In this piece, we will take a look at the ten A-Rated stocks billionaires are loading up on. If you want to skip our overview of the stock market and the latest news, then you can take a look at 5 A-Rated Stocks Billionaires Are Loading Up On.
The stock market is made of thousands of companies whose shares trade hands daily. These trades are based on information or other signals that make investors buy or sell the stocks. The volume of data that is available to the retail investor, coupled with complex financial terms makes investing appear daunting.
This is particularly true in today's market environment which is markedly different from what investors were used to before the 2019 coronavirus pandemic. Back then, interest rates were low and investors had easy access to capital for their investments. Similarly, firms found it easier to grow as low rates meant that not only could they easily raise capital for expansion but their products also found willing buyers.
However, just four years later, the market is quite different. Now, even as indexes such as the NASDAQ Composite and the S&P 500 have managed to post gains, the broader economic climate makes investing trickier. Multi decade high interest rates have ensured that only the best companies can keep their balance sheets healthy. They have also provided potential stock market investors with alternatives to park their money, and also shaken the valuations of stocks. Stock valuations factor in interest rates as a loss of interest through stable investments such as ten year U.S. government bonds are often the opportunity cost of investing capital in a company.
Now, with 2024 coming to an end, investors are finding more reasons to be optimistic than not. This is because it appears that the Federal Reserve might not have a choice when it comes to reducing interest rates in 2024. So far, the central bank has pumped up rates to 5.25% to curtail inflation, and economic data released in November and December 2023 has provided hints that inflation is on a downward trend. At the same time, the key worry that high rates might tip America into a recession might not bear fruit either. The Fed, throughout its interest rate hiking cycle, has hoped that instead of falling into a recession, the economy will undergo what is called a 'Soft Landing.' A soft landing is when economic growth slows down but does not enter into negative territory. Given the pace and scale of the interest rate hikes, a soft landing is the best case scenario for stock market bulls and recent data shows that it might actually materialize.
For instance, the Labor Department's data for the non farm jobs market released in December 2023 shows that the economy added 199,000 jobs in November while the unemployment rate stood at 3.7%. Both these figures are important, since the number of jobs added in November outpaced the 150,000 jobs added in October. Similarly, the unemployment rate dropped from 3.9% showing that the labor market continues to improve. This data set supports the soft landing narrative because it shows that despite painfully high interest rates, companies continued to expand their hiring. More hiring leads to more output and is good for economic growth. On the flip side, had the job market contracted, i.e. the unemployment rate grew and the number of jobs added fell, then investors would have worried that the first signs of an economic slowdown were approaching. This could have made them panic, leading to the stock market trading lower and safe haven assets such as the U.S. dollar rising.
However, in reality, since the jobs report was robust, investors responded by betting in the opposite direction. After the report was released, the S&P 500 index and the NASDAQ closed at 4,604 and 14,403, respectively to mark their highest readings since March 2022 and April 2022. This bit is important, as while markets have had somewhat of a good year in 2023 mostly due to the boom in technology and artificial intelligence, they are yet to retake their 2021 close levels. The indexes effectively reversed all losses since the first quarter of 2023 provides early hints about investor hopes for the future, and if the data continues to walk a fine rope, then this strong performance can extend into the future as well.
At the same time, a strong labor market report also allows the Fed to keep rates higher for longer. It shows that the labor market continues to be robust, and if not closely monitored, then it can end up feeding into inflation to undo all the work done to bring down inflation. These worries are also on economists and analysts minds. For instance, here's what Stuart Cole, the head macro economist at Equiti Capital had to say to Reuters:
"Today’s employment report has come in hotter than expected, with the payrolls number and monthly average earnings figure printing above expectations and the unemployment rate unexpectedly falling. The picture being painted as far as the Fed is concerned will likely be one of a labour market that remains strong and showing no real signs yet of buckling under the weight of the interest rates rises that it has so far delivered."
"The drop in the unemployment rate in particular will assuage any concerns of a recession, and with payrolls and earnings both rising it keeps the ‘soft landing’ narrative very much in the ascendancy."
"The report will likely see some of those forecasting an early Fed cut next year re-evaluating their positions, and unless we get a surprisingly large fall in the CPI numbers next week, those Q1 rate cut expectations will probably now be priced out."
With these details in mind, let's take a look at some A-rated stocks that billionaires are buying. Some notable names are Alphabet Inc. (NASDAQ:GOOGL), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN).
Photo by Kai Wenzel on Unsplash
Our Methodology
To make our list of the best A-rated stocks that billionaires are buying, we first compiled a list of 27 companies whose debt is rated higher than A by S&P, Moody's, or Fitch. Then, the number of billionaires that had bought their shares in Q3 2023 was determined and the top A-rated stocks that billionaires are buying are as follows.
10. Cisco Systems, Inc. (NASDAQ:CSCO)
Number of Billionaire Investors In Q3 2023: 19
Cisco Systems, Inc. (NASDAQ:CSCO) is a communications products provider headquartered in San Jose, California. Like other companies, the firm also beefed up its software portfolio with A.I. in December as it announced a slew of security upgrades that use the technology.
64 out of the 910 hedge funds part of Insider Monkey's Q3 2023 database had bought Cisco Systems, Inc. (NASDAQ:CSCO)'s shares. The firm's biggest hedge fund investor is Peter Rathjens, Bruce Clarke, and John Campbell's Arrowstreet Capital as it owns $1.2 billion worth of shares.
Along with Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOGL), and Amazon.com, Inc. (NASDAQ:AMZN), Cisco Systems, Inc. (NASDAQ:CSCO) is a top A-rated stock that billionaires are buying.
9. Chevron Corporation (NYSE:CVX)
Number of Billionaire Investors In Q3 2023: 19
Chevron Corporation (NYSE:CVX) is a global oil and gas exploration and production company. 2023 might be one of the most important years in the firm's history as its multi billion dollar acquisition of the energy firm Hess promises to yield billions in returns. However, the deal is currently being scrutinized by the FTC.
By the end of this year's third quarter, 72 out of the 910 hedge funds surveyed by Insider Monkey were the firm's shareholders. Chevron Corporation (NYSE:CVX)'s largest hedge fund investor is Warren Buffett's Berkshire Hathaway as it owns 110 million shares that are worth $18.5 billion.
8. Apple Inc. (NASDAQ:AAPL)
Number of Billionaire Investors In Q3 2023: 19
Apple Inc. (NASDAQ:AAPL) is an American personal computing and technology company headquartered in Cupertino, California. The firm scored a win in December 2023 when investment bank Morgan Stanley upgraded its share price target to $220 from $210, as it cited benefits from A.I. and strong services performance.
Insider Monkey took a look at 910 hedge fund portfolios for their September quarter of 2023 shareholdings and found that 134 had invested in the company. Apple Inc. (NASDAQ:AAPL)'s largest shareholder among these is Warren Buffett's Berkshire Hathaway due to its $156 billion stake.
7. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Billionaire Investors In Q3 2023: 20
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a Taiwanese firm that makes semiconductors on order for chip companies such as NVIDIA Corporation. The firm's CEO, Dr. C. C. Wei stressed in December 2023 that chip makers and designers have to work together to ensure no supply constraints when it comes to A.I. chips.
During 2023's third quarter, 107 out of the 910 hedge funds profiled by Insider Monkey were Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)'s shareholders. Ken Fisher's Fisher Asset Management was the biggest investor as it owned $2.6 billion worth of shares.
6. Johnson & Johnson (NYSE:JNJ)
Number of Billionaire Investors In Q3 2023: 20
Johnson & Johnson (NYSE:JNJ) is an American pharmaceutical and healthcare products manufacturer. The firm held a crucial investor day in December 2023 where it shared that its medical technology business should grow around 7% over the next couple of years.
As of September 2023, 84 out of the 910 hedge funds profiled by Insider Monkey had invested in the company. Johnson & Johnson (NYSE:JNJ)'s largest shareholder among these is Ken Fisher's Fisher Asset Management due to its $1.1 billion stake.
Johnson & Johnson (NYSE:JNJ), Alphabet Inc. (NASDAQ:GOOGL), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN) are some top rated stocks billionaires are loading up on.
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Disclosure: None.10 A-Rated Stocks Billionaires Are Loading Up On is originally published on Insider Monkey.
