If you want to learn how to build enormous biceps, following the advice of Arnold Schwarzenegger makes a lot of sense. The same concept applies to stock market investing. If you want to build a stock portfolio that delivers enormous gains, studying the actions of the world's most successful investors is a great place to start.
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You can learn a lot from following billionaire investors. Unfortunately one of those lessons is that they don't always get it right. Let's take a closer look at the stocks billionaires can't seem to get enough of to see if they belong in your portfolio.
1. Match Group
James Simons and Renaissance Technologies, the hedge fund he manages, bought about 1.6 million shares of Match Group (MTCH 0.63%) during the first three months of 2023.
Shares of the dating app provider are down about 80% from the peak it reached in 2021. It's been under more pressure than usual because it looks like the company's growth engines have sputtered out. Fiscal first-quarter Tinder sales remained flat compared to the previous year's period, and total revenue fell 1% year over year.
Simons was likely encouraged by signs that Match Group is becoming less reliant on Tinder, which generates 57% of total revenue. Fiscal first-quarter revenue from Hinge, a dating app that is "designed to be deleted," grew 27% year over year.
At the moment, you can buy shares of Match Group for just 15.9 times forward-looking earnings estimates. Investors who buy the stock at this modest multiple could come out way ahead if Hinge continues along its current growth trajectory. Following Simon's lead on this stock probably isn't a bad idea.
2. Roku
Roku (ROKU -10.29%) stock is still down around 77% from the peak it reached in 2021. Perhaps sensing a bargain, Israel Englander and his hedge fund Millennium Management bought 670,000 shares of the streaming platform provider during the first three months of 2023.
Counting by hours streamed, Roku's platform leads and it's getting stronger. During the first quarter, people streamed 25.1 billion hours of video through Roku-enabled devices, which was a 20% improvement year over year.
The Roku operating system (OS) is the only smart TV OS built from the ground up for televisions. It's currently the leading smart TV OS, with a 43% share of TVs sold in the first quarter.
RoKu's on my watchlist and not in my portfolio because it lost a frightening $665 million over the past 12 months. If the streaming platform leader can't make ends meet, it could mean that this is just a rotten business to be in. It could also mean that the company's been poorly managed. Either way, it's probably best to steer clear of this stock until its bottom line starts heading toward profitability again.
3. Bill Holdings
Bill Holdings (BILL 3.21%), or Bill.com as it's more commonly known, is an accounting automation software provider that caters to small and medium-sized businesses (SMBs). James Simons and Renaissance Technologies bought 348,000 shares during the first three months of 2023.
Sinoms was probably attracted to Bill because the business is growing by leaps and bounds. Revenue during its fiscal third quarter ended March 31 rose 63% year over year.
Bill isn't profitable yet, but it's quickly headed in that direction. Its' fiscal third-quarter loss shrank to $31.1 million from $86.7 million in the previous year period.
Bill's business is growing faster than the other companies on this list, but the market has already baked a lot of future growth into its stock price. It's currently trading at 73 times forward-looking earnings expectations.
Bill's forward price-to-earnings multiple is so high that most cautious investors will steer clear of the stock. If you can tolerate the risk, though, buying Bill before it shoots even higher might be a good idea.
