2 Billionaire Investors in Dow Stocks Are Absolutely Investing 1 They Can’t Sell Fast enough

For almost 128 years, Dow Jones Industrial Average (^DJI -0.06%) It has become the most watched barometer of Wall Street’s health. From a 12-company index with a heavy weighting on industrial companies in the late 1800s, it has now evolved into an index comprised of 30 diverse, time-tested multinational companies.

The long-term success of Dow components has become a huge attraction for investors. It’s not uncommon for everyday investors to access the portfolios of Wall Street’s brightest minds to see what they’ve been up to.

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Each quarter, money managers with more than $100 million in assets under management must file Form 13F with the Securities and Exchange Commission. 13F provides a detailed snapshot of what top asset managers have been buying and selling over the past three months. Despite the drawback of not having this inside information available until 45 days after the end of the quarter, 13Fs still provide valuable insight into stocks, industries, and trends that interest Wall Street’s most successful investors.

The latest round of 13Fs (filed February 14) was particularly significant for the three components of the Dow Jones Industrial Average. While billionaire investors have absolutely flocked to two quality Dow stocks, 13F filings show one of the Dow components has been sent to the chopping block.

No. 1 Dow stock among billionaire investors: Walt Disney

The first Dow component to attract the attention of billionaire money managers in the quarter ending in December was the theme park operator and media giant. walt disney (DIS 1.26%). Five prominent billionaires have added to their respective fund holdings, including (total number of shares purchased in parentheses):

• Ken Griffin of Citadel Advisors (6,340,344 shares)
• Jim Simons of Renaissance Technologies (1,100,700 shares)
• John Overdeck and David Siegel of Two Sigma Investments (563,685 shares)
• Ken Fisher of Fisher Asset Management (309,376 shares)

The House of Mouse’s lure for these billionaires appears to be a combination of improved operating performance and Disney’s unmatched intangible assets.

Regarding the former, Disney executives stuck to their previous forecast that the company’s streaming division would reach profitability by the fourth quarter of the current fiscal year (ending the end of September 2024). After years of significant operating losses in its streaming segment, Disney expanded its direct-to-consumer service to include an ad-inclusive tier and wasn’t afraid to raise prices.

I would also add that Disney is seeing gradual growth in its theme parks and entertainment segments as we move away from the worst of the COVID-19 pandemic. Don’t forget, it’s only been a little over a year since China abandoned its strict COVID-19 mitigation measures.

Another big catalyst for Walt Disney is the brand’s originality. No other media company offers as much depth of character or storytelling as Disney. Few companies can easily bridge the generational gap through their products and services.

Having a strong brand gives your company excellent pricing power. The price of admission to Disneyland in Southern California has been ten times higher than the prevailing rate of inflation in the United States since 1955. This is also why Disney can comfortably raise streaming prices without fear that it will drive away too many subscribers.

No. 2 Dow stock among billionaire investors: Amazon

The second Dow stock billionaires tried to buy in the fourth quarter was an e-commerce company. Amazon (AMZN -0.22%). The recently added Dow component has eight billionaire investors hitting the buy button. This includes (total number of shares purchased in parentheses):

• Ken Griffin of Citadel Advisors (4,321,477 shares)
• Jim Simons of Renaissance Technologies (4,296,466 shares)
• Chase Coleman of Tiger Global Management (947,440 shares)
• Ken Fisher of Fisher Asset Management (888,369 shares)
• John Overdeck and David Siegel of Two Sigma Investments (726,854 shares)
• Point72 Asset Management Steven Cohen (462,179 shares)
• Israel Englander (85,532 shares) from Millennium Management

Amazon is best known as the world’s leading e-commerce marketplace, but online retail sales generate low margins and have little impact on operating cash flow or earnings. Strong growth in the ancillary sector is likely to attract billionaires to Amazon.

No operating unit is more important to Amazon than its cloud infrastructure services platform, Amazon Web Services (AWS). AWS accounts for about a third of global cloud infrastructure services spending, according to estimates by technology market analyst Canalys. Despite accounting for only one-sixth of the company’s net sales, the high margins associated with cloud services have helped AWS consistently generate 50% to 100% of Amazon’s operating profits.

Amazon’s advertising and subscription services are also fast-growing segments. In April 2021, then-CEO Jeff Bezos noted that his company had surpassed 200 million Prime subscribers worldwide. Considering that Amazon is now the exclusive streaming provider, this number has likely increased. thursday night football.

Finally, Amazon is a logical beneficiary of the artificial intelligence (AI) revolution. For example, sellers can use generative AI solutions within AWS to personalize their messages to potential buyers. As long as AI remains a hot investment trend, Amazon is likely to attract the attention of billionaire money managers and profit.

Image source: Getty Images.

Dow component’s billionaire investors can’t sell fast enough: Verizon Communications

But not all Dow Jones Industrial Average stocks were adopted by billionaires in the fourth quarter. One widely held stock that found itself on the chopping block was the telecom titan. Verizon Communications (VZ 0.43%). Seven successful billionaires were sellers (total number of shares sold in parentheses).

• John Overdeck and David Siegel of Two Sigma Investments (3,314,607 shares)
• Israel Englander (2,830,060 shares) from Millennium Management
• Ken Griffin of Citadel Advisors (2,106,623 shares)
• Jeff Yass of Susquehanna International (1,844,350 shares)
• Point72 Asset Management Steven Cohen (1,458,200 shares)
• Jim Simons of Renaissance Technologies (834,522 shares)

The reason prominent billionaires are abandoning Verizon in droves likely has something to do with the July report. wall street journal It argues that incumbent telecommunications companies could face significant environmental and health-related liability costs associated with the use of lead-sheathed cables. Wall Street generally hates uncertainty.

The Fed’s historic rate hike cycle could be another selling catalyst for billionaire money managers. Traditional telecommunications companies have significant debt on their balance sheets. If the U.S. central bank raises the federal funds rate by 525 basis points within two years, future refinancing and borrowing costs could be higher.

Verizon is also a mature company that will grow at low single-digit growth rates for the foreseeable future. As AI stocks soar, active funds have likely reallocated capital to faster-growing companies with more robust long-term expansion prospects.

But even with this selling pressure, Verizon and its 6.7% yield still seem like a bargain. Upgrading networks to handle 5G download speeds is increasing wireless data consumption and sparking a wave of additional broadband.

Verizon also made it clear that lead-sheathed cables only play a minor role in its network. If a company is held financially liable, this will likely be determined by the notoriously notoriously difficult U.S. court system. That said, many of the reasons to be skeptical about Verizon lack substance.