Top 10 Stocks Superinvestors Bought in Q3 2022: New Money Looks At What The Smart Money Has Been Buying In The Third Quarter

Top 10 Stocks Superinvestors Bought in Q3 2022: New Money Looks At What The Smart Money Has Been Buying In The Third Quarter

UPDATED Mar 26, 2024

  • The third quarter of 2022 hadn’t been kind to investors, with the S&P 500 declining over 6% throughout the period. But as Warren Buffett famously said, "Be fearful when others are greedy and be greedy when others are fearful".
  • Consumer confidence is at a low, inflation is high and market sentiment is teetering on the edge with the prospect of recessions being tossed around in the news. But while it seems like a terrible time for investors, it’s actually an incredibly useful time to be making new investments.
  • Recent declines in US tech valuations have had some superinvestors salivating at the prospect of picking up shares in companies where they see long-term value at huge discounts compared to 12 months ago. While their investment doesn’t necessarily signal the end of the difficulties for shareholders, there’s something to be said for their confidence in businesses with solid fundamentals.
  • In this collection we cover some of the major stocks that have attracted the attention of world-renowned investors and have a look at where they might be finding long-term value in these companies.

10 companies

Alphabet Inc. offers various products and platforms in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America.

Why GOOGL?

Industry leader in search and advertising finding success in cloud services.

  • This most recent quarter saw 9 superinvestors buy into Google’s class C shares. The largest purchase of the Class C shares was done by AKO Capital, who acquired 2,291,880. Representative of a 255% increase to their holdings. A further 12 bought into the Class A shares during the quarter with the largest bet coming from Chase Coleman’s Tiger Global Management, who purchased 3,264,248 shares, an increase of 148% over their holdings at the start of the quarter.
  • Google got 12% cheaper across Q3 but it remains a popular bet among hedge funds and other smart money. The likely explanation lies in its incredibly strong balance sheet with minimal debt - literally $22B in plain old cash and just $14.6B in long term debt. They have a massive moat in online search and digital advertising, continuing their firm grasp of the market with over 83% of total search volume in 2022. Over the past 5 years they’ve been able to grow their revenue by 24% annually, EPS by 46% annually, equity by 13% and FCF by 23%, and then in terms of management’s skill, they’ve maintained an average return on invested capital of 18%.
  • Business has remained consistent for Google across the last year, with marginal increases to revenues stemming from advertisements in Search but a decline in revenue from YouTube advertisements and Google Network. On the other hand, there was an appreciable 38% increase in revenues stemming from Google’s Cloud services, rising from US$4.99B to US$6.87B since Q3 2021. Google Cloud includes Google’s infrastructure and platform services, collaboration tools, and other services that it provides for enterprise customers. A key customer segment for ensuring longevity, resilience and consistency in revenue amidst tougher economic cycles.

Rewards

  • Trading at 28.8% below our estimate of its fair value

  • Earnings are forecast to grow 11.82% per year

  • Earnings have grown 18.5% per year over the past 5 years

Risks

No risks detected for GOOGL from our risks checks.

View all Risks and Rewards

Microsoft Corporation develops and supports software, services, devices and solutions worldwide.

Why MSFT?

Strong performance in Azure keeping keeping the outlook positive amidst difficult conditions.

  • This most recent quarter saw 12 superinvestors add to their Microsoft holdings and 1 open a new position in the company. The largest acquisition of Microsoft stock was done by founder Bill Gates’ Bill & Melinda Gates Foundation Trust, which added 38,320,050 shares to their holding. This amounts to a scarcely believable 4,057% increase in their holdings over the quarter. A very obvious sign that the trust see’s immense value at current prices.
  • Microsoft was another poor performer in Q3 with the stock ending the quarter down 10%. But again, this is a big wide moat company with all their various B2B and B2C products. They have three revenue segments:
    • Productivity and business processes - Think Microsoft Office 365 commercial and consumer, Microsoft Dynamics and Linkedin
    • Intelligent Cloud - Encompassing Microsoft’s Azure cloud computing platform, a direct competitor to Amazon’s AWS and Google Cloud.
    • Personal Computing - The segment that includes Windows OS, Microsoft Surface and Xbox.
  • For Microsoft, these three businesses each make up roughly one third of their revenue and were making about one third of their operating income each. But what we’ve seen over the past few quarters is their cloud segment take off and their personal computing segment slow. This is very much a result of the macro environment and the trend of tightening consumer spending amidst record inflation levels. So while Microsoft’s cloud services are essential expenditure by commercial customers to keep their systems running, the consumer is saving money where they can and PC sales and spending on gaming entertainment are way down. But overall Microsoft is generally very well protected thanks to their economic moats in software and cloud and thus, despite the stock falling around 28% year to date, it continues to attract long-term minded superinvestors.

Rewards

  • Trading at 6.2% below our estimate of its fair value

  • Earnings are forecast to grow 12.59% per year

  • Earnings have grown 16.3% per year over the past 5 years

Risks

  • Significant insider selling over the past 3 months

View all Risks and Rewards

Meta Platforms, Inc. engages in the development of products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and wearables worldwide.

Why META?

Long-term bets in AI advertising models and VR could prove fruitful.

  • Superinvestors have been busy buying Meta throughout the third quarter, with 13 major investors adding to their already sizeable holdings in the company. The largest net gain over the quarter was by Viking Global Investors who purchased an additional 2,485,635 shares, increasing their holdings by 87% over the last few months.
  • In both Q1 and Q2, Meta appeared among the list of most purchased stocks, and with the stock falling a further 15% across Q3, it’s no surprise that Meta slots into the list yet again.
  • So what’s the deal with Meta? As is a common theme with this collection, Meta is another company with a wide moat. It has a large network effect, but of course Meta’s business has changed quite a bit recently. It used to very much be a simple money printer. Low costs, and all they did was show ads on their apps and print money, but now a few things have changed.
  • With the macroeconomic environment as it is, big advertisers are pulling back on budgets. By the third quarter of this year, Meta had realized an 18% reduction year-on-year in the price per advertisement due to declining demand. Recent pushes from Apple to reinforce user privacy has also negatively impacted Meta, with Apple’s App Tracking Transparency (ATT) rules preventing Meta from using user data in the same way they were previously to optimize the advertisements that would be served up to a user. ATT reportedly reduced the company’s revenues by about US$10B per year. While Meta’s shift to focus a large amount of resources to their metaverse presence is illustrative of a long-term bet on the future of social interaction, they’re detracting from their bottom-line, making the earnings reports look a little less rosy. In Q3 their R&D ballooned year-on-year to US$9.1B but their revenue actually shrunk, leaving just US$4.4B in net income, a 51.6% reduction compared to the $9.1B in earnings from the same quarter last year.
  • So it begs the question, why are the superinvestors still interested? Well it appears this is another case of short term pain for potential long-term gain. The company has established itself as a dominant player in the VR hardware market, with over 90% market share and their investment in probabilistic AI advertising models are helping reduce reliance on user data while providing advertisers with the same quality of advertising outreach they were used to. If both of these bets come to fruition, it’ll help reinstate Meta as the money-printer it was known to be over the last few years. It is also worth remembering that Meta does have a big advantage here in that this increased spending isn’t forced. They want to do this. If the situation drastically changed, and they began hemorrhaging more money, they could simply press pause on the metaverse project.

Rewards

  • Trading at 12.9% below our estimate of its fair value

  • Earnings are forecast to grow 14.28% per year

  • Earnings grew by 68.5% over the past year

Risks

  • Significant insider selling over the past 3 months

View all Risks and Rewards

Amazon.com, Inc. engages in the retail sale of consumer products, advertising, and subscriptions service through online and physical stores in North America and internationally.

Why AMZN?

Investment in future growth may be short-term pain for a long-term gain.

  • A declining share price has stoked the fire for some of our superinvestors who have seen value in Amazon’s stock at current prices. 11 superinvestors we have been following have stuck by Amazon and put their money where their mouth is by adding to their holdings or by opening a position, which is the case with the largest purchaser Dodge & Cox who opened a 5,700,000 share position in the company worth around US$644M.
  • But I thought Amazon was dying? Well I think this story boils down to an amazing business going through a particularly tough patch right now. If you look now, the stock has basically eliminated all the gains it saw thanks to the pandemic shutdowns and is now down around 50% for the year. But here’s the deal. Amazon has been sinking about $60B per year into growing their capacity, and they actually have managed to roughly double their revenue since 2020, growing it from US$280B to a staggering US$502B on a trailing 12 month basis.
  • However, what’s happening right now is that despite all this investment in increasing capacity, unfortunately consumers have a lot less discretionary income than during 2020 and 2021 due in-part to stimulus payments stopping and interest rates rising. So now Amazon has to weather this tough economic patch where we’ve seen a pivot in consumer spending, all while having to fund these new investments. The result of all this is that we’ve seen revenue grow, but also the cost of goods sold is higher, ultimately leading to a dip in both earnings and free cash flow.
  • There’s fear in the media, reports are being published over Amazon’s potential plans to lay off as much as 10,000 in their corporate divisions, but this hasn’t shaken investors thoughts on Amazon being a solid company. And while it’s a given that a company like Amazon will always be somewhat at the mercy of the current macroeconomic climate and of course consumer spending, there’s something to be said for the value of the stock given interest by world-renowned investors.

Rewards

  • Trading at 25.1% below our estimate of its fair value

  • Earnings are forecast to grow 21.96% per year

  • Became profitable this year

Risks

No risks detected for AMZN from our risks checks.

View all Risks and Rewards

Visa Inc. operates as a payment technology company in the United States and internationally.

Why V?

Payments processor seeing now slowdown in transaction volumes.

  • Viking Global Investors have been busy accumulating once again with Visa being another company they’ve set their sights on. Increasing their position 109% with the purchase of 2,790,724 shares, Viking Global Investors joins 8 other superinvestors in taking a larger bet on the payments giant.
  • Visa is a quintessential Buffett-style stock owing to its massive moat. It has a massive network effect and now can basically just collect tolls as it is the world’s top electronic payment facilitator.
  • Essentially everytime you go to tap your card while shopping, Visa’s job is to connect the store’s bank with your bank, and facilitate the transfer of money across to complete the transaction. They have the technology that facilitates these payments quickly, accurately and safely and they charge the merchant a very small fee for every transaction they facilitate. While this fee is tiny, it definitely adds up when you consider the volumes of transactions processed. In the twelve months ending September 30th 2022, Visa processed 192.5 billion transactions amounting to US$14T (yes, trillion with a T).
  • Overall they enjoy an approximate 50% market share by purchase volume with Mastercard at 23%, and with American Express the next largest at 19%.
  • Much like some of the other companies here, Visa is susceptible to the volatility in consumer spending caused by rising inflation and interest rates, but their latest quarterly figures paint a fairly positive picture. The latest reports show payment volume increasing 10% and processed transactions, cross-border volume all increasing similarly to the full year’s results indicating there hasn’t been much slowdown in business. This seems to have been what caught superinvestors’ attention, who jumped at the opportunity to grow their holdings when the stock fell 10% over the third quarter.

Rewards

  • Earnings are forecast to grow 9.87% per year

  • Earnings grew by 19.1% over the past year

Risks

No risks detected for V from our risks checks.

View all Risks and Rewards

Booking Holdings Inc., together with its subsidiaries, provides online and traditional travel and restaurant reservations and related services in the United States, the Netherlands, and internationally.

Why BKNG?

Strong booking growth in 2022 and promising outlook for early 2023 bodes well.

  • Booking Holdings was a popular stock in Q2 as well with 8 superinvestors buying in, and same again this quarter. The largest buy came from John Armitage’s Egerton Capital, which increased it’’s holdings by 92% or 100,111 shares in Q3. This is no surprise as the stock trended downwards throughout the second quarter and continued to do so in the third quarter, so the investors who saw value then, should’ve seen more value now.
  • Booking Holdings owns and operates a collection of travel related businesses including Booking.com, Priceline.com, Kayak, Agoda, Rentalcars.com and Opentable. They, like all travel businesses, experienced a lot of pain throughout 2020 and 2021, but are now well and truly recovering.
  • While the business operates on the discretionary side of the market - a side that suffers during periods of tightening consumer spending - things didn’t seem to be slowing, with the company reporting US$6.1B in company-wide revenues, up 29% from the prior year’s quarter and a significant increase over the US$4.3B reported in Q2 2022.
  • The company has aired concern over the current macroeconomic environment but has been encouraged by a slight improvement in room occupancy growth in October and a promising level of bookings secured for early 2023.
  • Investors may have seen an opportunity in the declining share price to capitalize on a potential travel boom in 2023, with those who can afford it continuing with holiday plans after Covid wreaked havoc on many holiday-goers’ plans.

Rewards

  • Trading at 27.4% below our estimate of its fair value

  • Earnings are forecast to grow 13.54% per year

  • Earnings grew by 40.3% over the past year

Risks

  • Significant insider selling over the past 3 months

  • Has a high level of debt

View all Risks and Rewards

Salesforce, Inc. provides Customer Relationship Management (CRM) technology that brings companies and customers together worldwide.

Why CRM?

B2B tech giant securing lucrative enterprise contracts.

  • Viking Global Investors who made their first investment in the company with 2,400,649 shares worth an estimated US$345M. It should also be noted that Leslie Ainslie’s Maverick Capital increased their holdings over 263% in this quarter alone too.
  • Salesforce is a cloud-based customer relationship management platform that unites a business’ marketing, sales, commerce, service and IT teams under one core product.
  • As we saw with Microsoft, in times where consumer confidence is at an all-time low, B2B models tend to fare better and so Salesforce should see a level of earnings resilience as enterprise customers generally have high levels of software retention and will not want to rock the boat by switching CRMs in such a tumultuous climate.
  • Salesforce is due to post its third quarter earnings on November 30th but looking back to its second quarter performance, the company reported a healthy 22% year-on-year increase in total revenue, although the company’s operating margin took a 270 bps hit, coming in at 2.5%.
  • It hasn’t been an easy ride for shareholders, with the stock down 43% from the start of the year to the end of Q3 but investors may be assuming their positions now in preparation for Q4, which typically is the most important one for the business as that’s when most of their b2b enterprise renewals fall.

Rewards

  • Trading at 25.7% below our estimate of its fair value

  • Earnings are forecast to grow 18.65% per year

  • Earnings grew by 1888.5% over the past year

Risks

  • Significant insider selling over the past 3 months

  • Large one-off items impacting financial results

View all Risks and Rewards

PayPal Holdings, Inc. operates a technology platform that enables digital payments on behalf of merchants and consumers worldwide.

Why PYPL?

Online payments processor seeing continued transaction growth.

  • PayPal has drawn the attention of several major superinvestors this quarter, enticing the likes of Stephen Mandel’s Lone Pine Capital into making a hefty investment, acquiring 4,005,315 new shares in the business, a huge 93% increase over his Paypal holdings as reported at the end of Q2.
  • A very dominant player in online payments, as of September they held 41% of that market and their figures look to be improving despite difficult times for consumers. Paypal has enjoyed a 14% year-on-year increase in total payment volume on an FX-neutral basis, reporting over US$337B in payments which has provided a nice 26% boost to EPS, a 29% increase to operating cash flow a 12% increase on a FX-neutral basis to US$6.85B in net revenues.
  • Total online transactions processed increased marginally from 5.5B to 5.6B from Q2 to Q3, showing some resilience in the face of a worsening outlook for consumer spending.
  • With the stock back at levels not seen since the depths of the 2020 market crash, I think some superinvestors are seeing this as a long term opportunity.

Rewards

  • Trading at 36.4% below our estimate of its fair value

  • Earnings are forecast to grow 2.55% per year

  • Earnings grew by 75.5% over the past year

Risks

No risks detected for PYPL from our risks checks.

View all Risks and Rewards

The Walt Disney Company operates as an entertainment company worldwide.

Why DIS?

Entertainment conglomerate finding success in the streaming segment.

  • Disney is another stock that’s been beaten down this year, but some superinvestors remain optimistic over the stock’s future. According to Dataroma, 7 superinvestors have stood by the entertainment conglomerate, adding to their existing holdings. Notably Daniel Loeb of Third Point added 400,000 new shares to their books, bringing their quarterly increase up to 40%.
  • Despite Disney’s souring share price, operationally, their parks segment is continuing to improve post COVID and they keep adding lots and lots of subscribers to Disney+ which is their main growth engine for the next 5 years. This quarter saw Disney add 12.1M new Disney+ subscribers, bringing the total subscriber figures to more than 235M, eclipsing streaming giant Netflix. While this looks great on the surface, Disney’s streaming services have struggled to gain profitability and the company is looking to introduce an ad-supported subscription tier to try and minimize losses.
  • In what was a surprise for the market, CEO Bob Chapek departed the business with former CEO Bob Iger set to retake the reins to try and steer the company in a brighter direction and help deliver more value to investors. An outcome that recent investors will be hoping for, and may have formed the rationale for their investment.

Rewards

  • Earnings are forecast to grow 25% per year

Risks

  • Large one-off items impacting financial results

View all Risks and Rewards

Micron Technology, Inc. designs, develops, manufactures, and sells memory and storage products worldwide.

Why MU?

Computer memory and data company innovating in the face of declining consumer demand.

  • Micron was a hugely popular stock among a select few superinvestors. Prem Watsa’s Fairfax Financial holdings and Viking Global Investors were among 6 major superinvestors to buy more Micron stock. Fairfax Financial Holdings increased their stake in Micron by 399% adding 2,768,649 shares to the books, while Viking Global Investors acquired an enormous 3,943,315 extra shares throughout the quarter.
  • Micron is a large American producer of computer memory and computer data storage. So there’s a big 180 happening right now in consumer electronics as businesses slash profit forecasts, and it’s causing mayhem in stock prices in this space (TSMC, Intel, AMD, Nvidia, Micron).
  • In keeping with the theme of the collection, Micron has also been negatively impacted by weakening consumer demand and the company has reacted by lowering supply volumes through cuts to 2023 capital expenditure. This hasn’t stopped the company from maintaining its position at the cutting-edge of technology as they once again led the industry by introducing their 232-layer NAND gate, becoming the first company to enter volume production on a node with more than 200 layers.
  • If you look at Micron’s stock from the start of the year until the end of Q3, it’s basically halved. So chances are a lot of the value crowd see long-term potential in this business, including Mohnish Pabrai, Li Lu, Guy Spier and Seth Klarman.

Rewards

  • Earnings are forecast to grow 79.87% per year

Risks

  • Significant insider selling over the past 3 months

View all Risks and Rewards

New Money may hold positions in the companies mentioned. Simply Wall St has no position in any of the companies mentioned.

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