5 Stocks the Smart Money is Buying in the 2024 Bubble

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 there's this really cool website I follow called Data Roma, which compiles a list of 80 famous investors, and each quarter they publish a list of the most bought stocks by these super investors across that period. For example, in my last update, which was Q4 of 2023, the businesses that made the list were Visa, Charter Communications, Amazon, Microsoft, and Google.

So let's see how things have changed across Q1 and where the super investors are finding value. Also, before we start, I do have to make clear at the top of the video 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.

Also, one thing I did want to quickly mention at the start of this video is actually something super cool that I got invited to do recently. So, I actually got invited up to Sydney to be a part of Stak's New York Slices series, which are bite-sized videos that teach you about investing in the US market. So, I got to be a part of the first two episodes, and you guessed it, the reason I'm mentioning it now is because the first two episodes are now out!

So, there's more coming, but if you head over to my Instagram or Stak, you'll be able to watch them right now, or you can check them out via the links in both the description and the pinned comment. And for those that maybe don't know Stak, they're a really cool share trading platform that aims to improve the accessibility of the US market for those that don't actually live there. So, people like me, their app is available in Australia and New Zealand, and I've been using their service for almost 7 years now.

I'm actually super lucky to have been able to get to know Dan and Matt, who founded the company, and it's honestly just a great business run by really nice, passionate people. I was actually up at their HQ earlier this year paying them a visit, but anyway, I just wanted to say a big thank you to Stak for being long-term supporters of my efforts here on YouTube. They're actually the first company that ever reached out to me to sponsor my channel back in the day, so thanks very much to them for reaching out and including me in their latest campaign, New York Slices, and thanks as well to Stak for sponsoring this YouTube channel.

But with that said, coming in as our fifth most bought stock in Q1 of 2024, we have Microsoft. Microsoft is currently the S&P 500's largest company, boasting a market cap of $3.2 trillion. The company found its original success by building a very powerful switching moat that they've garnered by offering lots of products for businesses that have become so important to the companies that use them. It makes it too hard or costly for the customers to switch away. For example, it all started with the Windows operating system, then it was strengthened by the release of Microsoft Office.

But these days, Microsoft has gone much further than that. They obviously have their core software business in Windows, as well as Microsoft Office and their server software. They also have a big cloud computing component through Microsoft Azure, parts of Office 365 such as OneDrive and Teams. They also offer physical products such as Surface devices and Xbox gaming products, and they offer services like LinkedIn, search advertising through Bing, and GitHub. Plus, they also have enterprise solutions like Dynamics 365 and research arms in AI and machine learning.

So the business has grown into much more than a simple software company offering Windows, Word, and Excel. And of course, one of the big reasons investors have been buying the stock over the last year or so is because of their efforts in AI. Microsoft were definitely first in the space with their investment in chat GPT creator OpenAI, and as of today, they are in the lead when it comes to large language models with OpenAI's release of Chat GPT-4.

And it's no secret that this partnership has had a very strong impact on Microsoft's share price, with the stock up 57% in 2023 and already another 16% year to date. Investors are currently betting heavily on Microsoft's future in AI, but beyond AI, they're also betting that Microsoft's current business segments are going to continue flourishing. Their revenues continue to grow consistently, net income has picked up after a lull in 2022, and their balance sheet is looking solid, with their total debt being covered by just their current holdings in cash and short-term investments.

Despite a reasonably high PE of 37 currently, clearly this equation did not phase the super investors, with six investors either buying or adding to their positions in Q1. Now, moving on into fourth place, we have Apple. From the largest company in the S&P 500 to the second largest company in the S&P 500, so in Q1, we also saw six of the super investors buying into Apple, although not Warren Buffett—we know about that one.

And like Microsoft, Apple is also a business that started out with one big moat, that being their brand moat, but over time they've obviously now grown their business to a point where it's much more than just a trendy phone. Of course, these days Apple have many product-based businesses, from iPhone to Mac to iPad, AirPods, watches, home speakers, a VR headset, and more. But the reason Apple's become such a cash-flowing company is because of their other major revenue segment, which is Services.

As we all know, Apple loves to provide lots of software applications that seamlessly integrate with their hardware, from iOS or MacOS to iCloud, Apple Music, the App Store, Apple Pay, Apple Care, Apple TV Plus, News Plus, Fitness Plus—the list goes on. And of course, we've seen what this has created. Right now, Apple not only thrives from its brand moat, but it has also built a big switching moat, the ecosystem it traps people in, encouraging customer loyalty and repeat purchases.

Tim Cook noted in Apple's latest earnings release that in the March quarter, Services had just set an all-time revenue record of $23.9 billion. Now, while that pales in comparison to their products revenue of $66.9 billion, let's rewind the clock just five years. In the March quarter of 2019, Services revenue was just $11.5 billion, and that represented 19.7% of Apple's total quarterly revenue. The March quarter of 2024, Services revenue accounted for 26% of Apple's total revenue.

So, it's fair to say that business segment has come a long way over the past five years. Still, at a PE of around 30 today, it's certainly not the cheapest stock the super investors could have ever bought. But I think a lot of investors, including Warren Buffett himself, are also in this one for the share buybacks. Apple actually recently announced that they've just authorized another $110 billion of share repurchases, which continues to lower their share count and provide continuing shareholders with a higher percentage ownership of the business without actually having to do anything. They don't have to take any action themselves.

And to give you a sense of the magnitude of share buybacks that have taken place over the last five years, they've spent around $46.7 billion on buybacks and have repurchased about 177% of their company. So that is Apple's current state of affairs, and not surprising to see it up on the list of most bought stocks, simply considering its amazing competitive position.

Okay, moving on to the third most bought stock in Q1, we have Charter Communications. Charter was again bought by six super investors in Q1, and this business operates under the brand name Spectrum. Spectrum, as I'm sure you Americans will know, is a telecommunications and mass media company that offers cable television, internet, phone, and mobile services. But interestingly, this stock also made it onto the list of most bought stocks in Q4 of 2023, last quarter.

Now, in my last video, I wanted to talk about why I believe the super investors were buying this stock up, and the conclusion that I came to was that at the time, Charter was trading at around a 50% discount from its 2021 peak. Well, since then, the stock has only continued to fall. In Q1, the stock fell from around $370 all the way down to as low as $276 per share. It really hasn't picked up at all since then. As you can see, the major drop was right in that first week of February, which was exactly when Charter released their quarterly earnings report.

So what were investors so unhappy about? Well, the company reported a loss of broadband subscribers, which was unexpected and a key metric for investors. Specifically, Charter saw a decrease of 61,000 internet customers in the fourth quarter of 2023, mostly from the residential sector, and that didn't bode well for the financials. The company missed its earnings per share target, reporting $7.55 in earnings per share against higher market expectations.

Now, this is not something that long-term investors tend to care about, but it's definitely a major mover of the share price on Wall Street. And overall, the earnings miss combined with the subscriber loss did raise concerns about Charter's future growth prospects. Furthermore, the company also announced a delay in its HFC network upgrade until 2026. That stands for hybrid fiber-coaxial. So it was just a lot of mediocre news all at once.

But the one thing that this bad news means is that well, Charter has a very low PE. The stock currently sits at an 8.8 PE, which I'm sure many will argue is more than fair considering their results. But clearly, some of our super investors are spotting this as a business worth owning at the current price. Personally, this is not one I follow. I'm definitely not the guy to ask about American telecommunications companies, but I think that's most likely the rationale behind the six super investors that bought Charter Communications this time around.

Okay, now moving on to our second most bought stock in Q1 of 2024, we have UnitedHealth Group. UnitedHealth Group is a diversified healthcare company that operates through two primary business platforms: United Healthcare and Optum. When looking at United Healthcare, this segment is one of the largest health insurers in the United States and provides health benefit plans to individuals, employers, and Medicare and Medicaid beneficiaries. And then for Optum, this is a health services platform that uses data and technology to improve healthcare delivery and administration.

Overall, UnitedHealth Group is one of the largest and most profitable healthcare companies in the world. In 2023, the group brought in revenue of $371 billion, with net income of more than $22 billion. Over the years, both revenue and net income have been on a very consistent uptrend, and this has led to a rough 1400% return since 2010. More recently, however, the stock has hit some turbulence, with the stock falling around 9% in Q1.

So some investors are raising concerns over increased regulation, noting lower-than-expected increases in Medicare Advantage payments for 2024, whereas others are simply seeing more competition in the space, with other players like Anthem, Cigna, and Humana all jostling for market share. And there's also the broader economy to consider as well. Costs for labor, medical supplies, and pharmaceuticals have risen, putting pressure on margins, and that's happened at the same time where the average citizen has less money in their pocket to spend.

However, despite the mixed sentiment, this clearly didn't stop our seven super investors from buying in Q1, even though the stock sits at a PE of roughly 31. And then finally, from there, that leads us to the number one stock being bought by the 80 super investors, and in Q1, it was Google. Google was bought by 11 of the super investors this quarter because interestingly, it did get to a low of around $132 per share at one point. That was quick to correct itself, however, and now the shares sit at around $175, with Google's market cap at now $2.15 trillion.

This makes it now the fourth largest stock in the S&P 500, between Nvidia and Amazon. And honestly, this stock features a lot in these lists. Why? Well, remember the investors that make it onto this list are predominantly the value crowd, who are all very focused on buying great businesses at fair prices. And when you look to Google, I think that's what you get. On quick glance, it doesn't seem super cheap at a PE of 27, but it's also not super expensive.

And with a business as high quality as Google, you do expect to pay some form of premium. And why do I say this business is high quality? Well, firstly, they have a very strong, profitable business model, obviously making most of their revenue through advertising. They face very little competition. Obviously, Google is by far the market leader in search. YouTube is a dominant player in terms of video; in fact, YouTube holds a higher TV viewing share than even Netflix.

And then, of course, you have the new part of Google's business, that being Cloud, which is consistently growing and is now also profitable. All of that naturally leads to very high cash flows, which go straight to growing their business further or bolstering the balance sheet, which I might add shows total assets now at $402 billion and total liabilities of just $119 billion. They have $111 billion of cash and short-term marketable securities just lying around, only $13 billion of total debt.

So Google is one of those standout businesses that really structure themselves to be a financial fortress. So I'm personally never surprised to see the super investors buying into this behemoth. So with that said, they are the five most bought stocks by the super investors in Q1 of 2024. But I did just want to explain a few things at the end of the video so that you guys get the full picture.

And if you remember back to the video I made last quarter, I made this point back then as well. And the point is that while these are the most bought stocks by the super investors for Q1 of 2024, overall on balance there wasn't that much buying going on. For example, my 13F update for Q1 of 2023, Google also sat in the top spot, but it had 21 super investors buying in—about double the amount of investors that were buying in this time around.

And unlike other times, these days there's also a heck of a lot of selling as well. For example, Microsoft, while we're seeing six super investors buying more shares in Q1, we also saw 20 super investors reducing. Sure, Google had 11 of them buying but also had two or three of them selling. So I do have to stress, on balance the super investors are not finding many obvious high conviction bets that a lot of them are all flooding into at the same time.

In fact, in most cases, they're simply sitting on their pre-established positions and holding them for the long term. And if you're interested, the five most held stocks currently by this group are Amazon, Meta, Visa, Google, and Microsoft. And one last thing, if you are interested in stock analysis and would like to learn the full step-by-step value investing approach, including reading financial statements and three different valuation methods, definitely check out Introduction to Stock Analysis over on New Money Education. The links are in the description, and you can use the coupon code SAVE50 to get $50 off. Plus, all proceeds go towards supporting our business here and helping us make more YouTube content.

So thank you very much to everyone that has already jumped on board. But guys, with that said, thanks very much for watching, and I'll see you all in the next video.