Before David Tepper became the owner of the NFL’s Carolina Panthers and MLS’s Charlotte FC, he made his name (and money) with Appaloosa Management, a global hedge fund he founded. Tepper, whose net worth is around $20 billion, is among the 100 richest people in the world. Needless to say, he found success in the world of investing.
Given Tepper’s success, it makes sense that investors pay attention to his investments and those of his hedge fund for tips. Even though the average investor and billionaire hedge fund manager don’t have the same risk tolerance or investment goals, there’s nothing wrong with taking inspiration from them.
Tepper’s portfolio is fairly concentrated, with nearly a third held in three “Magnificent Seven” stocks. If investors want solid companies with long-term sustainability, they need look no further.
1. Amazon
Amazon (NASDAQ:AMZN) became a household name due to its e-commerce business, but has since branched out and become a major player in a handful of industries.
Amazon’s e-commerce business was unprofitable for a while and was primarily used to generate revenue. It’s still Amazon’s largest source of revenue, but it has recently become profitable. In the fourth quarter, Amazon’s North American segment generated about $6.5 billion in operating profits, an impressive turnaround from the $240 million it lost in the fourth quarter of 2022. The international segment lost $419 million, which isn’t ideal, but it still makes Amazon profitable in its non-Amazon Web Services (AWS) businesses.
There is still room for growth in e-commerce, but much of Amazon’s growth will depend on its cloud service AWS. Although AWS growth has slowed recently, 13% year-over-year (YOY) growth isn’t too bad for Amazon’s biggest profit generator. AWS has a commanding market share in global cloud services, but has lost some ground over the past year. Nevertheless, its market share is 31%, which puts it at the top Microsoft‘S (NASDAQ:MSFT) Azure (24% share) and Alphabet’s Google Cloud (11%).
In the long term, Amazon will benefit from the organic growth of cloud services and e-commerce. However, the company has also shown that it is willing to invest in new industries. Take, for example, the $13.7 billion purchase of Whole Foods and its healthcare ambitions. Investors can rest assured that the company will not become complacent.
2.Microsoft
There are various technology companies, and then there is Microsoft, the poster child for occupying a wide corporate network.
It’s no coincidence that Microsoft has become the most valuable publicly traded company in the world; It took years of impressive business growth and a boost from AI mania. The latter can also lead the company through the next phases of growth.
Microsoft’s strategic partnership with OpenAI – which grants the company exclusive licenses to OpenAI’s large language models (LLMs) – could be just what the company needs to further strengthen its hold on office software. From Office (Excel, Word, PowerPoint, etc.) to Azure to Teams, Microsoft is almost unavoidable in the corporate world.
The abundance of enterprise customers gives Microsoft an advantage in ensuring its longevity and protecting itself against economic and market downturns. In difficult times, consumers can easily forego the latest smartphones or online purchases, and companies can limit their advertising. It is much harder for companies to stop using office software, migrate their data from the cloud, or move away from established communication platforms like Teams.
With Microsoft, investors can be confident that they are investing in a company focused on sustainable, long-term growth.
3. Metaplatforms
Facebook creator Metaplatforms (NASDAQ:META) remains one of the leading cash cow companies, generating revenue of approximately $36.5 billion in the first quarter, up 27% year-over-year.
With an average of 3.24 billion daily active family members in March 2024 (up 7% year over year), Facebook shows why it continues to be a go-to destination for many of the world’s top advertisers. Meta benefited from this, increasing its average family sales per person from $9.47 in the first quarter of 2023 to $11.20 in the first quarter of 2024.
Despite the rise in key metrics, Meta stock plunged following the release of its latest earnings, falling as much as 15% on the same day. Much of this is due to the company’s future spending plan, which primarily affects its AI infrastructure. Meta said it planned to spend $35 billion to $40 billion this year, up from the previous estimate of $30 billion to $37 billion.
Investors may not agree with the spending plan, but their reaction appears to be overreacting. However, the good news is that the lower valuation makes it a more attractive entry point.
Investors should also be excited about Meta’s new dividend of $0.50 per share. The dividend yield isn’t enough to satisfy most income-seeking investors, but it is an incentive that can encourage investor patience while Meta works on its AI plans.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Stefon Walters holds positions at Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms and Microsoft. The Motley Fool recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has a disclosure policy.
One-third of billionaire David Tepper’s portfolio is made up of these three great seven stocks was originally published by The Motley Fool