3 Stocks the Smartest Investors Have Been Buying Hand Over Fist … – The Motley Fool

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Retail investors likely wish they had more time to research and find new stocks for their portfolios. But with work, family, children, and other obligations there is only so much time in the day.
One trick that can help retail investors find new stocks to invest in is to look at what pension funds, asset managers, hedge funds, and other institutional investors are investing in. These entities, which regularly report their holdings, are known as the “smart money.” Many of them have been through extensive training, have decades of investing experience, and have also been through a recession or two.
Many of the people running these funds also made a lot of money and even become billionaires due to their investing success. Now, you may not always agree with these stock picks and you should never invest solely because someone else is (no matter who they are) but it’s never a bad idea to take a peek. Here are three stocks the smartest investors are buying hand over fist for 2023.
Ray Dalio is one of the most well-known names in all of investing and for almost four decades he ran what has become the largest hedge fund in the world, Bridgewater Associates, which has $150 billion of assets.
In October, Dalio stepped down as co-chief investment officer of the company and transferred his voting power to the board of directors. He will keep his seat on the board.
That means that one of Bridgewater’s last big investments when Dalio was co-chief investment officer was in Visa (V 2.52%), one of the largest payment rails in the world. In the third quarter, Bridgewater increased its holdings in the company by more than 147%. The hedge fund now owns 1.22 million shares valued at close to $253 million.
Visa’s stock performed pretty well in 2022, only falling about 6% last year, which is much better than the broader market. Visa can hedge inflation because it collects a fee on every transaction that passes through its network, so even as transactions get more expensive so do the fees that Visa earns.
But a big concern is if there is a severe recession, which would lead to a slowdown in overall spending on its network. Still, having already developed a big moat that will be hard for most competitors to replicate, I would expect Visa to be a good long-term stock. There’s also a chance that the economy does not tip into a severe recession this year and the company continues to see good volume.
Most investors have heard of billionaire Bill Ackman, the founder and CEO of Pershing Square Capital Management. Ackman rose to notoriety in the 1990s after founding another fund called Gotham Partners. He would also make successful bets shorting the mortgage giants Fannie Mae and Freddie Mac during the Great Recession.
Now, Ackman is seen as an activist, which is an investor or fund that purchases a big stake in a company to enact change in how it is run from an operational standpoint.
Ackman has reignited an old flame with Canadian Pacific Railway (CP 2.42%), which offers freight and supply chain services across eight major ports in the U.S. and Canada. Ackman came in as an activist in the company in 2012 and helped push for a new CEO and board of directors. Pershing sold the stock in 2016 and made billions in profits but Ackman previously said that selling CP is “one of our greatest investment regrets.”
Pershing initiated its position in CP earlier this year but increased its position by 417% in the third quarter of the year. Pershing now owns more than 15 million shares valued at around $1.14 billion. A bet on a railway is usually linked to a bet on the economy, so it’s possible Ackman sees a bright future for North America moving forward.
Nobody in the investing world is better known than legendary investor and 92-year-old Warren Buffett, who still runs Berkshire Hathaway (BRK.A 1.43%) (BRK.B 1.50%), one of the largest conglomerates in this world. When Buffett and Berkshire make a move, the market listens.
And no move was bigger this year than Berkshire’s buying of the U.S.-based oil producer Occidental Petroleum (OXY 0.10%). Berkshire began buying the stock early in 2022 and hasn’t stopped since. The company now owns 194 million shares that are valued at more than $12 billion. Berkshire owns more than 21% of outstanding shares.
Occidental performed great in 2022 with the stock more than doubling. The Russian invasion of Ukraine and the ban on Russian oil imports that followed made American-made oil very valuable. The Organization of the Petroleum Exporting Countries (OPEC) has also curbed the global supply of oil and the price of oil has surged this year, which boosted profits at Occidental.
Oil prices have come back down this year but it seems like Buffett and Berkshire think the days of tighter global oil supply are here to stay. If the price of oil does shoot higher, that could lead to stickier inflation and probably disrupt markets, so owning an oil stock is a good hedge on that scenario, if nothing else.
Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Canadian Pacific Railway, and Visa. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway, short January 2023 $200 puts on Berkshire Hathaway, and short January 2023 $265 calls on Berkshire Hathaway. The Motley Fool has a disclosure policy.
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