Top 5 Stocks the “Super Investors” Are Buying in 2022 | Stocks to buy (2022)

There's an old saying that goes like this: imitation is the sincerest form of flattery. This, for sure, applies to investing. Legendary investor Monish Pabrai puts it a little more direct: he says that there is no shame in getting your investment ideas from copying well-respected investors. In fact, Monish refers to this as shameless cloning.

In this video, we are going to do a little bit of that so-called shameless cloning by looking at what stocks great investors are buying for 2022. Make sure to stick around till the end of the video because you might just get an idea or two for your own portfolio. And real quick, make sure to like this video and subscribe to the Investor Center if you aren't already because a ton of research goes into these videos, and it really helps out the channel.

Now, let's get into the list. The reason we're able to get this information is that investors who manage what is considered to be a sizable amount of money have to reveal their portfolio every three months. This is according to rules set by the Securities and Exchange Commission, or SEC for short. The SEC is a government agency whose primary goal is to enforce laws against market manipulation. Because of this rule, we get to see exactly what stocks prominent investors are buying and selling.

Here are the top five most bought stocks by our list of super investors. The number one most bought stock by our group of super investors was Amazon, ticker symbol AMZN. Amazon is one of the world's largest companies, with a staggering market cap of 1.6 trillion dollars—yeah, that's trillion with a T. The company had total revenue of 470 billion dollars in 2021. This was a nearly 22% revenue increase from the year 2020, which, as I'm sure you know, was a huge year for online shopping as everyone was stuck at home.

One of the most impressive things about Amazon is that even despite its huge size, it's still able to grow so fast. Usually, as companies get larger, their growth rates start to slow down materially. Online sales bring in more than 50% of Amazon's revenue. Third-party seller services accounted for over 20% of revenue. Its fast-growing and highly profitable cloud computing platform, AWS, accounted for about 15% of revenue. Subscription services, advertising, and physical stores represent the remaining revenue.

Amazon is currently trading at a P/E ratio of around 70 times. At first glance, it seems like a very high number compared to the S&P 500, which is currently trading at a P/E ratio of around 23 times. However, for Amazon, its P/E ratio was nearly 250 times in the beginning of 2018. Something else to keep in mind is that Amazon is growing its earnings incredibly fast. In fact, the company is projected to triple its earnings over the next few years.

The company had earnings per share of 6.31 dollars in 2021, and by 2025, that is projected to grow to over 132 dollars per share. The reason that its P/E ratio has declined dramatically is that even though Amazon has grown significantly over the past 18 months, its stock price has remained unchanged. It is currently trading at around 3,200 dollars per share—the same price it was trading at in the summer of 2020.

Next up on the list is Mastercard, ticker symbol MA. Mastercard is one of the world's most recognizable brands, but surprisingly, most people don't know how the company really makes money. When most people think of Mastercard, they think of credit cards; though it's true that the Mastercard brand is one of the top worldwide labels for debit, credit, and prepaid cards, Mastercard doesn't really consider itself to be a credit card company.

A large majority of Mastercard's revenue comes from fees paid by its customers who are not everyday consumers, like you and me. Rather, Mastercard's customers are financial institutions such as banks that pay a fee to issue credit and debit cards with the Mastercard brand. The company has a market cap of 340 billion dollars and a P/E ratio of around 42 times. Running a payments network does not require a ton of investment in physical assets such as factories, and as a result, Mastercard produces a ton of cash flow.

In fact, the company produced 9.1 billion dollars of free cash flow in 2021. At 18.8 billion dollars in revenue, this is a free cash flow margin of 48%. To put in perspective just how high that is, let's compare that to another company with a similar market cap—Home Depot. Home Depot had revenues of 151.2 billion dollars last year and free cash flow of 14 billion dollars. This is a free cash flow margin of 9.2 percent. This just goes to show that Mastercard's business model allows it to produce a ton of cash, and this is something that is valued very highly by investors.

There's an old saying that goes: cash is king. But for stock market investors, cash flow is king—or, according to this pillow on Carl Icahn's house, happiness is positive cash flow. Happiness is also good investment returns, which is becoming increasingly difficult in today's market. Not only is inflation at its highest point in 40 years, but real returns have been negative since the end of November 2021. Restructuring your portfolio has never been more difficult or more crucial.

So where can you turn in light of this new normal? Certain platforms have arisen, giving access to the top alternative asset classes, and there's one in particular that seems like a no-brainer to me. It's called Masterworks, the sponsor of today's video. Masterworks.io has solidified itself as the platform for investing in contemporary art. They let you access their exclusive investments from names like Banksy, Monet, and other iconic artists for just a fraction of what billionaires pay to purchase.

In fact, roughly two-thirds of billionaires allocate between 10% and 30% of their overall portfolio to art. It makes sense, after all; contemporary art prices outpace the S&P 500 total return by 164% from 1995 to 2021 and have exhibited the lowest correlation to equities of nearly any major asset class. If you want to get on it early, all you have to do is go to masterworks.art/investorcenter, create an account, and check out what they have and invest in their offerings. And my subscribers get to skip their waitlist at the special link in my bio.

The next stock that our list of super investors are buying is Meta Platforms, ticker symbol FB, or maybe you know it by its old name, Facebook. This is probably the second most controversial stock on this list. Some people think this stock is a screaming buy, while another group thinks that the stock is going to continue to tank. The only stock more polarizing than Meta is the last stock on this list, which has met a beat by just a little bit.

Meta is most well-known for what it refers to as its "family of apps." These include Facebook, Instagram, Messenger, and WhatsApp, with over 3 billion monthly active users. Pretty much everyone who has access to the internet uses one of these apps. The company generates substantially all of its revenue from selling advertisements to marketers. Its ads enable marketers to reach people based on a variety of factors including age, gender, location, interests, and behaviors. As I'm sure you can imagine, being able to target potential customers based on these specific characteristics makes these types of ads very valuable for companies looking to sell products or services.

Meta's stock is down over 40% from its highs back in September 2021. This is over concerns investors have that competitors such as TikTok are taking away customers from its family of apps. Also, investors are worried that as social media transitions towards short videos, such as TikTok's and Instagram Reels, social media companies won't be able to sell as many ads as before. Another big concern among investors is that the company is losing billions of dollars as Meta is betting big on the metaverse. Facebook Reality Labs, which is the business segment that includes the augmented and virtual reality consumer hardware and software, lost 10.2 billion dollars in 2021.

These concerns caused the stock price to go down from a high of 380 dollars in September 2021 to less than 200 dollars per share in March of 2022. As a result, the P/E ratio has come down from 35 times in 2017 and is now at an all-time low of 15.7 times. This is a lower P/E ratio than that of the S&P 500, and this low P/E ratio is why a lot of investors are saying that the stock is too cheap to ignore.

The next stock that our list of super investors are buying is Visa. Now, I won't spend too much time describing Visa's business model because it's awfully similar to that of Mastercard, which we discussed earlier. Visa and Mastercard essentially have what is referred to as a duopoly in their industry. This is where an industry is essentially controlled by two big players, and every other company is fighting for the small percentage of the market the two big players don't control.

Another example of a duopoly is Coca-Cola and Pepsi in the soft drink industry. In my research for this video, the stats that I came across say that Visa and Mastercard combined control about 80% of all purchases made on credit and debit cards in the United States. Visa has around sixty percent of the market, while Mastercard has around thirty percent market share. I honestly can't think of any other industry where the top two players have such a huge market share.

Visa's stock price is currently around two hundred and twenty dollars per share, down from a high of around two hundred and fifty dollars in the summer of 2021. If you recall, Mastercard has a market cap of 340 billion dollars. On the other hand, Visa's market cap is pushing 500 billion dollars, which reflects Visa's higher revenues as Visa has a larger market share. Visa is also a cash-generating machine. In 2021, Visa had revenue of 25.5 billion dollars and generated free cash flow of 14.5 billion dollars. This is a staggering free cash flow margin of 56.9%, which is significantly higher than that of Mastercard and frankly, is probably the highest free cash flow margin of any business I have ever come across.

This is because with Visa's business model, there are not many costs associated with operating the business relative to the revenue that the company generates. This allows the company to generate a ton of cash. The next stock on our list is one of the most polarizing stocks I have seen in my career. There are two sides to this debate: one group that sees it as a once-in-a-generation buying opportunity and the other side that sees the stock as having a significant risk of going to zero. That stock is none other than Alibaba.

Alibaba is the world's largest e-commerce company and has been described as the Chinese Amazon. One very prominent investor has made a large bet on the company; that investor is none other than the legendary Charlie Munger. It was one of the first stocks Munger had bought in years and was noteworthy enough that I made an entire video on it that you can check out here: "The Bold Case for Alibaba.” The bold case for Alibaba is pretty straightforward. China is an absolutely massive country with 1.4 billion people.

Additionally, as the economy of China continues to grow, each of those 1.4 billion people is going to have more money to spend on average. The thinking goes that as the country gets richer and the economy grows, companies like Alibaba will benefit greatly from that growth. This has played out so far, with Alibaba growing its revenue: 58% in 2018, 51% in 2019, 35% in 2020, and 41% in 2021. Another area the buyers of Alibaba stock would point to as the great reason to invest is its valuation.

Alibaba currently trades at a P/E ratio of just 15 times and has a market cap of 290 billion U.S. dollars. Compare that to Amazon, which has a P/E ratio of 69 times and a market cap approaching 1.7 trillion U.S. dollars. On the other hand, we have the bears—these are people that wouldn't invest in the stock and would be sellers. They would make the argument that the stock is cheap for a reason. Many investors view the biggest risk in investing in Alibaba being the Chinese government.

Alibaba stock topped out at around 310 dollars per share in October 2020. Since then, regulatory concerns have caused the stock price to decline significantly. Alibaba stock is currently trading at around 100 dollars per share as of the making of this video. The Chinese government has taken steps to limit the profitability of certain sectors in the name of what the government refers to as its "common prosperity." This even included banning online tutoring companies from making a profit. Shares of Chinese tutoring companies fell anywhere from 70% all the way to 98% when that happened.

Investors in those companies were essentially wiped out. As I'm sure you can imagine, seeing this happen has spooked some investors from investing in Chinese stocks. This has sent shares in Alibaba plummeting. So, let me know what you think about Alibaba or any of the other stocks on this list. Leave a comment because I love hearing from you guys. Make sure to like this video and subscribe to the Investor Center because it is my goal to make you a better investor by studying the world's greatest investors. Talk to you soon.