Value investing
The Three US Stocks That Big Funds Are Buying: Booking, Alphabet & Microsoft
12 August 2022
The three US stocks that the big fund managers are buying include Booking Holdings Inc, Alphabet Inc, and Microsoft Corp.
As of the latest update, AKO Capital which has an AUM of $9.26 billion, has Booking Holdings (BKNG) as its top holding at 9.82% of the portfolio.
David Tepper Appaloosa Management which has an AUM of $2.5 billion, has Alphabet Inc (GOOG) at its top holdings at 13.3% of the portfolio.
Mairs & Power Growth Fund has an AUM of $4.45 billion and has Microsoft Corp (MSFT) at its top holdings at 7.98% of the portfolio.
In this article, I will share an overview of these three companies that big funds such as AKO Capital, David Tepper Appaloosa Management, and Mairs & Power Growth Fund are buying.
Booking Holdings Inc (NASDAQ: BKNG)
Booking is the world’s largest online travel company by revenue. They offer bookings and payment services for hotels, airlines, rental cars, reservations, cruises, etc. They are the owner of Booking.com, Agoda, OpenTable, and Rentalcars.com.
Booking also owns Kayak and Momondo, companies in the travel media category.
They make most of their money from transaction fees for online bookings.
The company’s TTM return on assets is at 6.38%, return on equity is at 35.07%, and return on invested capital is at 11.20%.
Booking’s current ROA and ROIC are below their five-year average, while their ROE is above their five-year average.
Their high ROA, ROE and ROIC displays just how profitable their asset-light business model is.
The current price-to-earnings ratio is at 55.14, the price to cash flow is at 13.63, and the price to book is at 20.48. Their price to earnings and price to free cash flow is currently below their five years average, while their price to book is above their five years average.
On 8 August 2022, Robert J Mylod, the CEO and President of Booking, bought 500 shares of BKNG at $1,934.44 each.
Alphabet Inc (NASDAQ: GOOG)
Alphabet is a holding company that owns Google.
Google generates 99% of Alphabet’s revenue, more than 85%, through online ads. They make some of their other revenue from sales of apps and content on Google Play and YouTube and their cloud service fees.
Alphabet also makes some money from hardware such as its Chromebooks, Pixel smartphone, and some of its home products.
Their moonshot investments include technology to enhance health through Verily and self-driving cars through Waymo. These are still loss making business.
Alphabet’s TTM return on assets is at 20.86%, return on equity is at 29.22%, and return on invested capital is at 25.80%.
Alphabet’s ROA, ROE, and ROIC are currently above their five years average.
With all of ROA, ROE, and ROIC above 20%, it shows how profitable Alphabet’s digital advertising business is. Amazingly profitable.
The current price-to-earnings ratio is at 22.31. The price to cash flow is at 16.89, and the price to book is at 6.12. Their price to earnings and price to free cash flow is currently below their five years average, while their price to book is above their five years average.
On 10 August 2022, John L Hennessy, the non-executive Chairman of Alphabet Inc, sold 500 shares of GOOGL at $120 each.
Microsoft Corp (NASDAQ: MSFT)
Microsoft is a consumer and enterprise software company. They are famous for their Windows operating systems and Office productivity suite.
They make money from three main segments:
- Productivity and business processes (Microsoft Office, Office 363, LinkedIn, etc.)
- Intelligence cloud (platform as a service offering Azure, Windows Server OS, etc.)
- Personal computing (Xbox, Surface laptops, tablets, etc.)
Microsoft’s TTM return on assets is at 20.82%, return on equity is at 47.15%, and return on invested capital is at 33.23%. A really high number that displays just how profitable their business asset-light model is.
Microsoft’s ROA, ROE, and ROIC are currently above their 5-year average.
The current price to earnings ratio is at 29.74, the price to cash flow is at 24.31, and the price to book is at 12.85. Their price-to-earnings ratio is currently below their five years average, while their price-to-cash flow and price-to-book ratio are above their five years average.
On 15 July 2022, Alice L. Jolla, the Corporate Vice President and Chief Accounting Officer of Microsoft, sold 177 shares of MSFT.
Are These Companies A Buy?
That will depend on your valuation assumptions and your risk profile.
My view is out of these three companies, Alphabet and Microsoft have a broader and stronger moat than Booking Holdings.
But in terms of valuations, I do not own any of them. At the right price, I definitely will. But not at any cost.
Disclosure:
I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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Chris Lee Susanto
Co-Founder of Evergrow Fund, Founder of Re-ThinkWealth.com, and Founder of Value Investing Mentorship Club®.
Chris started investing in stocks early at age 21 and is a big proponent of business-like stock investing – a mixture of both value and growth investing. He invests in companies where there is value to be found (as long as it is still within his circle of competence), be it a turnaround, depressed, value, or quality growth company (compounders). He either buys the stock outright or he profits through selling put or selling call options – or buying call options (buying and selling options are especially dangerous for those who do not know how to properly execute them).
Some of the places where Chris has been invited to speak or has added value as a mentor or writer include Singapore Polytechnic, SMU Institute of Innovation and Entrepreneurship (IIE), Seedly TV, Dollars and Sense, The New Savvy, Value Walk Blog, Investment Moats, NUS Tembusu College, NUS Investment Society, CGS-CIMB Singapore, Singapore Financial Conference by NTU IIC, The Financial Coconut Podcast, Money FM 89.3 and Internationally in Myanmar.
He is also a practitioner of Transcendental Meditation and Mindfulness practice. He also advocates regular exercise, enough sleep, and nutritious food as part of our lifestyle as an investor so that we can see things with a clearer lens and not be “caught” due to ignorance.
To find out more about VIM, click here.
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