Daily Traders Edge

These Are The 3 Stocks The World’s Best Investors Are Buying Right Now

July 18
10:03 2018

The bull market might seem to be losing momentum as it enters its ninth year, with persistent headwinds like trade tensions and interest rates causing wild week-to-week swings. Yet many stocks still trade at reasonable valuations with solid growth prospects. We recently asked three Motley Fool investors to identify three top stocks that appeal to the world’s top investors, and they cast the spotlight on these prime picks — Apple (NASDAQ: AAPL) , Newfield Exploration(NYSE: NFX) , and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) .

Buffett’s biggest bet

Leo Sun (Apple) : Warren Buffett is arguably the greatest investor in the world, and his favorite stock is Apple. Buffett’s Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) initially invested in Apple in 2016, and subsequently made the iPhone maker its top holding.

In May, Buffett disclosed that Berkshire owned 250 million shares of Apple, a 5% stake which is worth about $46 billion. Buffett subsequently told CNBC that he’d “love to own 100%” of Apple. That’s a bold move for an investor who famously shunned tech stocks throughout most of his career. However, Buffett told Berkshire investors at the annual meeting that he “didn’t go into Apple because it was a tech stock.”

Instead, Buffett praised the robust demand for iPhones as a consumer product , Apple’s expanding ecosystem of services, and its ability to boost shareholder value with buybacks or acquisitions. Buffett also told CNBC that concerns about the saturation of the smartphone market were overblown, since Apple sold luxury products. “People want the product,” he stated.”They don’t want the cheapest product.”

iPhone sales are slowing down, but Apple is locking in its users with paid services like Apple Music, which support the growth of its services unit. Analysts expect higher revenue per customer, steady loyalty rates, and new products to boost Apple’s revenue and earnings by 14% and 25%, respectively, this year. Those are impressive growth rates for a stock that trades at just 14 times forward earnings.

A prescient pick of an oil exploration company before prices rose

Chuck Saletta (Newfield Exploration) : Ray Dalio’s Bridgewater Associates didn’t become the biggest hedge fund in the world by accident. It took at least some amount of fortuitous or downright brilliant timing, such as what was displayed in the company’s recent investment disclosure. Bridgewater Associates dramatically increased its position in independent oil exploration company Newfield Exploration before oil resumed its ascent above $70 a barrel.

No companies are more exposed to the price of oil than those that focus on exploration and production like Newfield Exploration. For Bridgewater Associates to take such a large increase in its position — going from around 216,000 shares to over 1,800,000 — it had to believe that oil prices would resume rising.

At the time of Bridgewater Associate’s investment, Newfield Exploration had negative free cash flow — it was consistently investing more in capital expenditures than it was generating in operating cash flow. That’s not a comfortable position for any company to be in over the long haul, but it makes sense for a company that expects a large future payoff from all the investments it is making.

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