Identifying great investments can be a challenge. But looking at what some of the most successful investors are doing can be a great way of finding stocks to buy.
Warren Buffett says the fact that someone else owns a stock is never a good enough reason to buy it. I agree, but I think it an be a good source of inspiration.
Meta Platforms
When I looked through the reports, one name kept appearing. Meta Platforms (NASDAQ: META) appeared as the most popular stock to buy over the last six months.
These investors have been leaning into a significant drop in the company’s share price. An they’ve been rewarded with a 50% rally since the start of the year.
The core business is in good shape. Meta’s social media platforms have more users than ever and its AI investments seem to have offset the threat of Apple’s data policy changes.
Furthermore, the company announced plans to improve its efficiency and bring its costs under control. That had been one of the biggest investor concerns with the stock in 2022.
There are still plenty of risks, though. The metaverse project continues to lose money and the company expects this to get worse in 2023.
As a result, I’m much more cautious about the stock than I was last year. I thought Meta shares were a bargain at $125, but I’m not so sure at today’s prices.
Microsoft
Meta Platforms was the stock bought by the most investors during the last six months. Over the last three months, though, that was Microsoft (NASDAQ:MSFT).
The Microsoft share price is up 7% since the start of the year. And the company continues to grow its income at an impressive rate.
Despite its previous success, I find it hard to see the stock as an obvious bargain. The company’s cloud infrastructure and AI look promising, but there’s also risk here.
For one thing, there’s significant competition from the likes of Amazon. That creates uncertainty around margins and competitive advantage.
It’s one thing to know that Microsoft is exposed to growing industries. But knowing how much money it will make from them is much more difficult.
Others might be better placed to assess this, but I think it’s highly uncertain. And that means I can’t see the stock as an obvious bargain.
Alphabet
The most popular stock, though, was Alphabet (NASDAQ:GOOG). More of the investors I looked at owned shares in Google’s parent company than either Meta or Microsoft.
Despite high stock-based-compensation (which I view as a risk) Alphabet shares are up 16% since the start of the year. Nonetheless, I’ve been buying the stock for my portfolio lately.
The company has cloud and AI investments. But its core business has a dominant position in the online search industry and generates extremely strong returns with relatively little costs.
Alphabet has also managed to restrict its losses better than Meta has. The company’s speculative projects lost $2.9bn in 2022, while Meta lost $4bn in the last quarter alone.
Buffett once said that he views Google as a missed opportunity. Other billionaires haven’t been so hesitant, though, and I prefer it to Meta or Microsoft at today’s prices.
