During the past two weeks, investors have scrutinized the stock market closely, especially as the S&P 500 just recovered from one of its worst selloffs in 2024. There is doubt as to whether any investment in the stock market can be safe today and whether diversifying or concentrating portfolios can be the better choice to navigate this volatility.
Investors can do their own homework and try to find the best investments, but the reality is that not too many retail investors have the time to pour through annual reports and build financial models. To get most of the rewards with a fraction of the work it takes to find these investments, investors can look to recent 13-F filings, mandatory documents that show where the mega investors are allocating their money.
Triggered by a recent purchase, Bill Ackman’s 13-F shows the Wall Street value player scooping up shares of Nike Inc. (NYSE: NKE) after the company’s recent earnings selloff. Known for his macro perspective, keeping the world view at the top of his decisions, Ray Dalio decided to add to his sizeable position in Amazon.com Inc. (NASDAQ: AMZN). A tech-savvy dip-buyer, Cathie Wood, has made her pick by adding to her Tesla Inc. (NASDAQ: TSLA) position after a recent discount.
Discounted Nike Stock Is Bill Ackman's Bread and Butter
His fund is known to be positioned in the retail sector, with a mix of consumer discretionary stocks like Chipotle Mexican Grill Inc. (NYSE: CMG) and, more recently, Nike. The stock sold off by as much as 26.5% after reporting its second-quarter 2024 earnings results, which were disappointing for most shareholders.
The reality is that management's lower guidance was driven by a weaker performance from Nike's Chinese branch, as that economy has taken longer than expected to recover its consumer sector. Inflation has been expanding every month this year in China, and the PMI index (a measure of business activity) has also been positive since December 2023.
That showed Bill Ackman how irrational the market was in sending Nike to its lowest price-to-earnings ratio since 2017. Buying the stock became a clear choice for him, just as it was for Wall Street analysts to recommend this name. Those at Guggenheim see the stock valued as high as $115 a share, calling for up to 36.9% upside from where it trades today.
Rate Cuts Could Boost Amazon Stock by Strengthening Consumer Demand
While most argue that the potential rate cuts coming from the Federal Reserve (the Fed) could be already priced into the market, there are stocks whose growth may never be priced in. Ray Dalio knows Amazon stock is one of them.
Why? While short-term traders are getting excited about the rate cuts to boost Amazon's consumer activity, they forget that Amazon is much more than just a consumer stock. It is highly exposed to the artificial intelligence and cloud computing wave that is only getting started.
Long-term investors like Ray Dalio consider this when considering stocks like Amazon. Wall Street analysts were willing to take Dalio's view one step further and forecast Amazon stock's earnings per share (EPS) growth up to 22.8% in the next 12 months.
Leaning on these forecasts, Barclays thinks Amazon is worth closer to $235 a share, which implies the stock needs to rally by roughly 32.7% from where it trades today. Given so many bullish factors, investors can point to Amazon stock's 5% short interest decline over the past month as a sign of bearish capitulation.
Surprisingly, Amazon stock still trades at a P/E ratio of 42.3x today, which is lower than its valuation during COVID-19. Unless the market expects another wave of lockdowns and a global pandemic, these valuations become a steal for investors like Dalio to take advantage of today.
Buffett's Oil Bet Is an Indirect Play on Tesla Stock's Upside
Recently, Buffett went on a buying spree in shares of Occidental Petroleum Co. (NYSE: OXY) to take on his bullish view that oil prices are increasing. As oil prices go higher, to the Goldman Sachs $100 a barrel target for 2024, other sectors will be affected.
Depending on the energy sector, electric vehicle appeal is higher when oil is more expensive, raising the cost of gasoline with it. So, if Buffett is right (as usual) about more expensive oil, then more costly gas could cause an uptick in demand for Tesla vehicles as a more attractive alternative.
This is why Cathie Wood decided to scoop up shares in the past quarter, especially now that Wall Street analysts forecast up to 40.8% in the next 12 months. Those at Morgan Stanley placed a price target of up to $310 a share for Tesla stock, daring it to rally by as much as 40.7% from where it trades today.
After a disappointing second quarter of 2024, Tesla stock sold off by 25% on lower guidance projections and missed delivery figures. However, the future does look a bit different than what this guidance might suggest, and bears have realized it as they dropped Tesla stock’s short interest by 16.7% over the past month.
