When looking at the top bets of some of the most prominent billionaire investors, there is a common theme that stands out. These professionals are favoring highly profitable companies that dominate their industry. Most importantly, they are investing in the stocks that trade at reasonable valuations relative to future growth expectations.

Stephen Mandel of Lone Pine Capital, Chase Coleman of Tiger Global Management, and Andreas Halvorsen of Viking Global Investors have had successful investing careers, with their net worth ranging from $2.5 billion to $7 billion, according to Forbes. Let’s look at these firms’ largest holdings at the end of the second quarter and why investors should expect outstanding returns from these stocks over the next few years.

1. Taiwan Semiconductor Manufacturing

Lone Pine Capital manages over $16 billion in assets. Its largest holding at the end of the second quarter was leading chip maker Taiwan Semiconductor Manufacturing (NYSE: TSM), also commonly known as TSMC.

TSMC is a widely held tech stock among the most successful investment firms. The company enjoys a lucrative position as the world’s top chip foundry. It manufactures chips for Nvidia, Advanced Micro Devices, Intel, and a host of other semiconductor companies and commands over 60% share of the global foundry market.

TSMC gives investors broad exposure to the trends driving growth in the semiconductor industry without the additional risks of picking the winners and losers among the Nvidias and Intels of the world.

TSMC’s advantages in advanced chipmaking positions it well for growth as companies invest in powerful chips to handle the demanding workloads of artificial intelligence (AI) training. The demand for high-performance chips drove a 32% year-over-year increase in revenue last quarter, and it should continue that momentum into 2025.

Management expects strong results in the near term driven by improving chip demand for smartphones and AI. Strong top-line growth should pad profits, as TSMC generates a high operating margin of 45% relative to revenue. This will fund the company’s plan to spend at least $30 billion this year in capital expenditures to support long-term demand for advanced chip technologies.

Wall Street analysts expect the company’s earnings to grow at an annualized rate of 26% over the next several years. With the stock likely to continue trading at its current forward price-to-earnings (P/E) ratio of 26, investors could earn a return on par with those estimates.

2. Meta Platforms

Meta Platforms (NASDAQ: META) estimates there are 3.2 billion people that use its family of apps every day. This is a strong advantage in the digital advertising market, which is how the company makes money.

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Chase Coleman’s Tiger Global Management has held a large stake in the social media leader since 2018, and it held $3.7 billion worth of shares in the second quarter, making it the firm’s largest holding.

Meta AI is already having a big impact on the user experience in Facebook and Instagram. The company’s AI models improved the quality of recommendations, which can have a big impact on the time spent on these platforms. As a result, ad impressions and price per ad were up 10% year over year last quarter, and that drove a strong revenue increase of 22% over the year-ago quarter.

Strong revenue growth will provide more profit for Meta to reinvest in advanced AI models and, therefore, keep the positive cycle of growth going. “We had a strong quarter, and Meta AI is on track to be the most-used AI assistant in the world by the end of the year,” CEO Mark Zuckerberg said.

Meta is a highly profitable business. It generated a profit of $51 billion on $149 billion of revenue over the last four quarters. Management plans to spend between $37 billion and $40 billion on capital expenditures this year, with a significant increase expected in 2025. This spending will support AI research and other products for long-term growth.

Wall Street analysts expect Meta to post annualized earnings growth of 17% in the coming years. Assuming the stock continues to trade at the same P/E, that’s enough growth for the shares to double in value within the next five years.

3. Amazon

Amazon (NASDAQ: AMZN) is a powerful brand in e-commerce and the enterprise space with the Amazon Web Services (AWS) cloud computing business. It generates most of its $604 billion in trailing 12-month revenue from retail-related services, including advertising, but around two-thirds of its operating profit comes from cloud services.

Viking Global Investors held $1.8 billion worth of Amazon stock in Q2, making it the firm’s largest holding, and it added significantly to its stake in the quarter.

“We’re continuing to make progress on a number of dimensions, but perhaps none more so than the continued reacceleration in AWS growth,” CEO Andy Jassy said in the second-quarter earnings report. Amazon is benefiting from companies migrating their on-premise data systems to the cloud, and a big incentive for this migration in 2024 is taking advantage of AI services.

AWS revenue increased 19% year over year last quarter, and Amazon should see this momentum continue. Amazon offers tools to help customers build their own AI applications with Amazon Bedrock, in addition to its proprietary AI chips like Trainium, to provide more cost-efficient computing power for AI training.

Amazon’s increasing AI capabilities position it well in a cloud market expected to reach $774 billion, according to Statista. Wall Street analysts expect the company’s earnings to increase at a 23% annualized rate. Investors should expect the stock to command a premium P/E multiple and hit new highs for years to come.

Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now?

Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $731,449!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of August 26, 2024

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. John Ballard has positions in Advanced Micro Devices, Meta Platforms, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.

3 Billionaire-Held Stocks to Buy Now was originally published by The Motley Fool

One of the best ways to make solid investment decisions is to pay attention to Warren Buffett’s portfolio. Many of his largest holdings have outperformed the market for years or even decades at a time.

One of his long-term positions, Visa (NYSE: V), caught my eye after a recent correction. Buffett has held onto this stock since 2011. There are two exciting reasons why you should consider Visa for your portfolio right now.

This is the type of stock that every investor wants to own

In one of his more famous quotes, Buffett tried to explain a lesson he’s learned over and over: Trust great businesses, not management teams. “When a management with a reputation for brilliance tackles a business with a reputation for bad economics,” Buffett once advised, “it is the reputation of the business that remains intact.”

The lesson here is simple: Buy high-quality businesses that even a half-competent management team could run. In this regard, Visa is the perfect example. A few months ago, I speculated that Visa could become the next trillion-dollar stock. It wasn’t the savvy management team that I loved, but the business fundamentals that even a poor management team would find difficult to screw up. Visa’s main advantage, I argued, was the long-term tailwind of network effects.

What are network effects? This business school term essentially describes a product or service that gets more valuable the more that people use it. Social media is a prime example. Even the best social media platform won’t get anywhere without hitting a critical mass of users. In this way, a social media network’s greatest advantage is its user base, not its technology. People want to join networks that others are a part of, which means that the larger platforms generally tend to grow even bigger over time.

Payment networks like Visa operate in much the same way. No one wants to use a credit or debit card that merchants won’t accept. And merchants don’t want to accept forms of payment that consumers don’t use. The natural result is industry consolidation. According to data compiled by Statista, Visa has a massive 61% market share for general-purpose payment cards in the U.S. Mastercard comes in second with a market share of 25%, while just two companies round off the rest of the industry. This isn’t a new dynamic, either. Mastercard and Visa have enjoyed industry-duopoly positions for more than a decade, with Visa commanding a heavy lead the entire time.

Great stocks rarely get this cheap

Massive-industry consolidation combined with an asset-light business model has resulted in huge and steady profits for Visa. Its returns on equity are incredibly impressive considering the company employs a conservative amount of leverage. Free-cash-flow generation has nearly always been positive. And after a small correction, shares now trade at nearly their cheapest levels in years on a price-to-earnings basis.

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Right now, the S&P 500 as a whole trades at a price-to-earnings ratio of 29.2. That means Visa stock trades at a discount to the market average despite operating an incredibly reliable and profitable business model that benefits from network effects that should endure for decades to come. According to recent filings, it doesn’t appear as if Warren Buffett has been selling any of his Visa position. It’s hard to imagine him doing so at these prices.

Is Visa stock a buy right now? The answer appears to be a strong “yes.” At these levels, the company is a great match for value and growth investors alike.

Should you invest $1,000 in Visa right now?

Before you buy stock in Visa, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Visa wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $731,449!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of August 26, 2024

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Mastercard and Visa. The Motley Fool recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.

Is Visa Stock a Buy? was originally published by The Motley Fool

With cryptocurrency emerging as a stand-alone asset class, a growing number of billionaires are now hunting for potential investment opportunities. Some of them are buying cryptocurrencies for their enormous upside potential, while others are buying them for their ability to diversify a portfolio or hedge their overall market position.

Based on public statements and official 13F filings with the Securities and Exchange Commission (SEC), it’s possible to put together a snapshot look at what top billionaires are buying. Unsurprisingly, Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) are at the top of their shopping lists.

1. Bitcoin

Hedge fund billionaires Stanley Druckenmiller and Paul Tudor Jones are two high-profile names making the case for why Bitcoin should become a part of a diversified portfolio. As Druckenmiller has pointed out, Bitcoin has many of the same properties as gold, making it interesting as a potential long-term store of value. And Paul Tudor Jones has made the case that Bitcoin can be one way to hedge against geopolitical and macroeconomic risk.

Billionaire hedge fund managers have emerged as some of the biggest buyers of the new spot Bitcoin exchange-traded funds (ETFs). Based on biweekly market data from CoinShares, it’s possible to see at a glance which hedge funds are the biggest buyers.

Some of them — such as Jane Street and Susquehanna International Group — may be familiar names to regular readers of The Wall Street Journal. Others, such as Boston-based Bracebridge Capital — which is run by the wealthiest female hedge fund manager in the U.S. — may be less familiar. But what they all have in common is that they’re loading up on Bitcoin.

And don’t forget about billionaire Larry Fink of BlackRock Inc. (NYSE: BLK), which manages over $10 trillion in assets. Back in June 2023, BlackRock was the first to file a spot Bitcoin ETF application with the SEC. That ETF — the iShares Bitcoin Trust (NASDAQ: IBIT) — is now the most popular spot Bitcoin ETF. Fink is also a regular guest on CNBC, explaining why average investors should be investing in Bitcoin.

Much of the billionaire demand for Bitcoin is being driven by its upside potential. The growing consensus is that Bitcoin now has a path to $150,000 by the end of 2025. And from there, the sky’s the limit. Cathie Wood of Ark Invest, for example, has suggested that Bitcoin could be worth as much as $3.8 million per coin by 2030.

2. Ethereum

While Bitcoin has garnered the most attention from billionaires, don’t sleep on Ethereum. Arguably, Ethereum gives you much more diversification than Bitcoin since it’s much more involved in every facet of the blockchain world. Ethereum is a smart contract blockchain network. It’s a building block for everything from games and non-fungible tokens (NFTs) to metaverse worlds.

But what billionaires like best about Ethereum is its potential to disrupt the traditional world of Wall Street. That’s due to the enormous strides being made in decentralized finance (DeFi), which can be thought of as the blockchain version of traditional finance. For example, traditional finance has centralized exchanges such as Coinbase Global (NASDAQ: COIN), while DeFi has decentralized exchanges such as Uniswap (CRYPTO: UNI).

Some of the best numbers about the disruptive potential of Ethereum come from Cathie Wood of Ark Invest. In this year’s “Big Ideas 2024” report, she outlined exactly how much value is flowing from traditional finance to decentralized finance, especially smart contract blockchain networks such as Ethereum. Wood suggests that DeFi could grow at a 32% annualized rate over the next few years, making it a $5.2 trillion market opportunity by 2030.

If you’re looking for a billionaire evangelist for Ethereum, look no further than Mark Cuban. Based on his experience as a tech entrepreneur and angel investor, he’s well-positioned to discuss the benefits of Ethereum. Cuban has been beating the drum for Ethereum ever since 2021, when he praised its versatility and technological sophistication.

Do billionaires buy altcoins?

Based on the above, you might conclude that billionaires are only buying Bitcoin and Ethereum. That’s not necessarily the case. If you parse the latest data from CoinShares, a handful of other cryptocurrencies appear to be attracting the attention of large institutional investors. These include Solana (CRYPTO: SOL), Litecoin (CRYPTO: LTC), XRP (CRYPTO: XRP), and Cardano (CRYPTO: ADA).

However, the amount of money that is flowing into these altcoins seems trivial in comparison. For example, over $8 billion has flowed into Bitcoin since the start of the year, and nearly $1 billion into Ethereum. In comparison, $34 million has flowed into Litecoin, $31 million into Solana, $22 million into XRP, and $12 million into Cardano.

This strategy of loading up on Bitcoin and Ethereum, while making relatively tiny crypto investments elsewhere, is probably one that makes sense for the average investor. You’ll get the best of both worlds: enormous upside potential combined with some additional diversification for your portfolio.

Should you invest $1,000 in Bitcoin right now?

Before you buy stock in Bitcoin, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Bitcoin wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $731,449!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of August 26, 2024

Dominic Basulto has positions in Bitcoin, Cardano, Ethereum, and Solana. The Motley Fool has positions in and recommends Bitcoin, Cardano, Coinbase Global, Ethereum, Solana, Uniswap Protocol Token, and XRP. The Motley Fool has a disclosure policy.

Billionaires Are Buying These 2 Cryptocurrencies Hand Over Fist was originally published by The Motley Fool

Data analytics company Palantir Technologies (NYSE: PLTR) has experienced an increase in its growth rate as its customers look to use artificial intelligence (AI) to enhance their day-to-day operations. Palantir has held bootcamps to showcase its new AI platform, AIP, to demonstrate to customers how it can help their businesses. And it looks to be paying off with an improved growth rate.

While many companies may offer to provide AI solutions, it can often be difficult to implement them. That’s where Palantir can provide some excellent value to its customers, and it could unlock a tremendous growth opportunity for the business.

Getting from prototype to production isn’t easy for many companies

Designing new processes and testing out new AI products can seem easy, but actually implementing changes and putting them into production is a different ballgame, and that’s where Palantir sees many companies struggling.

On its latest earnings call, Palantir’s Chief Technology Officer Shyam Sankar said, “It is so easy to create an AI prototype, the equivalent effort of making a PowerPoint slide, but it’s actually very, very hard to get that in production, probably 10 to 100 times harder than traditional software transitioning to production. And therein lies our entire opportunity in the market.”

And not getting projects into production may be a potential source of frustration for companies as they try to justify costly AI initiatives. Research company Gartner estimates that 30% or more of generative AI projects may end up abandoned by the end of next year as businesses struggle to validate the payoff from their investments. This can result in managers feeling the pressure to move projects into production sooner rather than later, which can potentially lead to an increase in demand for Palantir’s services, including its AIP.

Palantir’s sales have been rising, and profits have been accelerating even faster

Palantir’s business has been moving in a positive trajectory in recent quarters as not only has it become consistently profitable, but its top and bottom lines have also been increasing. And a particularly positive sign is that profits have been rising at a faster rate than revenue.

In its latest quarterly results, which ended on June 30, Palantir’s revenue grew by 27% to $678 million, which is faster than the 13% growth it achieved a year earlier.

However, even amid all this revenue and even profit growth, Palantir’s stock still doesn’t look cheap. With Palantir at more than 180 times its trailing earnings and nearly 90 times next year’s estimated future profits (based on analyst expectations), investors are still paying a hefty premium for the business. Even based on revenue, Palantir looks egregiously overvalued, trading at close to 30 times its sales.

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Palantir’s stock has potential, but it also comes with risks

Palantir has more than doubled in value this year as it has become a popular buy with AI investors. But there are challenges and headwinds looming, including a possible recession and a decline in AI-related spending.

While the business does appear to be moving in the right direction, it’s Palantir’s pricey valuation that would prevent me from buying shares of the company today. Without a more significant acceleration in its profits or more of a reduction in its stock price, there simply looks to be too much optimism and future growth already priced into its valuation to make it a good buy, and for this to be an investment with a high probability of generating a strong future return.

Investors may want to wait to see if the company can indeed build off its recent results and continue to accelerate its growth rate, because if it can’t, the stock could be due for a correction. As of now, it may be a bit too risky to buy the stock given its high price tag.

Should you invest $1,000 in Palantir Technologies right now?

Before you buy stock in Palantir Technologies, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $731,449!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of August 26, 2024

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.

The Big Problem Palantir Technologies Hopes to Solve for Its Customers was originally published by The Motley Fool

Despite America being one of the world’s best economies, the typical person living in the United States falls woefully short of saving for a comfortable retirement. According to studies, the median retirement savings across all U.S. families is $87,000. So, if you’re at or around $100,000 today, I have two crucial nuggets of good news for you.

First, you’re doing better than you might give yourself credit for, so give yourself some love. Second, the next $100,000 will feel much easier, thanks to the power of compounding.

Yes, retiring with $1 million or more in savings is attainable. However, the work to get there may depend on your life circumstances once you hit that first $100,000 milestone.

Here are three scenarios to outline what you can expect moving forward. Remember, you’re never out of the game, no matter where you start.

Scenario No. 1: You’re ahead of the game

The typical family doesn’t have $100,000 saved, so hitting this goal anytime before age 35 puts you well ahead of the game. Perhaps you are a high earner or lived frugally during your 20s and early 30s. Regardless of your circumstances, you can ease off the gas over the coming decades. Suppose you have this $100,000 invested in a diversified portfolio that generates an annualized return of 8%.

Assuming you’re 35, you would retire at 65 with almost $1.1 million without adding another penny. You could achieve FIRE (financial independence, retire early). For example, if you contributed $500 per month starting at 35, you would cross $1 million in savings by age 58. Bump that to $1,000, and you’ll hit $1 million by age 55. The bottom line is that you would have options, which is what financial independence is all about.

Scenario No. 2: You got a late start

Most families get a late start, based on the data on what people retire with. That’s OK. Life happens: People buy homes, start families, and have student loans. No, the math isn’t as friendly if you’re starting later, but there is still tons of time to build a comfortable retirement. For this scenario, imagine a family starting late but saving $100,000 by age 45.

You don’t benefit from compounding as much as those starting earlier. Without additional contributions, you would retire with $492,000 at age 65. How much do you need to add? Contributing $1,000 monthly will get you to $1 million by retirement.

That sounds like a lot; however, many people enter their prime earning years in their mid-40s. It could be time to revisit your budget if you struggle to contribute the necessary amounts. For example, the average new car payment is $726. Downgrading to a used vehicle isn’t ideal but could free up hundreds of dollars toward that monthly contribution goal. Eventually, one must sacrifice some luxuries to build a comfortable retirement. It doesn’t sound fun now, but I promise you won’t be thinking about that new car you once had decades later.

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Scenario No. 3: You’re playing catch-up

Naturally, those who wait the longest to save for retirement have the most challenging road ahead. However, there is still time, even if you’re way behind. The worst thing you can do is give up because you think it’s too late.

Suppose you hit $100,000 at age 55 and want to retire with $1 million. You’ll have to save aggressively, but it is still possible. Contributing $4,300 monthly could likely get your retirement savings to $1 million by the age of 65, assuming an 8% interest rate.

No matter their budget, many people may not have that money available. So, you may have to extend your career to give compounding some extra time to help you. Retiring at 70 instead of 65 means an additional five years to save. In this scenario, one only needs to contribute $2,000 monthly to retire a millionaire. In other words, that additional five years cuts your monthly contribution goal to less than half! Compounding makes a tremendous difference, even with just five extra years.

This is the take-home point

You’ve read it throughout this article, but it is important enough to say it once more: You have time to build a better retirement, no matter where you are in life. The math might change based on your situation, but anyone can plan and work toward a better retirement than they would have otherwise.

The $22,924 Social Security bonus most retirees completely overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.

View the “Social Security secrets” ›

The Motley Fool has a disclosure policy.

Have $100,000? Here Are 3 Ways to Grow That Money Into $1 Million for Retirement Savings was originally published by The Motley Fool