With the market at sixes and sevens, it probably won’t hurt looking at what stocks the rich are buying and adding to their portfolios. The issue is that information on popular big-time investor stocks is often very conflicting and polarized. Thus, I picked four stocks that are currently popular among the whales of Wall Street. Additionally, I’ve contextualized how the respective stocks can be played for optimal gains.
Personally, I enjoy cyclical value stocks and I’m delighted to see that some of the big investors on Wall Street are opting for the same strategy. Cyclical value provides the best long-term risk-to-return profile, in turn providing you with the best probability of achieving alpha.
But, without further delay, let’s get into it. Here are four stocks the rich and powerful bought in the first quarter (Q1):
|OXY||Occidental Petroleum Corporation||$70.64|
Stocks the Rich Are Buying: Occidental Petroleum (OXY)
During Q1, legendary investor Warren Buffett snapped up $4.5 million worth of Occidental Petroleum (NYSE:OXY) stock. It is reported that Buffett’s main attraction was the company’s robust financial statements. It’s easy to see why Buffett rates the company’s financial stability highly. For example, OXY beat its Q1 earnings target by 9 cents per share amid solid operational capacity in the DJ, Delaware, and Midland basins.
OXY stock is filled with intrinsic value, as the firm’s jaw-dropping quarterly cash flow of $3.3 billion adds a lot of substance to its value prospects. Moreover, the stock is trading below its fair market value. OXY stock is trading at a normalized forward price-earnings discount worth 85.02%, which conveys the stock’s deep value prospects.
Cathie Wood bought Nio (NYSE:NIO) stock during Q1. The founder of ARK Invest decided that Nio presents good value for money, as the stock is in oversold territory. Nio provides a secular growth opportunity, meaning that the stock can thread cyclicality with hypergrowth prospects. For instance, Nio’s year-over-year revenue growth of 1.22x materialized during a period of economic downturn.
From a short-term vantage point, Nio’s May deliveries skyrocketed by 38%, amounting to a year-over-year increase of 4%. NIO stock has a lot of potential in the offing with supply-chain congestion in China slowing down. Additionally, the company is one of the few vehicle producers that isn’t faced with rising wage demands as China’s inflation rate remains at a mere 2.1%. Thus, I see Nio taking advantage of price arbitrage to proliferate its financial results.
Stocks the Rich Are Buying: Citi (C)
Another Warren Buffett addition, Citigroup (NYSE:C) is a hot stock at the moment as a cyclical play. Buffett’s Berkshire Hathaway (NYSE:BRK.A,BRK.B) gobbled up nearly $3 billion worth of C stock during Q1, embodying a classic Buffett value play. C stock is a cyclical value play that could yield excess returns in the next few years. Rising interest rates could spur on the debt markets and trim the bank’s wage bill, subsequently amplifying Citi’s bottom-line earnings.
C stock is undervalued. First of all, the stock is trading at a 1.75x discount to its book value, implying that investors haven’t priced the company’s asset base fully. Secondly, C stock’s dividend yield of 3.89% provides solid income-generating prospects and implies management’s confidence in the business’ future financial success.
Ray Dalio invested in a meme stock. Yes, you did hear that right. The Bridgewater founder bought more than 4,000 shares of GameStop (NYSE:GME) stock in Q1, surprising most market participants. GameStop’s transformation is what is appealing to me. The firm’s Chief Executive Officer Matt Furlong recently opined: “Our growth and the launch of new tech products, such as our digital asset wallet and the upcoming NFT marketplace demonstrate that we are, in fact, starting to transform.”
I wouldn’t bet the house on GME stock. However, adding an oversold stock to your portfolio that has garnered 41.47% year-over-year in earnings-before-interest-and-tax growth won’t hurt.
On the date of publication, Steve Booyens did not hold any position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.