Following the stock picks of famous investors can be a great way to find future winners. These investors typically have an excellent track record of delivering average market returns, and because some of these professionals oversee billions of dollars in assets for their clients, they conduct exhaustive research before investing in a company.
Three Motley Fool contributors were asked to identify three high-octane stocks that they favor and that billionaire investors have recently bought. Their choices: Alibaba Group (NYSE:BABA), Coupang (NYSE:CPNG)And Chipotle Mexican Grill (NYSE:CMG).
A fallen growth stock that could come back to life
John Ballard (Ali Baba) : Alibaba shares are trading well off their peak today. Economic headwinds from COVID-related issues weighed on consumer spending in China last year, which had a significant impact on Alibaba’s revenue, and the stock’s movements reflected that. But this once-rapidly growing leader in e-commerce and cloud computing could be turning a corner.
One of the billionaire investors who has acquired a significant stake in the company is David Tepper of Appaloosa Management, whose net worth is estimated at $20 billion, according to Forbes. Tepper is a highly successful hedge fund manager and his firm more than doubled its stake in Alibaba to $814 million during the first quarter.
While Alibaba may not appear to be a high-octane stock at the moment, the opportunity it has to expand internationally through its AliExpress cross-border retail business, in addition to meeting demand growing supply of artificial intelligence (AI) services through Alibaba Cloud, could see the company’s revenue growth improve in the coming years.
Alibaba’s revenue jumped 7% year-on-year in the quarter ending in March, driven by its market-leading Taobao and Tmall online retail businesses. It also reported strong demand for AI services in Alibaba Cloud. These results show that the worst is probably behind the company. Management noted in the latest earnings report that improved shopping experiences on Taobao and Tmall should help the retail group return to healthy growth in its 2025 fiscal year (which ends in March 2025). ).
With the shares trading at a cheap forward price-to-earnings (P/E) ratio of 9.4, the stock’s value could double if it moves closer to the market’s average P/E of 21.
This e-commerce business is making all the right decisions
Jeremy Bowman (Coupang): E-commerce presents one of the biggest growth opportunities in global commerce, and one of the most intriguing ways to gain exposure is through Coupang, South Korea’s leading e-commerce operator.
Coupang is growing rapidly, increasing profit margins and borrowing liberally from the strategy playbook that created Amazon into the titan he is today. It is expanding into new sectors such as food delivery and video streaming, and recently acquired luxury online fashion marketplace Farfetch. The company is also investing in AI technology to help it manage its warehouses with robots.
In Coupang’s most recent quarter, revenue jumped 28% on a currency-neutral basis to $7.1 billion, and its gross profit soared 36% to $1.9 billion, thanks in part to the recent price hike for its Prime-like Rocket Wow membership service.
Not surprisingly, the stock has caught the attention of some billionaire investors. Stanley Druckenmiller, the mastermind behind Duquesne Capital Management, the hedge fund that has generated average annual returns of around 30% for nearly 30 years, considers Coupang his family office’s second-largest holding, behind Microsoft.
Druckenmiler didn’t explain why he likes Coupang, but the combination of the stock’s growth potential and reasonable valuation is intriguing. The stock has a P/E of 33.
Other billionaires who bought Coupang in the first quarter include Marc Stad, whose Dragoneer Investment Group fund bought nearly 2 million shares, and Israel Englander of Millennium Management, who bought nearly 1 million shares.
Given the past success of e-commerce companies like Amazon and MercadoLibreand Coupang’s growth potential, improving profitability and reasonable valuation, it would not be surprising to see more billionaire investors buying Coupang shares in the coming quarters.
An eternal winner who could still make millionaires
Jennifer Saibil (Chipotle Mexican Grill): Chipotle has probably created a few millionaires during its years in the stock market, and it has been a mainstay of billionaire Bill Ackman’s Pershing Square Capital stock portfolio.
In the first quarter, Ackman did sell some stocks, but that could have been to rebalance the portfolio. Pershing Square owns only eight shares, and even after the sale, Chipotle stock went from 18% of the total to 20%.
While Ackman was selling, other billionaire investors were buying. Ken Griffin of Citadel Investors, for example, bought 135,356 shares in the first quarter. Chipotle stock is up 35% this year and has been a reliable winner for most of its time as a public company.
Investors love Chipotle, and for good reason. It regularly reports double-digit increases in revenue, driven by strong comparable sales growth. Earnings per share (EPS) are constantly increasing. This trend was evident in the first quarter, with sales increasing 14% year-over-year and comparable sales increasing 7%. EPS increased from $10.50 to $13.01.
Plus, there’s another reason why Chipotle stock is off to the races this year. In March, management announced a 50-for-1 stock split that will take place in June. Stock splits generally indicate that a company’s management team is confident about its future, and even if they don’t do anything to change the value of the underlying company, investors love them. Chipotle shares have been trading above $1,000 for some time, so this split was probably long overdue.
This fast-casual chain is an all-weather winner with plenty of growth still to come. Retail investors should join billionaires in adding Chipotle stock to their portfolios.
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Jennifer Saibil holds positions at MercadoLibre. Jeremy Bowman holds positions at Chipotle Mexican Grill and MercadoLibre. John Ballard holds positions at MercadoLibre. The Motley Fool ranks and recommends Chipotle Mexican Grill, Coupang, MercadoLibre and Microsoft. The Motley Fool recommends Alibaba Group and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
3 High-Octane Stocks Billionaires Are Buying was originally published by The Motley Fool
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