With less than two weeks to go before crossing the finishing line for 2023, it's safe to say it's been a phenomenally strong year for the stock market. The iconic Dow Jones Industrial Average recently hit an all-time closing high, while the benchmark S&P 500 and growth-driven Nasdaq Composite are respectively higher by 23% and 42% on a year-to-date basis, as of Dec. 15.
Yet in spite of these already huge gains, some of Wall Street's smartest and most-successful money managers are positioning their funds to benefit from a continued surge in growth stocks in the new year. Based on the latest round of Form 13F filings with the Securities and Exchange Commission, billionaire money managers absolutely want to own the following three growth stocks in 2024.
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Palantir Technologies
The first high-powered growth stock that billionaire investors have flocked to is data-mining company Palantir Technologies (PLTR 0.68%). The third quarter saw six billionaire asset managers add to their funds' existing positions or open a new position, including (total shares purchased in parenthesis):
- David Siegel and John Overdeck of Two Sigma Investments (4,655,969 shares)
- Jim Simons of Renaissance Technologies (3,805,496 shares)
- Philippe Laffont of Coatue Management (893,931 shares)
- Israel Englander of Millennium Management (604,716 shares)
- Jaff Yass of Susquehanna International (509,063 shares)
The lure of Palantir Technologies likely boils down to four factors.
To start with, Palantir has turned the corner to recurring profitability on the basis of generally accepted accounting principles (GAAP). Mindful cost-cutting, coupled with a steady double-digit growth rate, have pushed Palantir into the recurring profit column faster than Wall Street had expected. Although the company's price-to-earnings (P/E) ratio is still at nosebleed levels, the simple fact that it's profitable on a GAAP basis somewhat changes the dynamic of the valuation discussion.
Secondly, there's a lot of excitement surrounding artificial intelligence (AI), and Palantir gives investors the ability to have a front-row seat to this next-big-thing investment. Palantir's Gotham platform is driven by AI and machine learning to assist federal agencies with mission planning, data culling, and a host of other tasks. The analysts at PwC have estimated that AI could boost global gross domestic product by close to $16 trillion come 2030.
Another factor at play is the early innings growth potential of Palantir's Foundry platform. Foundry offers solutions to businesses that'll help them make sense of big data, with the purpose of streamlining their operations. Foundry's commercial customer count grew by a hearty 34% in the September-ended quarter from the prior-year period.
Lastly, there are no large-scale substitutes for Palantir. Though its stock may be pricey, no other company services federal agencies and wide-ranging businesses with AI-driven, dynamic solutions quite like Palantir. This gives it an incredibly sturdy moat.
Meta Platforms
Third-quarter 13F filings also make it abundantly clear that billionaire money managers absolutely want to own shares of social media stock Meta Platforms (META 2.10%) in the new year. A grand total of 10 billionaires opened a position in, or added to their existing position in, Meta Platforms in the September-ended quarter, including (total shares purchased in parenthesis):
- Stephen Mandel of Lone Pine Capital (2,779,103 shares)
- Dan Loeb of Third Point (1,100,000 shares)
- David Siegel and John Overdeck of Two Sigma Investments (583,953 shares)
- Steven Cohen of Point72 Asset Management (525,573 shares)
- Philippe Laffont of Coatue Management (496,278 shares)
- Ole Andreas Halvorsen of Viking Global Investors (462,474 shares)
- David Tepper of Appaloosa Management (447,500 shares)
- Chase Coleman of Tiger Global Management (330,800 shares)
- Ken Fisher of Fisher Asset Management (158,862 shares)
The likeliest reason these 10 billionaire investors have plowed their respective fund's money into Meta is its dominance in the social media space. Despite seemingly never-ending competition, Meta's social media "real estate" consistently sits at the top of the pecking order. Facebook, Instagram, WhatsApp, and Facebook Messenger are among the four most-downloaded apps globally.
To build on this point, the sheer number of monthly active users (MAUs) Meta is able to draw in with its social media apps is jaw-dropping. The September-ended quarter featured 3.96 billion MAUs from its family of apps. That's more than half of the world's adult population visiting a Meta-owned asset at least once monthly. It's precisely the reason why Meta can typically command strong ad-pricing power.
Billionaire money managers are probably also enamored with Meta's cash flow and its balance sheet. This is a company that closed out the September quarter with north of $61 billion in cash, cash equivalents, and marketable securities, as well as $51.7 billion in net cash from operations through the first nine months of 2023. Meta's pristine balance sheet affords risk-tasking that most other companies couldn't even dream about.
For example, CEO Mark Zuckerberg is intent on aggressively innovating with regard to augmented and virtual reality. Despite steep losses from Meta's Reality Labs segment, the company remains quite profitable and is still easily growing its cash pile.
There's an intriguing value proposition with Meta, as well. Even after more than tripling from its 2022 bear market low, it's trading a sizable discount to its cash flow multiple over the previous five years.
Image source: Walt Disney.
Walt Disney
The third growth stock billionaire money managers absolutely want to own in 2024 is media giant Walt Disney (DIS -0.56%). Based on the latest round of 13Fs, four prominent billionaire investors piled into the famed "House of Mouse," including (total shares purchased in parenthesis):
- Nelson Peltz of Trian Fund Management (26,443,257 shares)
- Israel Englander of Millennium Management (2,963,518 shares)
- Ken Griffin of Citadel Advisors (568,101 shares)
- Ken Fisher of Fisher Asset Management (399,294 shares)
Arguably the top catalyst for Walt Disney is the normalization of its operations worldwide. The COVID-19 pandemic clobbered both its theme-park operations and film entertainment segment. With China abandoning its stringent COVID-19 mitigation measures last December, and consumers steadily returning to theaters, there's a clear path for Disney to return to strong top- and bottom-line growth.
Another reason billionaire investors are drawn to Walt Disney is the company's irreplaceability. While there are plenty of other theme-park operators and content creators, none has the characters or engagement factor that Disney brings to the table. It's one of the few companies that can easily transcend generational gaps and help grandparents and grandchildren find common ground through fun and imagination. This uniqueness means Disney has a virtually impenetrable moat in the entertainment arena.
In addition to its sustained competitive advantages, Walt Disney is able to use pricing power to its advantage. The admission price to Disneyland has risen by more than 10,000% since the park opened its gates in 1955. That's about 10 times the aggregate U.S. inflation rate over the past 68 years.
Disney's pricing power is going to come in especially handy with its burgeoning streaming segment. Increasing monthly prices across all tiers without losing too many of the company's loyal subscribers is the primary catalyst that can push the company's streaming services to profitability by the end of Disney's fiscal year (Sept. 28, 2024).
A forward P/E ratio of less than 18 looks like a bargain for a brand-name company that's expected to grow its earnings per share by an annualized 15.6% over the next five years.
