Tracking what millionaire investors are buying can be very profitable. After all, these investors typically became millionaires through a long track record of smart investing.
What stocks is the billionaire investor buying right now? Two in particular stand out.
Ray Dalio is on the defensive with this dividend stock.
Ray Dalio's investment firm Bridgewater Associates manages more than $100 billion in assets. The company operates one of the world's largest hedge funds and has achieved its size through an impressive long-term track record of success.
What stocks is Dalio's company currently buying? One of his favorites is altria group (NYSE:MO). The company has held the stock since Q3 2021, but last quarter decided to increase the stake by more than 30%, bringing the total number of shares to over 76 million.
What's so attractive about Altria stock today? The company is generally considered a defensive stock. So when the market falls, stocks like Altria can usually weather the storm without much pain. This is true for most tobacco stocks that sell products to consumers who will continue to buy regardless of economic conditions.
Is Bridgewater worried about a recession or a downturn in the market? Perhaps, but it could also just be attracted to Altria's cheap valuation. The stock's free cash flow yield is currently 12%, one of the highest in decades. This yield is made possible not only by its generous free cash flow levels, but also by its declining share price. The downside to defensive stocks is that they often underperform during strong bull markets.
Over the past 10 years, Altria's stock price, for example, has increased by just 11.6%. However, its abundant free cash flow allows it to pay a reliable dividend, with the current yield being around 9.2%. Including dividends, the stock has given him a total return of 107% over his 10 years.
With a very cheap valuation and a high but affordable dividend yield, don't be surprised to see Dalio and Bridgewater continue to invest in Altria.
Join Warren Buffett in this $19 billion investment
Warren Buffett and his holding company Berkshire hathaway (NYSE: BRK.A)(NYSE: BRK.B), runs one of the most tracked portfolios in the world.Berkshire is currently buying stocks chevron (NYSE:CVX) Like there's no tomorrow. The company has owned Chevron stock since the fourth quarter of 2020, but last quarter it increased its position by nearly 16 million shares, bringing its total position to 126 million shares, worth about $19 billion.
Chevron is now one of Berkshire's largest positions. Why are Buffett and Berkshire so bullish on the company? Like Altria, Chevron stock is historically cheap, according to several valuation metrics. For example, the company's free cash flow yield is about 6.5%, more than double the five-year average. Abundant free cash flow fuels his 3.8% dividend and aggressive share buybacks. For example, the company last year authorized a $75 billion stock repurchase program, replacing its previous $25 billion stock buyback program. Together, these two programs represent nearly one-third of Chevron's total market capitalization.
To be bullish on Chevron, you also need to be bullish on energy prices. However, the direction of oil and gas prices is difficult to predict. Fortunately, Chevron has proven that it can profit from both favorable and unfavorable environments. For example, despite falling oil prices, stocks have achieved a total return of 99.6% over the past five years. fell It will decrease by about 20%. Mr. Buffett and Mr. Berkshire are probably pleased with this performance, which delivered strong returns despite difficult conditions.
Should you invest $1,000 in Chevron right now?
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Ryan Vanzo has no position in any stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Chevron. The Motley Fool has a disclosure policy.
2 Surprising Stocks Billionaires Are Buying Hand Over Fist was originally published by The Motley Fool.
