As we look for investment inspiration, it's often a good idea to take a look at billionaires' latest moves. They have clearly been successful over time, picking out the next great stock or selling a position after a growth story has reached its final stages. So, we might follow them into (or out of) certain stocks at just the right time.
These days, some of the world's top investors have decided to sell a stock everyone is talking about. This technology player has soared in the quadruple digits over the past five years -- and in the first half of this year, it climbed nearly 150%.
But this momentum hasn't encouraged billionaires David Tepper of Appaloosa Management, Israel Englander of Millennium Management, and Ken Griffin of Citadel to buy more of this growth player. Instead, in the first quarter, they each lowered their stake in the well-known stock. Should you do the same? Let's take a closer look at their moves and find out.
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Driving the S&P 500 higher
First, a bit of background on the movement of technology stocks in general in recent times. These players drove the S&P 500's first-half gain as investors piled into companies involved in the high-growth area of artificial intelligence (AI). Today's $200 billion AI market is projected to reach beyond $1 trillion by the end of the decade. So, investors have aimed to get in on winners early and benefit as the growth story unfolds.
At the same time, investors are feeling more confident about buying growth stocks based on optimism about at least one potential interest rate cut before the end of the year. Lower rates are positive news for growth companies since these businesses often rely on borrowing to expand. And lower rates also should improve the spending power of their customers.
Tepper, Englander, and Griffin each hold a variety of technology players and therefore have benefited from gains in these stocks. But in the first quarter of this year, they reduced their positions in one particularly well-known stock, Nvidia (NVDA 4.01%).
Tepper decreased his Nvidia holding by 44% and now has 442,000 shares, Englander cut his stake by 35% to 1.3 million shares, and Griffin lowered his position by 68% to 1.1 million shares.
At the same time, Englander reinforced positions in Amazon and Apple, and Griffin, who also added to his Apple holding, increased his stake in Broadcom by 570% to more than 295,000 shares. Tepper reduced his investments in several tech giants, including Microsoft and Meta Platforms, but increased his position in Oracle by more than 70%.
We don't know the exact reason for each move, but it's important to note that these billionaires still own a significant number of Nvidia shares along with shares of other technology players, signaling they still believe in their growth stories.
Reducing a holding isn't the same as completely exiting a position. In many cases, the movement is meant to lock in profits and reallocate funds into other stocks that they think might be ready to pop.
Consider your investment strategy
Now, let's get back to our question: Should you follow these billionaires and sell your Nvidia shares? This depends on your investment strategy. If you're looking for a new source of growth for your portfolio, and -- like these top investors -- you hold a significant position in Nvidia and have been a shareholder for a number of years, you might want to lock in some profits.
You then could reinvest your winnings in other companies that could take off in the months or years to come. You can do this and still hold on to some Nvidia shares, so that you also can benefit from the next stage of that company's growth story.
If you hold a small Nvidia position or have only been a shareholder for a short time, it's worth holding on to this top stock. That's because, as mentioned earlier, the AI market is set to soar throughout this decade, and Nvidia, as the leading seller of AI chips, is positioned to benefit. On top of this, it sells a whole portfolio of AI products and services, and it pledges to innovate on an annual basis. This should keep earnings growing and increase stock performance.
So, yes, some billionaire investors are lowering their stakes in Nvidia, but they clearly still believe the stock has farther to go. And that means Nvidia remains a solid long-term investment for them -- and for you.
