Billionaire investors who manage large hedge funds are among the most successful investors in the world. That's why it can be tempting for retail investors to follow their every move.
However, retail investors need to conduct their own due diligence because billionaires and hedge funds often trade on short-term time horizons and use very different rationales for their choices. Many of them also run large funds, so they aren't necessarily making every buy-and-sell decision that is attributed to them.
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Still, investors can use the investment moves made by billionaires to gain new ideas, and if many billionaires are buying a particular stock, it can certainly be a bullish indicator worthy of further investigation. Here's one stock billionaires are buying like there's no tomorrow.
A cheaper, safer artificial intelligence pick
In the third quarter of the year, multiple notable billionaire investors piled into the large tech conglomerate and search giant Alphabet (GOOG 0.70%)(GOOGL 0.75%), which is now up 65% this year (as of Dec. 2):
- Warren Buffett's Berkshire Hathaway purchased over 17.8 million shares, a position now valued at over $5.6 billion.
- Stanley Druckenmiller's Duquesne Family Office initiated a new position in the quarter, purchasing 102,200 shares.
- Philippe Laffont's Coatue Management also initiated a new position in the third quarter, purchasing close to 2.1 million shares.
Alphabet has had a fairly volatile year. The company overcame a U.S. Department of Justice (DOJ) lawsuit that sought to force Alphabet to divest its Chrome browser. While a federal judge agreed with the DOJ that Alphabet had employed monopolistic practices in the broader search and digital advertising ecosystem, the judge stopped short of forcing Alphabet to divest Chrome.
NASDAQ: GOOG
Key Data Points
Additionally, many investors were concerned earlier this year about Google's ability to continue to dominate the search market with the emergence of OpenAI's ChatGPT. But Google has shown strong innovation, with its artificial intelligence overviews at the top of most of its search queries; its new AI mode, which provides a ChatGPT-like experience; and a new AI model expected to further enhance Google's search experience.
While I'm not sure if you can call any "Magnificent Seven" stock cheap per se, Alphabet trades at less than 30 times forward earnings, far cheaper than some of the nosebleed AI valuations seen in stocks like Palantir and Tesla.
Alphabet also has a certain degree of safety baked in, because if AI doesn't work out as well as some hope, the company still has many strong businesses with long growth runways ahead, such as Google Cloud, YouTube, Waymo, and an emerging semiconductor business that is starting to make waves.
