When I’m looking for stocks to buy for my portfolio, I often view what trades professional money managers are making. I find that this is a great way to generate investment ideas.
Here, I’m going to highlight some key trades they’ve been making recently. Should I buy these stocks for my own portfolio?
Let’s start with boutique investment management firm Blue Whale. It runs the Blue Whale Growth fund, which has delivered excellent returns for investors since its launch a little over four years ago.
Here, portfolio manager Stephen Yiu has been adding to his position in semiconductor manufacturing equipment maker ASML (NASDAQ: ASML). Yiu believes ASML, which sells its equipment to the likes of Taiwan Semiconductor Manufacturing Company, Samsung, and Intel, is “well-positioned to benefit disproportionately from the almost 25% expected yearly growth in demand for smart and connected devices going into the next decade.”
Would I buy ASML for my own portfolio? Yes. I actually bought some stock last month when it was trading near $740. My view is that with governments looking to build semiconductor manufacturing plants domestically, ASML is well-placed for growth.
It’s worth noting that its shares aren’t cheap. Currently, the forward-looking P/E ratio is about 55. This adds risk. However, I’m comfortable with the valuation as ASML basically has a monopoly position in its market.
Next up, Baillie Gifford. It runs the very popular Scottish Mortgage Investment Trust as well as a number of other top-performing growth funds.
Looking at the investment manager’s latest 13F filing, it’s interesting to see it has recently been buying shares in fitness equipment company Peloton (NASDAQ: PTON). In the third quarter of 2021, the firm snapped up 7.9m PTON shares, increasing the size of its holding by nearly 40%.
This is a stock I’m happy to avoid for now as the company is struggling a bit. This is illustrated by the fact that it generated a huge loss in the most recent quarter and also cut its revenue guidance for the last quarter of 2021 by $1bn.
It’s also worth pointing out that Peloton’s management is still confident about the long-term growth story. I think there are better stocks to buy right now however.
Finally, we have Fundsmith, which runs the UK’s most popular fund, Fundsmith Equity. Its latest factsheet reveals that, in October, the fund completed the purchase of a position in Amazon (NASDAQ:AMZN). This is a stock fund manager Terry Smith has had his eye on for a while. It seems he finally sees the valuation as attractive.
Would I buy Amazon shares for my portfolio today? Yes. The stock has lagged the market this year and I think the share price weakness has provided a good buying opportunity. Of course, the stock isn’t cheap at 70 times next year’s expected earnings. However, I’m comfortable with that multiple given Amazon’s dominance.
I’ll point out that Amazon does have a few challenges to work through in the near term. Supply chain issues and wage inflation are two issues the company is dealing with right now. These could impact near-term growth.
I don’t expect these issues to last forever though. Eventually, they should dissipate and when they do, I think Amazon’s share price is likely to move higher.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Edward Sheldon owns shares of ASML Holding, Amazon, and Scottish Mortgage Inv Trust and has positions in Fundsmith Equity and Blue Whale. The Motley Fool UK has recommended ASML Holding, Amazon, and Peloton Interactive. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.