Picking winning stocks is a difficult task, even for experienced investors. But the most successful folks on Wall Street have resources the rest of us don't, and (by definition) a reasonably good track record. So if you're looking for some new stock ideas -- or for a reason to revisit ones you've passed over before -- it can be a good move to look what billionaires and famous investors have been buying lately.
We asked a trio of Motley Fool contributors to take a look at the stocks some of the world's best investors are talking about right now, and pick the ones that interest them most. They came back with Apple (NASDAQ:AAPL), Syncrony Financial (NYSE:SYF) and Amazon.com (NASDAQ:AMZN). Here's why these companies have caught the eyes of top investors, and gotten the thumbs up from these Fools.
Riding the iEverything wave
Tim Brugger (Apple): With slightly more than 134 million shares owned following Berkshire Hathaway's (NYSE:BRK-A) (NYSE:BRK-B) recent additions, it's safe to say Warren Buffett has joined the legion of global iFans. Last quarter's additions were timely, given that the Apple's iPhone X has now hit the streets.
One forecast predicts Apple will ship a record-breaking 88.8 million iPhones of all types in the fourth quarter. With an average selling price of over $700 forecast, that would produce another strong quarter.
Though expenses rose a bit last quarter, Apple's 12% jump in revenue to $52.6 billion drove an impressive 24% rise in earnings to $2.07 per share. Ending its fiscal year in record fashion and starting off fiscal 2018 with iPhone X's flying off store shelves bodes well for the future, to say the least.
Slightly concerning, though Buffett clearly isn't worried, is the fact that an estimated 55% of Apple revenue last quarter was from smartphone sales. That's a lot of eggs in one basket -- a basket that will increase in size this quarter, as it always does during the holidays. However, the percentage of Apple's total quarterly revenue from that came from iPhones was somewhat offset by increased sales of Apple Watches, Apple TV 4K, and its services.
As Apple inches ever closer to a $1 trillion valuation, it appears Buffett will be along for the ride. And a profitable trip it will be.
You can take that to the bank!
Danny Vena (Synchrony Financial): Legendary investor Warren Buffett first initiated a position in Synchrony Financial in the second quarter of 2017, and he increased that position in the third quarter. All told, Berkshire Hathaway now holds 20.8 million shares in the company. So what had the Oracle of Omaha buying?
Synchrony Financial is the largest issuer of private-label credit cards in the United States. Its partners include such well-known retailers as Wal-Mart (NYSE:WMT) and Lowe's (NYSE:LOW), payments giant PayPal (NASDAQ:PYPL), and e-commerce juggernaut Amazon.com. The company also provides promotional financing and installment loans for a wide assortment of national and regional retailers, including Guitar Center and Mattress Firm.
Buffett has long been a fan of the recurring payments that come from interest income. In its most recent quarter, the credit card issuer increased its net interest income by 11% year over year to $3.9 billion.
Synchrony also has an online banking business; its lack of branches allows it to pay higher interest rates than its brick-and-mortar peers on deposits, which increased by $4.7 billion year over year and covered more than 73% of its funding.
Buffet probably also likes that because store credit cards generally charge higher interest rates than the standard variety, Synchrony generates an impressive net interest margin -- the difference between the interest a company collects and what it pays out to depositors -- of 16.2%.
All of this gives investors plenty of incentive to follow Buffett's example and buy Synchrony.
A current leader and still growing
Chris Neiger (Amazon): Say what you want about billionaire investor and Dallas Mavericks owner Mark Cuban, but the guy knows how to spot great business opportunities. In an interview with CNBC earlier this year, Cuban said he had just increased his holdings in Amazon, making the e-commerce giant his largest position.
Cuban pointed to two competitive advantages for the company: Its potential in artificial intelligence, and its ability to understand and anticipate its customers needs. He said Amazon is, "[T]he ultimate AI company, it's the ultimate start-up," and added, "When Amazon talks about opening up grocery stores, it's not because they want to sell groceries in stores. It's the same with bookstores. It's because they want to know what you need, when you need it, before you know you need it so they can deliver it right to your door in anticipation."
Part of Amazon's ability to anticipate what its users need derives from its adoption of artificial intelligence and machine learning, which the company has integrated into nearly all of its services. CEO Jeff Bezos has told investors to "watch this space" as machine learning becomes a bigger part of how Amazon runs its business.
Setting aside Cuban's comments, Amazon has given its investors plenty of reason to be optimistic lately. Sales increased by 34% year over year in the third quarter (29% if you take out sales from its recent Whole Foods purchase); and its cloud computing business, Amazon Web Services, saw revenues jump by 42% in the quarter. The company is gearing up for a strong fourth quarter as well; management expects sales growth between 28% and 38%.
Amazon's shares are priced at a hefty premium right now, trading at 145 times expected forward earnings. But its dominance in online retail, cloud computing, artificial intelligence, and huge moves like its purchase of Whole Foods prove that it can move into nearly any segments it wants and start dominating. That's why Cuban still thinks there's still upside for Amazon, and that its opportunity is "enormous."
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Chris Neiger has no position in any of the stocks mentioned. Danny Vena owns shares of Amazon, Apple, and PayPal Holdings. Tim Brugger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Apple, Berkshire Hathaway (B shares), and PayPal Holdings. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Lowe's and Synchrony Financial. The Motley Fool has a disclosure policy.