Warren Buffett

Source: Motley Fool.

A lot of attention is given to the actions of billionaire investors. After all, who wouldn't want to achieve the same success as investors like Warren Buffett? While following in the footsteps of great investors has its appeal, investors still need to do their own due diligence. After all, even great investors stumble from time to time. With that in mind, we checked in with three Motley Fool analysts to get their take on three billionaire bets. Read on to learn whether they think these companies are worth investing in.

Patrick Morris: In the third quarter we learned that Andreas Halvorsen's Viking Global Investors -- the seventh-largest pure-play hedge fund, with $26 billion in equity assets, according to S&P Cap IQ -- had amassed a $775 million stake in Citigroup (NYSE:C).

Halvorsen is among a select group of hedge fund managers known as Tiger Cubs, who learned under Julian Robertson of Tiger Management, which delivered an incredible 32% compound annual return in the 1980s and 90s. While Halvorsen has an impressive track record -- the Viking Long Fund returned 38% to investors in 2013 -- I'd have to disagree with the decision to purchase Citi.

Although Citigroup is wildly inexpensive and trading below its tangible book value -- by comparison, peer Wells Fargo (NYSE:WFC) trades at a 2.4 multiple -- as colleague John Maxfield noted, its history of massive pitfalls indicate the turnaround investors hope for might never come.

Consider the bank's experience in 2014. As a result of fraud from its operations in Mexico, Citigroup had to write down its 2013 pre-tax income by $360 million. Just two weeks after reporting third-quarter earnings of $3.4 billion in net income, Citigroup had to lower its results to $2.8 billion thanks to "a $600 million increase in legal accruals." And, as Bloomberg reported, it is involved in a legal battle surrounding fraud in Chinese ports.

As Ben Graham said, "price is what you pay, value is what you get." While Citigroup might be cheap, there are real questions about its true value.

Dan Dzombak: When Alibaba (NYSE:BABA) went public in September, multiple billionaire hedge fund managers quickly acquired stakes in the Chinese e-commerce giant. Like Amazon.com, Alibaba dominates its home country's e-commerce market with over 50% market share, but unlike Amazon, Alibaba does not charge a percentage of sales. Alibaba makes money by selling advertising on its sites to drive consumers to companies that sell through the site. As such, the company tracks the total amount of merchandise sold on its platform, its gross merchandise volume, and its overall revenue so investors can understand how the business is doing.

Business has been booming for Alibaba.

 

Most Recent Quarter

Year-Over-Year Growth

Gross merchandise volume

$90.5 billion

49%

Revenue

$2.74 billion

54%

Non-GAAP net income

$1.11 billion

15.5%

Annual active buyers

307 million

52%

Mobile monthly active users

217 million

138.5%

Source: SEC.

Alibaba is trading for $275 billion. At that level, the company trades for an estimated 54 times March 2015 expected earnings and 36 times March 2016 expected earnings. While the company still has much room to grow in China and around the world, investors are paying top dollar:

1. Not for actual shares in Alibaba, but for a holding company in the Cayman Islands that holds a contractual agreement with Alibaba, called a variable interest entity, that Chinese regulators have not approved.

2. For a company whose management has not been great to investors over its history, such as when they walked away with its Alipay subsidiary without the approval of the board or shareholders.

In the end, while many billionaires are comfortable buying Alibaba for its growth potential despite the risks, if you buy Alibaba make sure you size it appropriately in your portfolio given its high-risk nature.

Matt Frankel: One stock owned by several billionaires, including Buffett himself, is Goldman Sachs Group (NYSE:GS). While I believe Goldman is best-in-breed among investment banks, the company faces some risks that might not justify the super-high price levels the stock has climbed to recently.

For starters, Goldman's investment banking revenue soared by 26% in 2014, led by strong growth in the merger-and-acquisitions and equity underwriting businesses. With the market at record-high levels, more companies are issuing IPOs and acquiring their rivals. However, if the market corrects, this could change quickly and have a strong impact on Goldman's profits.

If the market corrects, Goldman could see a sizable decrease in its revenue-driving trading activity. There also are ongoing litigation risks and expenses related to new government regulations to worry about.

With the stock at a fresh 52-week high of just under $200, now might be a good time to stay on the sidelines with Goldman Sachs. The risk/reward simply isn't as good as it was a couple of months ago, when the company traded for than 12% less than the current share price.

  

Patrick is long Amazon. Dan and Matt do not have positions in the companies mentioned. The Motley Fool recommends Amazon.com, Goldman Sachs, and Wells Fargo. The Motley Fool owns shares of Amazon.com, Citigroup, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.