For more than 127 years, the Dow Jones Industrial Average (^DJI 0.40%) has served as a key barometer of Wall Street's health. Since its inception, it's evolved from a 12-stock index focused on industrial companies into a 30-component index that features time-tested, diverse, multinational businesses.
Although the Dow's components have historically excelled over the long run, Wall Street's outlook for the companies that comprise this ageless index varies considerably. This is evidenced by the latest round of Form 13F filings with the Securities and Exchange Commission.
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A 13F provides investors with a concise snapshot of what Wall Street's smartest and most successful money managers bought and sold in the most recent quarter (in this case, the September-ended quarter). What's particularly noteworthy is what billionaires were buying and selling within the Dow Jones Industrial Average.
What follows are two Dow stocks billionaires couldn't stop buying, as well as the one Dow component they seemingly couldn't sell fast enough.
Dow stock No. 1 billionaires are piling into: Microsoft
If there's a Dow component that stands head and shoulders above its peers for all the right reasons following the third quarter, it's tech stock Microsoft (MSFT 1.82%). Although it's already a widely-owned stock by top-notch money managers, Microsoft was purchased by 11 billionaire investors in the September-ended quarter, including (total shares purchased in parenthesis):
- Ole Andreas Halvorsen of Viking Global Investors (1,822,348 shares)
- Ken Griffin of Citadel Advisors (1,631,542 shares)
- Jim Simons of Renaissance Technologies (1,112,483 shares)
- Israel Englander of Millennium Management (1,032,317 shares)
- David Siegel and John Overdeck of Two Sigma Investments (733,563 shares)
- Dan Loeb of Third Point (705,000 shares)
- Ken Fisher of Fisher Asset Management (554,792 shares)
- Chase Coleman of Tiger Global Management (462,360 shares)
- David Tepper of Appaloosa Management (395,000 shares)
- Steven Cohen of Point72 Asset Management (203,018 shares)
If you're wondering what could possibly compel 11 of the world's top billionaire fund managers to buy shares of Microsoft, look no further than its success in cloud computing and artificial intelligence (AI).
Microsoft's fiscal first quarter, which came to a close on Sept. 30, featured 19% year-over-year sales growth from its Intelligent Cloud products and services. In particular, constant-currency sales growth of 28% was registered for Azure, which is the world's No. 2 cloud infrastructure service provider. With enterprise cloud spending still in its infancy, Azure should be able to deliver consistent double-digit sales growth.
Microsoft is making plenty of inroads with its AI ventures, too. It's invested billions in OpenAI, the company that developed the popular chatbot ChatGPT, and has worked with OpenAI to incorporate artificial intelligence-driven search into its search engine Bing. The company's AI solutions have the potential to accelerate growth in nearly every sales channel.
But don't forget about Microsoft's veritable treasure chest, which allows it to take risks that few other companies can afford. The company ended September with approximately $144 billion in cash, cash equivalents, and marketable securities, compared to just $45.7 billion in short- and long-term debt. Microsoft is generating so much cash from its operations each year that it has the luxury of making acquisitions and dipping its toes into the hottest tech trends.
Dow stock No. 2 billionaires are piling into: Salesforce
A second Dow stock billionaires seemingly couldn't stop buying during the September-ended quarter is cloud-based customer relationship management (CRM) software solutions provider Salesforce (CRM 0.42%). Even though the stock has gained 70% on a year-to-date basis, five billionaires added to their existing positions, including (total shares purchased in parenthesis):
- Stephen Mandel of Lone Pine Capital (804,634 shares)
- Israel Englander of Millennium Management (612,987 shares)
- Steven Cohen of Point72 Asset Management (606,608 shares)
- Ken Griffin of Citadel Advisors (383,143 shares)
- Ken Fisher of Fisher Asset Management (276,696 shares)
For those who might be unfamiliar with CRM software, it's used by consumer-facing businesses to enhance sales and deepen customer relationships. It can be particularly helpful when determining which existing clients would be likeliest to purchase new products and services. This gives CRM software broad-based applications across most sectors and industries.
What helps Salesforce stand out in the CRM space is its dominant market share. According to a report from IDC, Salesforce held a 23% global share of the CRM market, as of the end of 2022. This is more than 4 percentage points above its four closest competitors (one of which is Microsoft) on a combined basis. Salesforce isn't going to cede its top spot in the CRM arena anytime soon.
This is a company that's also riding the AI wave. Salesforce's Einstein AI solutions work with many facets of its CRM platform to anticipate new sales opportunities and personalize customer experiences. It's a generative AI solution that can be especially helpful in the marketing process for businesses.
Salesforce's success is a reflection of strong leadership from CEO and co-founder Marc Benioff, as well. Specifically, Benioff has overseen a handful of earnings-accretive acquisitions that have completely transformed Salesforce and broadened its service ecosystem. Examples include the buyouts of MuleSoft, Tableau Software, and Slack Technologies, which have expanded the company's reach and provided high-margin cross-selling opportunities.
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The Dow stock billionaire investors sold en masse: Intel
However, not all billionaire money managers share an optimistic view of the Dow's 30 components. Semiconductor stock Intel (INTC -9.20%) is the perfect example of a time-tested company, but its stock was sold en masse by billionaires during the third quarter, including (total shares sold in parenthesis):
- Israel Englander of Millennium Management (5,796,294 shares)
- Jim Simons of Renaissance Technologies (4,229,294 shares)
- Ken Griffin of Citadel Advisors (3,660,427 shares)
- Jeff Yass of Susquehanna International (1,828,149 shares)
- David Tepper of Appaloosa Management (525,000 shares)
- Ken Fisher of Fisher Asset Management (279,788 shares)
The two likeliest reasons these six billionaires ran for the exit during the third quarter are Intel's poor recent operating performance, as well as its expected late entrance into the AI-driven graphics processing unit (GPU) arena.
With regard to the former, central processing unit makers like Intel benefited immensely from the work-from-home shift during the pandemic. But with employees returning to the office in greater numbers, demand for laptops and desktops have declined. Though these legacy segments remain cash cows for Intel, their recent year-over-year weakness has been a drag on the company's stock.
The other concern for Intel is that its AI-driven Falcon Shores GPU isn't set to hit the market until 2025. In the meantime, Nvidia has quickly become the infrastructure backbone of AI-accelerated data centers and should be able to meaningfully expand its production in the coming year. Further, Advanced Micro Devices recently debuted its MI300X AI-accelerated GPU and plans to ramp up production in 2024. There's clear worry that Intel could fall behind the competition in high-compute data centers.
But if there's one area for investors to be excited about, it's Intel's Foundry Services segment. Next year, Intel should open two chip fabrication facilities in Ohio, with a third chip-fab plant slated to open in Germany in the latter half of the decade. By 2030, Intel may be the world's No. 2 foundry, which could put it in an advantageous position to other tech companies.
