Do you know what the world's greatest investors do when their favorite stocks are down? According to recent disclosures filed with the Securities and Exchanges Commission, they buy more shares.
Billionaire money managers know that stock market meltdowns, while scary, are temporary. The declines of every U.S. bear market in history have eventually been wiped away by the gains of a much longer recovery period, and there's no reason to suspect this time will be any different.
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Against that backdrop, some of the world's most successful investors are making purchases that clearly show they think these businesses will survive the current turmoil and emerge much stronger over the long run.
The Trade Desk
Shares of The Trade Desk (TTD 2.48%) have been under pressure all year thanks to upsetting news from its larger peers in the digital advertising industry. The stock is down by around 55% over the past year even though management keeps reporting signs of strength in its business. Legendary investor Kenneth Griffin appears keenly aware of the mismatch. The hedge fund he manages, Citadel Advisors, bought nearly 1 million shares of the ad tech company's stock in the third quarter.
Social media platforms run by Meta Platforms and Snap have seen pullbacks in ad revenue this year, but The Trade Desk is playing a much different game. It reported third-quarter revenue that rose 31% year over year because advertisers are attracted to its independent platform.
The Trade Desk is particularly well-positioned to clean up in the exploding market for connected TV advertising. The company's solution for anonymously tracking user behavior -- Unified ID 2.0 (UID2) -- is poised to become the industry standard. In September, one of the world's most prolific ad buyers, Procter & Gamble, announced it would use and support UID2. Given the company's unassailable lead in the lucrative connected TV space, following Griffin's lead and adding some shares of The Trade Desk to your portfolio looks like it would be a smart move right now.
Shockwave Medical
Shares of Shockwave Medical (SWAV 0.12%) surged higher earlier this year, but the stock is down by around 19.6% from the peak it reached just a couple of months ago. Perhaps sensing a bargain, James Simons and the hedge fund he manages, Renaissance Technologies, bought heaps of Shockwave shares in the third quarter.
Shockwave Medical manufactures the world's only intravenous lithotripsy devices. These are essentially catheters that cardiovascular surgeons slide into blocked arteries that are stiff with calcium deposits. Rather than expanding those stiffened arteries with angioplasty balloons, Shockwave's devices break up the calcium deposits deep inside arterial walls in a way that leads to fewer dangerous complications.
Shockwave is still getting the word out, but we can already see that marketing the world's only intravenous lithotripsy devices will be a lucrative business. The company's bottom line just crossed into positive territory last year -- and in a big way. Net income came in at 27% of total revenue. The company's proprietary devices essentially sell themselves, so this stock has a great chance to outperform over time for patient investors.
SoFi Technologies
Shares of digital bank start-up SoFi Technologies (SOFI 2.93%) soared following its stock market debut in late 2020. Sadly for those who bought in (particularly after that initial run-up), the stock has tumbled by a painful 79% from the peak it reached in early 2021.
Billionaire Steven A. Cohen and the fund he manages, Point72, haven't let SoFi's sinking stock price frighten them away from a great investment. Point72 opened a new SoFi position in the third quarter, purchasing more than 3.5 million shares.
SoFi got started about a decade ago as the first company to offer student loan refinancing. Now, it's a full-service consumer bank that offers all manner of lending products, including lucrative personal and auto loans.
Last year, SoFi obtained a national banking charter that allows it to fund its loans using customer deposits, and those deposits are rising fast. The number of SoFi checking accounts and related financial service products in use had soared by 83% year over year to 5.9 million as of the end of September.
With heaps of low-interest capital to work with, SoFi is rapidly approaching profitability. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) climbed to $78 million over the past 12 months. That's a big improvement from the loss of $45 million it booked in 2020.
Shares of SoFi currently trade at about 42 times the midpoint of management's adjusted EBITDA expectation for 2022. That is an entirely reasonable multiple to pay for a company whose bottom line is rapidly moving in the right direction.
