Although you probably don't need the reminder, it's been a rough year on Wall Street. The benchmark S&P 500 produced its worst first-half return since 1970. Meanwhile, the growth-centric Nasdaq Composite plunged 34% on a peak-to-trough basis since hitting its all-time closing high in November. Everything from weak economic growth and historically high inflation to Russia's invasion of Ukraine further upsetting the global energy supply chain has contributed to this challenging year.
Yet, in spite of the stock market plunging throughout much of the year, billionaire investors have stood their ground. Billionaire money managers are well aware that every notable pullback in the market has proved to be a buying opportunity over the long run.
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Based on recent 13F filings with the Securities and Exchange Commission, it's become clear that billionaire fund managers have been buyers as the market plunges. Here's what seven prominent billionaires have been buying.
1. Paul Singer: PayPal Holdings
Billionaire activist investor Paul Singer of Elliott Investment Management has been a busy bee in 2022. Most notably, he's taken a roughly $2 billion stake in fintech stock PayPal Holdings (PYPL -1.14%), which was disclosed by PayPal in its second-quarter earnings release.
What's interesting about this position is that Singer often invests in struggling companies. Although PayPal's share price has taken a big hit as pandemic-related valuations deflate, PayPal's operating performance shows a company that's clearly not hurting. Even with U.S. gross domestic product falling in back-to-back quarters, PayPal has maintained double-digit total payment volume growth on a constant-currency basis.
More importantly, user engagement hasn't slowed down. When 2020 came to a close, the average active account completed just shy of 41 transactions over the trailing year. As of June 30, 2022, this average active account had completed nearly 49 transactions over the trailing 12 months. With engagement trends headed in the right direction and digital payment growth still in its very early innings, I'd be surprised if Singer's investment ultimately ended up in the red.
2. Philippe Laffont: Upstart Holdings
Philippe Laffont may not be a household name among billionaire money managers, but he successfully oversees Coatue Management, a hedge fund with almost $8.3 billion in assets under management. In the latest quarter, Laffont added almost $75 million in shares of cloud-based lending platform Upstart Holdings (UPST -1.25%).
Upstart aims to completely turn the traditional loan-vetting process on its head. It uses artificial intelligence (AI) to completely automate and approve about three-quarters of all loans processed. Not only is this saving the roughly six dozen financial institutions Upstart is partnered with time and money, but it's giving loan applicants who might otherwise be denied through the traditional vetting process an opportunity. Upstart-vetted loans have produced similar loan delinquency rates as traditional loans, despite a lower average credit score for Upstart-approved applicants.
The other lure for Upstart is its potential for expansion. Until last year, Upstart almost exclusively focused on personal loans. With the company now expanding into auto loans and small business loans, its addressable market has increased tenfold.
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3. Warren Buffett: Occidental Petroleum
The Oracle of Omaha, who's been CEO of Berkshire Hathaway (BRK.A -0.30%) (BRK.B -0.26%) since 1965, probably needs no introduction. Among the 16 stocks Warren Buffett has purchased this year, none has raised more eyebrows than oil stock Occidental Petroleum (OXY 0.82%). Berkshire has acquired nearly 188.4 million shares of Occidental this year, as of Aug. 8.
Why Occidental Petroleum? The best guess is that Buffett strongly believes crude oil and natural gas prices will remain elevated for years to come. This is a forecast that can certainly be supported by reduced capital investments in the wake of the pandemic, as well as Russia's aforementioned invasion of Ukraine. With no quick fixes to global supply woes, oil and natural gas could very easily support above-average spot prices for years.
But what makes Occidental such an odd Buffett stock is its balance sheet. The Oracle of Omaha normally buys stakes in businesses with strong brand names, exceptional leadership, and rock-solid balance sheets. Occidental is more highly levered than most integrated oil and gas companies. In other words, this is a riskier investment than we're used to seeing from Buffett.
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4. Steve Cohen: CrowdStrike Holdings
Billionaire Steve Cohen, who's known just as much for owning baseball's New York Mets as he is for running Point72 Asset Management, has been an active buyer of cybersecurity stock CrowdStrike Holdings (CRWD 0.13%) as the market plunges. Cohen's fund bought close to 820,000 shares of CrowdStrike during the second quarter.
Aside from the fact that cybersecurity solutions have evolved into a basic necessity service in any economic environment, what allows CrowdStrike to stand out is its AI-driven Falcon platform. Falcon oversees about 1 trillion events daily and has proved superior to the on-premises competition at identifying and responding to potential threats.
Although CrowdStrike has had no trouble growing its subscriber base over the years, what's far more impressive is how the company has been able to encourage existing clients to spend more. A little over five years ago, just 9% of the company's clients had purchased four or more cloud-module subscriptions. As of the end of April 2022, 71% of existing clients had purchased four or more cloud-module subscriptions. This is CrowdStrike's not-so-subtle key to superior operating margins and its amazing revenue retention rate.
5. Jim Simons: Shopify
Billionaire Jim Simons of Renaissance Technologies has thousands upon thousands of positions. However, cloud-based e-commerce platform Shopify (SHOP -2.37%) became one of Renaissance's largest positions during the second quarter, with a greater than 14-million-share aggregate buy.
Despite shares coming under heavy selling pressure due to the company's nosebleed valuation and recent weakness in retail sales as a whole, Shopify looks like a giant in the making. Aided by the pandemic, the gross merchandise value transacted on Shopify's platforms (as of the June-ended quarter) has grown by an annual average of 50% over the past three years. What's more, the company believes it has a $153 billion addressable market just with small businesses. This doesn't even factor in the inroads the company has made with larger companies.
Innovation should also be key for Shopify's long-term outlook. The introduction of Shop Pay, a buy now, pay later service designed to help merchants serve more customers, should benefit nicely during long-winded periods of economic expansion.
6. Ray Dalio: CVS Health
Bridgewater Associates' billionaire money manager Ray Dalio has also been an active buyer. Dalio chose to pile into CVS Health (CVS -0.65%) as the market plunged. Bridgewater bought close to 1.94 million shares during the second quarter, which increased the fund's stake by 159% from the March-ended quarter.
The beauty of healthcare stocks is that they're defensive. People can't control when they get sick, which means there's always demand for prescription drugs, medical devices, and healthcare services.
On a more company-specific basis, CVS Health has benefited from its vertical integration. Its acquisition of health insurer Aetna in 2018 lifted its organic growth rate, provided ample cost synergies, and gave more than 20 million insured Aetna members a reason to stay within the CVS Health network.
Additionally, CVS has been reaping the rewards of its HealthHUB health clinics. In the wake of the COVID-19 pandemic, consumers have demonstrated they're eager for quick solutions to minor illnesses and injuries, as well as supplemental care for chronic conditions. The roughly 1,500 HealthHUBs CVS operates are facilitating these interactions, which have the potential to boost customer loyalty and drive repeat visits.
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7. Jeff Yass: Amazon
Last but not least, billionaire Jeff Yass of Susquehanna International has been buying FAANG stock Amazon (AMZN -1.65%) as the market plunges. Susquehanna added close to 6.6 million shares of Amazon during the second quarter, which increased its stake to approximately 15.2 million shares.
Although Amazon is best known for its dominant online marketplace, which is estimated to bring in 40% of U.S. retail sales in 2022, per eMarketer, it's the company's considerably higher-margin ancillary operations that make it such an ideal buy.
For instance, Amazon's online marketplace has helped attract more than 200 million global Prime subscribers. With almost $35 billion in annual run-rate sales from subscription services, Amazon is able to divert plenty of capital to its fast-growing logistics network and other supercharged growth projects.
However, Amazon's future is undeniably linked to cloud infrastructure segment Amazon Web Services (AWS). AWS brought in 31% of cloud spending during the second quarter, according to estimates from Canalys. More importantly, AWS is responsible for generating the bulk of Amazon's operating cash flow despite accounting for just a sixth of the company's net sales. As AWS grows into a larger percentage of total sales, Amazon's cash flow can soar.
