notice how these top results here are sponsored, meaning a company spent money to place their product in front of you as a consumer. These companies likely spend hundreds of millions, if not billions of dollars developing and manufacturing their product. Google didn't have to spend that money but is still able to make almost a royalty-like payment from companies that want to sell their products online. Essentially, this is a royalty-like revenue stream on e-commerce sales. Talk about a fast-growing and profitable business model!

Because of how great a business model Google has, the stock has always appeared to be expensive. That was until the threat of a new entrant created a buying opportunity. As Amman talked about in a recent podcast, Google was a business he admired but never got a chance to buy because the stock was expensive. That was until AI company OpenAI introduced ChatGPT. Investors were concerned that ChatGPT would ruin Google's business model; shares in Google plunged. However, Amman viewed this as a buying opportunity as shares traded at an all-time low P/E ratio of just 15 times. Amman's fund loaded up on Google stock and made it a core position.

While this investment is working out for Amman currently, it's far from a guaranteed success. For his entire career, Amman has avoided investing in technology companies, saying they were too difficult to predict. He has gotten burned on technology companies in the past, losing a whopping $400 million in Netflix stock in just a matter of months. Hopefully for Amman, this time will be different.

Next up on our list is Michael Bur's investment in HCA Healthcare, ticker symbol HCA. HCA is the largest for-profit operator of hospitals in the United States. The company operates around 175 hospitals in the U.S. and UK. It also runs another 125 freestanding surgery centers, urgent care, rehab, and other outpatient centers. The company has locations in about 20 states, with 45 of its hospitals located in the states of Florida and Texas alone. The facilities in Florida and Texas combined to account for approximately half of the entire company's annual revenue.

As crazy as it sounds to viewers outside the U.S., operating for-profit hospitals is a big business in this country. HCA has a market cap of a staggering $86 billion. Further, the company generated nearly $65 billion in revenue in 2023 and recorded a profit of $5.2 billion. Despite growing earnings per share at a double-digit rate for a decade, HCA stock trades at a relatively low multiple of earnings for such a high-growth company. Now, this has to do with concerns about the future of the healthcare industry in the U.S.

In America, if someone has health insurance, there are two broad categories they fall in. That insurance is either through the government, such as with Medicaid or Medicare, or through a commercial insurance plan. For commercial insurance, think of someone who has insurance through their employer. When a hospital provides care to a patient, how much revenue that hospital receives from the service depends in large part on whether that patient has government insurance or commercial insurance. Government insurance plans pay a hospital much less for the same service than a commercial insurance plan does. This means that patients with these government insurance plans are much less profitable for hospitals.

The concern some investors have is that over time, through government legislation, more and more patients will have government insurance. If this does materialize, this would likely significantly hurt the profitability of hospitals. Bur, however, is never one to shy away from controversial investments, having previously owned shares in weapons manufacturers and private prisons. It looks like you can add this one to the list.

The final stock on our list comes courtesy of super investor Monish P. It is Warrior Met Coal, ticker symbol HCC. Warrior Met Coal produces and exports metallurgical coal for the steel industry. Part of being a value investor involves being able to invest in areas of the stock market that are ignored and unloved by investors. The coal business definitely falls into that category. Coal has been one of the largest contributors to global carbon emissions since the Industrial Revolution. As a result, many governments are instituting a shift from coal to what they consider cleaner sources of energy. Additionally, many professional investors are restricted from investing in coal companies for environmental reasons. This has resulted in potentially attractive valuations for these overlooked companies.

When discussing what causes stock prices to move up or down, Monish P frequently uses a stadium analogy to demonstrate his point. Imagine the stadium of your favorite sports team. The stadium only has a certain number of seats for fans to be able to sit and watch the team. However, there are certain games that fans want to see more than others. Since there are more fans that want to see these games and there's only a fixed number of seats available, prices for these big games are higher.

This same basic logic can be applied to the price for a stock for a publicly traded company. There is a limited number of shares available to be purchased by investors. This is referred to as the number of shares outstanding. Think of this as the number of seats available in our stadium analogy. The number of investors wanting to purchase a given stock fluctuates dramatically for a variety of reasons. Think of this as the number of fans that want to purchase a ticket to watch the local sports team. This shifting demand to purchase shares can cause wide swings in a stock's price as it falls in and out of favor with investors.

In the case of Warrior Met Coal, the fact that the company operates in the unpopular coal industry limits the number of investors that would be interested in purchasing it. This is why the stock trades at a P/E ratio of just six times. Monish P likes the fact that the industry is unpopular because it allows him to buy the stock for cheap. For example, Warrior Met Coal trades at around $56 per share as of the making of this video. However, over the last seven years, the company has paid out dividends to shareholders totaling nearly $30 per share. Quite the reward for long-term owners of the stock.

Additionally, the company has a current market cap of around $3 billion. However, the company has a whopping nearly $750 million in cash sitting on its balance sheet. That means that roughly 25% of the company's market cap is sitting in its bank account in cash. Similar to his idol, Warren Buffett, Monish P is also a disciple of the father of value investing, Benjamin Graham. Graham has a saying that in the short run, the market is a voting machine, but in the long run, it is a weighing machine. Only time will tell what the ultimate value is for Warrior Met Coal, but Monish P is making a sizable bet on the name.

So, there we have it. I hope you enjoyed the video. Make sure to subscribe to the channel because it's my goal to make you a better investor by studying the world's greatest and fastest. Talk to you again soon!

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