If you want to be a better dancer, you're probably a lot better off following Beyoncé than your cousin's TikTok channel. The same principle applies to the world of investing. If you want great returns, you should learn from the best investors.
Those of you eager to learn from the pros will be glad to know that the world's top investors need to disclose their activity each quarter to the U.S. Securities and Exchange Commission. Here are three stocks they were buying hand over fist as markets tanked in the second quarter.
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1. Sea Limited
During the three months ended June 30, 2022, Ray Dalio and Bridgewater Associates made lots of new stock purchases. The largest new position Bridgewater began was Sea Limited (SE 1.20%). This is a Singapore-based tech company that operates Shopee, an online marketplace popular throughout Southeast Asia and Taiwan. Sea Limited also owns Free Fire, the online game most downloaded to mobile devices worldwide over the past few years.
Shares of Sea fell hard in the first quarter, likely making them seem like a bargain to Dalio during the second. Now, you could buy them at lower prices than Bridgewater probably paid. A wider-than-expected net loss in the second quarter, followed by a decision to suspend forward guidance for the e-commerce segment, pressured the stock lower in August.
Investors are getting nervous about Sea's growth strategy, and they probably should. The company's been using every dollar of profit from its gaming operation, and more, to fuel the growth of its e-commerce and digital financial services operations. Gaming revenue slid backward in the second quarter, leading to a scary net loss of $931 million. It's probably a good idea to wait for signs that Sea's e-commerce and financial services segments can generate a reliable profit before risking your own hard-earned money on this stock right now.
2. Ally Financial
Ally Financial (ALLY 6.73%) is an all-digital consumer bank that was once the financial arm of General Motors. To this day it has a leading share of the lucrative market for auto loans.
A well-known fan of banks, Warren Buffett, and the holding company he's managed since the 1960s, Berkshire Hathaway, more than tripled their stake in Ally Financial during the second quarter.
Like many of Buffett's favorite stocks, Ally pays a dividend. At recent prices, this one offers a better-than-average 3.5% yield that could grow by leaps and bounds in the foreseeable future. Ally has raised its payout 150% over the past five years, but the company needed just 20% of earnings over the past 12 months to meet its dividend commitment.
At recent prices, you can buy Ally for just 0.9 times its book value. That's a nice price for a bank that just reported a 14.7% return on equity in the second quarter.
3. Walt Disney
Daniel Loeb and his hedge fund, Third Point Management, made a relatively big bet on Walt Disney (DIS -0.45%) stock in the second quarter. Loeb bought 1 million shares of the entertainment company, making it 2.2% of Third Point's portfolio.
There's a lot for investors to like about Disney. A never-ending string of top-grossing comic book movies would be impressive on its own, but there's much more. This stock is attracting top investors because nobody can leverage intellectual property as effectively as the House of Mouse.
In the second quarter, revenue from Disney's streaming services business grew 23% year over year to $4.9 billion. With far fewer COVID-related restrictions, revenue from the company's parks exploded in the U.S. and abroad.
Loeb was attracted to Disney partly because its streaming services appear to be gaining on the competition. At the end of April, Disney+ had 33% more subscribers than it did a year earlier. With its chance to dominate the streaming industry in the years ahead, it's probably a good time to add this stock to a well-diversified portfolio of your own.
