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Daily Traders Edge

2 Smart Stocks That Millionaires Can’t Stop Buying

September 07
09:59 2021

The most recent round of 13-F forms has been filed with the SEC. These quarterly reports disclose the equity holdings of institutional investment firms, providing a degree of transparency for the financial community. Of course, it’s always wise to do your own research, but watching the pros can be a good way to get ideas.

With that in mind, here are two stocks that millionaire money managers bought during the second quarter.

1. Adobe Systems

Cyrus Taraporevala, the CEO of State Street‘s asset management arm, added shares of Adobe Systems (NASDAQ: ADBE) to the company’s investment portfolio. This looks like a smart move. With a market cap of $318 billion, Adobe is one of the largest software companies in the world. Its product portfolio ranges from digital media to digital experience, providing tools that drive creativity, productivity, and customer engagement.

Starting with digital media, Adobe offers market-leading solutions for photo and video editing, cinematic special effects, and graphic art. The company also provides PDF tools like Acrobat and Adobe Sign, both of which replace paper-based processes with digital documents, helping clients cut related costs by up to 90%. Like the company’s creative software, its PDF platform has achieved widespread adoption, as 5 million organizations worldwide rely on Adobe Document Cloud.

In digital experience, Adobe’s software helps marketers collect and analyze data, manage content, and deliver a personalized customer experience across digital channels. Recently, Forrester Research recognized Adobe as the leading provider of enterprise marketing software, citing its use of artificial intelligence as a key differentiator. And Fast Company seconds that opinion, ranking Adobe as one of the 10 most innovative AI companies.

However, the most impressive thing about Adobe is its financial performance. Despite being nearly 40 years old, this tech company continues to deliver solid double-digit growth.

METRIC Q2 2016 (TTM) Q2 2021 (TTM) CAGR
Revenue $5.3 billion $14.4 billion 22%
Free cash flow $1.6 billion $6.6 billion 33%

Data source: YCharts. TTM = trailing 12 months. CAGR = compound annual growth rate.

Adobe also benefits from a healthy balance sheet, which currently boasts $5.8 billion in cash and short-term investments, compared to $4.1 billion in long-term debt. That financial stability means the company can weather downturns without issuing debt or equity, and it has plenty of cash on hand to capitalize on opportunities as they arise.

Here’s the big picture: Adobe puts its market opportunity at $147 billion by 2023, leaving substantial room for future growth. And given its many best-in-class products, I think this tech company will continue to reward shareholders over the long term.

2. Mastercard

James Gorman, the CEO of Morgan Stanley, added shares of Mastercard (NYSE: MA) to the company’s holdings. No surprises here. Mastercard is the third-largest payments network in the world, capturing 24% of purchase transactions in 2020, according to The Nilson Report. And excluding the Asia-Pacific region, where UnionPay is the dominant player, Mastercard ranks No. 2 behind Visa.

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