5 Stocks the Smart Money is Buying for 2024.

So, as you guys know, I love tracking the 13F filings of the world's super investors to see what they're buying and selling from quarter to quarter. But I follow this website called Data Roma, which actually compiles a list of 80 famous investors. Each quarter they show lists of the most bought stocks overall and also the most held stocks.

So, in this video, let's look at the five most bought stocks from the super investors heading into 2024 and whether there's anything we can take away from the list for our own investing. Also, just quickly a reminder, as always, that by mentioning the stocks in this video, I'm in no way implying a buy, hold, or sell recommendation. This video should be taken as information and entertainment only and remember all advice is general in nature and it might not be right for you.

So with that said, coming in as our fifth most bought stock leading into 2024, we have Visa. Visa was bought by seven super investors in Q4, and congratulations to them as the stock is already up around 8% to start the year. Visa is actually a fairly common stock that features on these lists of super investor buyers. Quite frankly, it has a very big competitive advantage in its network effect.

It has a product that is scalable across the entire Earth's population and it's basically formed an oligopoly with MasterCard and American Express that makes it a very handsomely profitable company, which only needs to charge a very small fee per transaction to make a hell of a lot of money. In fact, in their 2023 annual report, Visa noted they processed 22.6 billion payments on their networks with a total value of 12.3 trillion.

But here's the thing, they only need to charge a very, very, very small fee to the cardholders, the merchants, and the banks to make a lot of money off 12.3 trillion of volume and that's exactly what happens. In 2023, they managed to profit $17.2 billion, up 15% from the year before, and this is very much one of those companies that has such a comfortable competitive position that the numbers more or less do just trend up consistently over time. It's honestly what long-term investors love to see, so I'm not surprised to see it feature on our list.

Then coming in at number four, we have Charter Communications. Charter Communications, which operates under the brand name Spectrum, is of course an American telecommunications and mass media company that offers cable television, internet, phone, and mobile services. But interestingly, the stock is currently sitting at its lowest level since 2019.

Now, I do have to preface this by saying that Charter is not personally a business I follow, but it seems as though there are three main factors behind their decline. The first is slowing growth; revenue is growing very slowly. In fact, they've grown revenue by 31% total in 6 years, and net income is much the same, growing from 3.5 billion in 2017 to 4.5 billion now.

The second closely related factor is mediocre subscriber performance. Their residential business is by far the most important to them, and while they have been posting decent mobile additions, broadly customer count is flat, revenue per customer is flat, and with more spending to upgrade their network, the free cash flow is also declining. Then lastly, debt; the company does have a high debt load of around $98 billion, which is scaring off investors in a higher interest rate environment, especially when they continue to do things like share repurchases with the money.

The one thing I reckon the super investors may see in Charter, however, is simply the value. It does have a PE of around 10 right now, so maybe some super investors see value if the company can upgrade its network and drive more subscribers, although some are arguing that even the current multiple is too high given its recent growth.

But then moving on, coming in at number three, we have Amazon. So Amazon was bought by seven super investors in Q4 of 2023, which honestly did surprise me, as the stock rose about 80% in 2023 and it's currently sporting a PE ratio of around 60. The only thing I can maybe subscribe to is the idea that the super investors were potentially taking advantage of this dip in October, where the stock fell down to $120 per share.

But even still, it seems pretty expensive, and Amazon is an interesting story because it really is the tale of two strategies. Throughout the 2010s, it was very much growth for growth's sake under Bezos's rule, and they did grow and the stock exploded, but that also caused them some troubles. For example, during the pandemic, the company's warehouses were overstaffed, operating expenses skyrocketed, and ultimately Amazon needed a change in strategy.

A key factor in the stock's renewed success has been Andy Jassy's focus on higher profitability, which mainly comes from a greater focus on their services business over their products business. In fact, in 2022, Amazon recorded more full-year service revenue than product revenue for the first time and that's naturally been improving margins. In Q3 last year, Amazon reported an operating margin of 7.8%, the highest since it peaked in the first quarter of 2021.

But then they maintained that profitability in Q4 and it's having an impact. The company has gone from a cash-burning machine to a cash-generating machine, producing $36.8 billion in free cash flow in Q4, a stark contrast to the negative $11.5 billion in Q4 of 2022. So, there are definitely things to be excited about for Amazon shareholders, but time will tell if buying at the current price pays off.

Okay, moving on into second place, we have Microsoft. Microsoft, like the rest of the Magnificent 7, rose dramatically in 2023, up 57% as of the time of recording. Their meteoric rise over the last 12 months has given the stock a monster market cap of over $3 trillion and now sits standalone as the S&P 500's most valuable company.

This stock was also bought by eight super investors in Q4, but interestingly on this list, none of the stocks this quarter will actually stand out buyers like what we've seen in prior quarters. For example, in my last super investor portfolio update, which was Q1 of 2023, the number two spot was held by Amazon, but at the time there were 13 super investors buying in.

In fact, had Microsoft only been bought by eight of these super investors back then, it would only just scrape in at number five. And I'll talk a little bit more about this in a second. But generally, what we saw this quarter is much less buying than usual from the super investors, so I'd encourage you to definitely take that into account as well.

But yes, Microsoft comes in at number two; it's a big behemoth. You can argue it's now overvalued after being swept up in the AI stock market mania of 2023, but many super investors, such as Steve Eisman and Worth to Motrin, are also making the point that Microsoft are the closest out of the Magnificent 7 to actually realizing significant revenues from their work in AI. They've already integrated the functionality of ChatGPT into their search platform Bing.

They've added the co-pilot key to Windows keyboards, in the first layout change since the addition of the Start key in 1994. They've integrated AI into Azure cloud and Office 365, and of course, they've already positioned themselves very well as a major investor in OpenAI with close ties to the management team and a seat on the board.

Now, yes, Microsoft's efforts in AI are still very much in their infancy, and it's true the success of the next few years will come down more to their sales from Office 365, their cloud services, Windows, and devices like the Surface Pro and the Xbox. But with most of these super investors being notoriously long-term focused, I wouldn't be surprised if eight of them are simply making a long-term bet on Microsoft's future in AI.

And with that said, we finally come to the number one spot, and that is Google. Google A shares were bought by eight super investors in Q4, including Michael Burry himself, so be sure to check out that video if you missed it. And also, the C-class shares were bought by three of our super investors. Similarly to Microsoft, Google had an absolutely explosive 2023, up 58%, and at the time of recording, they have a market cap of $1.78 trillion.

Ignoring the speculative hype behind AI, it isn't actually that surprising to see Google consistently at the top of this list. A) they saw operating profit from their advertising business rise 19% in 2023. B) their Google Cloud business now generates profit instead of being a money pit, generating $1.7 billion in profit for them in 2023. And C) they have one of the most reassuring balance sheets you'll find worldwide, with $11 billion in cash or short-term marketable securities, long-term debt of just $13 billion, a current ratio that is current assets divided by current liabilities of 2.09, and total assets at about 3.4 times total liabilities.

So, this is extremely reassuring for investors and, in all honesty, it's a big factor as to why the stock commands such a premium pretty much all the time. But would the super investors, a bunch of long-term value-minded investors, really agree to pay that much of a premium just to own these high-quality companies like Amazon, Microsoft, or Google?

Well, this is where I just wanted to take you back to the tables from Data Roma because there is something that we should consider, particularly this quarter. I said earlier that there are a lot fewer super investors buying this quarter than what we usually see. For example, Google was bought by just 11 super investors this time around versus 23 in my last video from Q1.

But we also need to consider how many super investors are selling, and when we do, the story of the video kind of changes a bit. While seven super investors bought Visa, 11 of them reduced; while seven super investors bought Amazon, 12 of them reduced; while eight super investors bought Microsoft, 21 investors reduced; and while 11 super investors bought Google, 34 of them reduced.

So while this series is titled "What the Super Investors Are Buying This Quarter", probably would have been more accurate to call it "What the Super Investors Are Selling". And let's be real, it's not really that surprising to see them, on balance, selling stocks like Microsoft, Google, or Amazon considering Microsoft's 2023 return was 57%, Google's was 58%, and Amazon's was 80%. These investors are very rational, super switched-on people, and it's not surprising to see them sell down after a period of stock market mania.

I mean looking at their PE ratios right now shows you that it appears these stocks on a quick glance seem pretty much priced to perfection or even a little bit overpriced. I mean Google sits at a PE of around 26, but then Microsoft is priced even higher at 36, and Amazon's very high at a PE of 58.

And when you're looking at these super investors' portfolios individually, you can really see the trend. You know, Buffett did pretty much nothing in Q4; Leeloo did nothing; Bill Ackman was mostly selling; Guy Spier did nothing; Seth Klarman mostly reduced; heck, Monish Pabrai barely owns any US stocks at all right now.

So we have to be careful when just looking at the buyers because, as is the case here, it doesn't really give us the full picture of what's going on. So with that said, I want to finish the video by going through not the five most bought or most sold stocks by our super investors, but maybe just the five most held stocks because I have a hunch that in 2024 we won't see them buying a whole lot of companies. The long-term-minded super investors are probably just going to sit back and hold their long-term compounders.

So what are the most held stocks? Well, at number five we have Visa; at number four we have Amazon; then number three is Meta; number two is Microsoft; and number one is Google. And what do you notice about these companies? They are all businesses with really big competitive advantages, and that really highlights the strategy these investors subscribe to: find the great businesses that have the competitive edge, wait until you present fantastic opportunities to buy them, and then just hold them through everything else and let them compound over a very long period of time.

And that's what the data is showing is going on right now. But with that said, guys, hope you enjoyed the video. Please leave a like, and also I'm excited to share that you can now check out a 100% free course over on New Money Education that details the exact process of the long-term Buffett-style value investing strategy. We talk through the four key pillars of the value investing approach, so if you haven't checked out New Money Education just yet, please come over and do so. As I said, it is completely free to start, and I'd really appreciate it. Links are in the description down below.

With that said, I'll see you guys in the next one.