Fears of a deep recession brought about by soaring interest rates brought the major market indexes to their knees in the third quarter. From the middle of August through the end of September, the S&P 500 index tanked 16.6%, and the tech-heavy Nasdaq Composite index slid 19.4%.
At times like these, it's important to remember that every bear market in history has been wiped away by subsequent recovery periods. This is why the billionaires on this list (and many more) have been net buyers of stocks throughout the recent turmoil.
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Despite an extraordinarily rough time for markets as a whole, some of the most successful money managers in the business kept buying their favorite stocks hand over fist in the third quarter. Here are two that billionaires kept buying despite market conditions that most of us would describe as highly unfavorable.
1. Abbott Laboratories
Ray Dalio and the fund he manages, Bridgewater Associates, bought around 280,000 shares of Abbott Laboratories (ABT -0.18%) during the third quarter. This is a healthcare conglomerate with leading positions in multiple lucrative niches.
Abbott has the nutrition niche sewn up so tight that earlier this year, the temporary closure of a single manufacturing facility in Michigan led to a nationwide baby formula shortage. However, nutrition is a reliable but relatively small part of Abbott's business compared to diagnostics and medical devices.
The company's new constant blood glucose monitor (CGM) for diabetic patients, Freestyle Libre 3, is driving growth at the moment. The device received clearance from the U.S. Food and Drug Administration in May. In the third quarter, U.S. diabetes care sales surged 31% year over year.
Results of a real-world study with nearly 6,000 type-2 diabetes patients will drive demand for Abbott's new CGM in 2023 and beyond. The Relief study showed that patients who started using Abbott's new CGM had 67% fewer hospitalizations for acute diabetic events after one year.
Strong CGM sales helped Abbott raise guidance for 2022 adjusted earnings from at least $4.90 per share to a range between $5.17 and $5.23 per share. However, despite a bottom line that's moving in the right direction, shares of Abbott are down around 25% this year. Now, you can buy the stock for a very reasonable price of just 20.2 times the midpoint of management's earnings outlook for the year.
Abbott recently declared its 395th consecutive quarterly dividend, which, at recent prices, offers a 1.8% yield. This isn't an attractive starting point, but increasing profits from soaring CGM sales could lead to some big payout bumps over the next several years.
2. Prologis
Israel Englander and his fund, Millennium Management, made a big bet on Duke Realty in the third quarter, knowing it would be acquired by Prologis (PLD 0.57%).
Prologis is the world's largest owner of logistics-based real estate. The business is structured as a real estate investment trust (REIT) that can avoid income taxes as long as it distributes at least 90% of profits to shareholders as dividends.
The addition of Duke Realty's assets brought Prologis' total portfolio to approximately 1 billion square feet of logistics facilities. The company collects rent from Walmart, Amazon, FedEx, and roughly 5,800 other clients that ship a lot of stuff to consumers or other businesses.
Shares of Prologis offer a 2.7% dividend yield at recent prices, and it could rise significantly over the next several years. Funds from operations, a proxy for REIT earnings, are expected to reach at least $5.12 per share this year. This exceeds the company's current annual dividend obligation by 62%. With ultra-reliable cash flows from long-term leases, the company should have no trouble maintaining and raising its payout.
