Amid a flurry of earnings reports and economic-data announcements, you may have missed one of the most important data releases of the entire quarter on November 14. That's when money managers and wealthy individuals with at least $100 million in assets under management were required to file Form 13F with the Securities and Exchange Commission.
A 13F offers an under-the-hood look at what some of the smartest money managers in the world were holding in their portfolios at the end of the most recent quarter -- in this case, as of Sept. 30, 2022. Even though this portfolio snapshot is more than six weeks old, it can still provide insight as to what stocks and/or trends are piquing the interests of top-tier fund managers.
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Despite being clobbered by the 2022 bear market, growth stocks remained a popular buy for billionaire money managers during the third quarter. What follows are seven supercharged growth stocks billionaires can't stop buying.
1. Philippe Laffont: PayPal Holdings
First up is billionaire Philippe Laffont of Coatue Management, who oversaw the purchase of 3.47 million shares of fintech-stock PayPal Holdings (PYPL 1.96%) during the third quarter. This came close to quadrupling Coatue's stake in PayPal from just three months prior.
Although fintech companies have taken a hit with inflation soaring and the U.S. economy weakening, PayPal has demonstrated incredible resilience. Total payment volume, without currency movements, has continued to grow by a low double-digit percentage.
Perhaps most important, active account engagement keeps climbing. On a trailing-12-month basis, active accounts completed an average of 40.1 transactions when 2020 ended and 50.1 transactions in the quarter that ended in September 2022. Since PayPal is primarily a transaction-driven model, this bodes well for its sales and profit growth.
Additionally, CEO Dan Schulman is tightening the company's belt amid growing economic uncertainty and doing what he can to bolster shareholder value. PayPal is aiming for $1.3 billion in annual cost savings in 2023 and recently authorized a $15 billion share-repurchase program.
2. Israel Englander: Intuitive Surgical
For billionaire Israel Englander of Millennium Management, robotic-assisted surgical-systems developer Intuitive Surgical (ISRG 2.21%) was a stock he couldn't stop buying in the third quarter. Englander's fund scooped up 567,169 shares, which increased its position by 97% in just three months.
One reason for Englander's optimism likely has to do with Intuitive Surgical's industry dominance. The company had installed 7,364 of its da Vinci systems in hospitals and surgical centers around the world by the end of September, which is far and away more than any of its competitors. Further, the $0.5 million to $2.5 million price tag for these systems makes it unlikely that its customers would ever switch to a competitor.
Intuitive Surgical also benefits from its razor-and-blades-designed operating model. In its early days, the company generated most of its revenue from selling its pricey da Vinci systems. However, these are intricate systems to build, and therefore produce only mediocre margins. Over time, selling instruments with each procedure and servicing its systems have become the company's key -- and considerably higher margin -- revenue sources.
3. Paul Singer: Pinterest
Billionaire activist-investor Paul Singer of Elliott Investment Management was a busy bee during the third quarter, with a notable buy of 10 million shares of social media stock Pinterest (PINS 0.89%). This tripled Singer's fund's stake from the sequential second quarter.
Although growing recessionary fears have taken their toll on social media stocks this year, Pinterest has outperformed its peers. The company's monthly active user (MAU) count has climbed on a sequential basis for the past two quarters.
Even more important is the fact that Pinterest has had no trouble monetizing its 445 million MAUs. Average revenue per user jumped 11% globally in the most recent quarter, with especially strong growth from international markets, not including Europe.
But as I've previously opined, the best aspect of Pinterest is its operating model. Since users willingly share what interests them, data-tracking app changes make little difference to Pinterest. It can still serve critical data to advertisers on a silver platter.
4. Jim Simons: Airbnb
As for billionaire Jim Simons of Renaissance Technologies, his eyes were fully set on host-and-stay marketplace Airbnb (ABNB 2.77%). Simons added more than 1.67 million shares of Airbnb in the latest quarter, pushing Airbnb to become Renaissance's third-largest holding by market value.
What makes Airbnb such an exciting investment is that it's disrupting the stodgy hotel-and-travel industries. The number of hosts on Airbnb's online marketplace continues to climb, and the company is pacing around 400 million combined nights and experiences booked this year. Best of all, long-term stays (bookings lasting at least 28 days) are Airbnb's fastest-growing category, with the rise of the remote worker in the wake of the pandemic providing the company with an expanding revenue channel.
Airbnb's Experiences segment is also just getting its feet wet. Aside from partnering with local experts to lead travelers on adventures, I'd argue this division has the opportunity to further infiltrate the $8 trillion global travel industry via transportation and food partnerships.
Image source: Getty Images.
5. Ole Andreas Halvorsen: Visa
Billionaire fund-manager Ole Andreas Halvorsen of Viking Global Investors "charged" ahead in the third quarter with a big buy of payment processor Visa (V 0.65%). Viking added 2.79 million shares of the payment giant in the September-ended quarter, which increased its stake by 109% from the second quarter.
Although Visa is cyclical and therefore not immune to economic downturns, it does have a few tricks up its sleeve. For instance, it accounts for more than half of all credit card network purchase volume in the U.S. -- the top market for consumption globally -- and was the only U.S. payment processor to significantly expand its share following the Great Recession. There's also a sustained opportunity for Visa to expand internationally.
Furthermore, Visa's management team wisely keeps the company focused on payment processing and stays away from lending. When recessions inevitably arise, lenders almost always deal with loan losses. Since Visa doesn't lend, it's not required to set aside capital to cover loan losses. Translation: It bounces back from downturns quicker than other financial stocks.
6. Chase Coleman: Snowflake
Billionaire Chase Coleman of Tiger Global Management has been a big buyer of supercharged growth stocks for years. That didn't change in the third quarter, with Coleman overseeing the purchase of 471,324 shares of cloud data-warehousing company Snowflake (SNOW 2.69%). This brought Tiger Global's stake to north of 2.6 million shares.
Coleman's optimism likely has to do with Snowflake's sustained competitive advantages and superior growth rate. In terms of the former, Snowflake's infrastructure is built atop the most-popular cloud infrastructure services. This makes the sharing of data seamless for the company's customers.
What's more, Snowflake shuns subscriptions in favor of charging its customers based on the amount of data they store and Snowflake Compute Credits used. It's a transparent pricing system that its customers clearly appreciate.
As for growth, Snowflake is unmatched in the cloud arena. Even amid a challenging economic environment, the company grew sales by 83% in its July-ended quarter, with its remaining performance obligations (i.e., its backlog) up 78% to $2.7 billion.
7. Jeff Yass: Amazon
Last but not least, billionaire Jeff Yass of Susquehanna International clicked the "buy now" button repeatedly on e-commerce player Amazon (AMZN 1.30%). Yass' fund added nearly 9.6 million shares, which increased its stake in Amazon by 63% to around 24.8 million shares.
Though Amazon is best known for its dominant online marketplace -- Amazon accounted for almost $0.40 of every $1 in online retail sales in 2022 -- retail sales don't generate a lot in the way of profit or operating cash flow for the company. Rather, it's Amazon's ancillary operations that are producing the bulk of its cash flow.
For instance, the company had signed up more than 200 million people to a Prime membership, as of April 2021, and this figure has almost certainly climbed since then. Amazon Web Services (AWS) is also the world's No. 1 cloud infrastructure provider, with an estimated 31% share of cloud-service spending in the second quarter, per Canalys. AWS, subscription services, and even advertising services, can combine to potentially triple Amazon's operating cash flow by mid-decade.
