In a little over two months, Wall Street and investors will turn the page on 2022 -- and it can't seem to come soon enough. Since hitting their respective intra-day highs between mid-November and the early part of January, all three major U.S. stock indexes have plunged between 22% and 38%, which puts them all, firmly, in a bear market.
But just because there's turbulence on Wall Street, it doesn't mean billionaire money managers have been chased to the sideline. On the contrary, most billionaires have been actively putting their funds' money to work during this bear market decline.
What's been particularly notable is the affinity billionaires have shown to Dow Jones Industrial Average (^DJI -0.17%) stocks in 2022. The Dow Jones, which has fared the best of the major U.S. indexes (down by as much as 22%), is composed of 30 multinational businesses that offer a rich history of profitability. In other words, it's an index packed with time-tested businesses that can allow investors to sleep easy at night.
Based on Form 13F filings with the Securities and Exchange Commission, there are four Dow stocks billionaire money managers can't stop buying.
The first Dow Jones Industrial Average stock billionaires can't seem to get enough of is theme park operator and media kingpin Walt Disney (DIS -1.93%). Billionaires Ole Andreas Halvorsen of Viking Global Investors and Dan Loeb of Third Point respectively bought around 1.74 million shares and 1 million shares of Disney for their funds in the June-ended quarter.
One of the primary reasons investors buy Walt Disney stock is the uniqueness of its operating model. Though there are other theme park operators, movie studios, and content libraries for consumers to choose from, virtually no company on the planet can so seamlessly engage multiple generations of people like Disney. There is no true alternative to what this company can offer consumers.
Walt Disney is also a logical bounce-back candidate following the COVID-19 pandemic. Multiple revenue channels were hit during the height of the pandemic due to the intermittent closures of theme parks and movie theaters. With the worst of the pandemic closures likely in the rearview mirror, Disney should be able to lean on its proprietary content, the lure of its theme parks, and its pricing power to rapidly make up for a few lost years of growth.
The company's streaming platform, Disney+, is yet another reason billionaires are likely attracted to Disney stock. Since launching its streaming service less than three years ago, Disney+ has amassed 152.1 million subscribers. Eventually, this segment could become a cash cow for Walt Disney.
Energy stocks have been in the best-performing sector this year, which might be why billionaires Jim Simons of Renaissance Technologies and Warren Buffett of Berkshire Hathaway have piled into oil stock Chevron (CVX -0.41%). Simons and Buffett respectively oversaw the purchase 4.96 million shares and 2.26 million shares of Chevron during the second quarter.
The bullishness surrounding energy stocks likely has to do with the global energy supply chain being somewhat broken. Due to demand uncertainty during the pandemic, most oil and gas companies significantly pared back their capital investments. To make matters worse, Russia's invasion of Ukraine compromises oil and gas transmission to Europe. With no easy fix to quickly boost global supply, there's a good chance that energy commodity prices will remain well above average for years to come.
Also, as I've pointed out before, Chevron is an "integrated" operator. Although it generates its beefiest operating margins from its drilling segment, the company operates transmission pipeline assets, as well as chemical plants and refineries. Pipelines tend to lean on fixed-fee or volume-based contracts that produce very predictable cash flow. Meanwhile, chemical plants and refineries benefit from lower input costs when oil prices fall. Chevron is well positioned, no matter which direction the price of oil and natural gas moves.
Lastly, Chevron's balance sheet is a step above its competition. With a considerably lower debt-to-equity ratio than most global oil majors, Chevron has superior financial flexibility to make acquisitions or return money to its shareholders.
Johnson & Johnson
A third Dow stock billionaire money managers haven't been able to stop buying is healthcare conglomerate Johnson & Johnson (JNJ 0.84%). Billionaires Ken Fisher of Fisher Asset Management and Israel Englander of Millennium Management gobbled up around 5.09 million shares and more than 176,000 shares of J&J in the June-ended quarter, respectively.
One reason investors of all walks tend to be lured by J&J is its defensive nature. No matter how poorly the U.S. economy or stock market perform, or how high inflation flies, there will always be demand for prescription drugs, medical devices, and healthcare services. To add, Johnson & Johnson is one of only two publicly traded companies with a AAA credit rating from Standard & Poor's (S&P), a division of S&P Global. In short, J&J is a very safe investment that won't cause its shareholders to lose sleep at night.
Johnson & Johnson's operating segments also work well with one another. For more than a decade, J&J has shifted its revenue mix to include more higher-margin pharmaceutical sales. However, brand-name drugs have a finite period of sales exclusivity. To counter this eventual patent cliff, the company can rely on its leading medical device segment, which appears perfectly positioned to take advantage of an aging U.S. population and broadening access to medical care.
Johnson & Johnson's capital return program is a marvel as well. Only a handful of publicly traded companies boast a longer active streak of consecutively raising their base annual dividend than J&J (60 years).
The fourth Dow stock billionaires can't stop buying is none other than tech giant Microsoft (MSFT -0.31%). Billionaires Jim Simons, Ken Fisher, and Ken Griffin of Citadel Advisors were all big buyers during the second quarter. Simons' fund added 3.82 million shares, while Griffin and Fisher oversaw purchases of around 988,000 shares and 822,000 shares, respectively.
Billionaires' love for Microsoft probably has to do with the company's push into the cloud. Microsoft Azure is the world's No. 2 cloud-service provider, in terms of market share, and has been consistently growing by close to 50% on a year-over-year basis, excluding currency movements. Virtually every Microsoft operating segment that's incorporated cloud initiatives is growing by a double-digit percentage from the prior-year period.
Something else to note is that Microsoft's abundant operating cash flow and cash-rich balance sheet allow the company to take risks that most of its peers can't. For example, Microsoft announced its intent in January to acquire gaming company Activision Blizzard in a $68.7 billion all-cash deal. If regulators approve this deal, Microsoft will further boost its gaming presence, as well as provide itself a jumping-off point to become a key player in the multitrillion-dollar metaverse.
And like J&J, there's safety in numbers with Microsoft. It's the other publicly traded company with the highest possible credit rating (AAA) from S&P. Standard & Poor's has more faith that Microsoft can service and repay its outstanding debt than it does in the U.S. federal government (AA rating) doing the same.