Amidst fervent acquisitions, affluent billionaires are heavily investing in two prominent Dow Jones stocks.
Top-tier asset managers, like Andreas Halvorsen of Viking Global Investors and Bill Ackman of Pershing Square Holdings, are responsible for managing considerable wealth for their clients, necessitating extensive research into every investment. Both investment titans added positions in two Dow Jones Industrial Average members during the second quarter and continued their investment in Q3. Here's why these stocks make excellent investment choices.
1. Nvidia
Andreas Halvorsen's Viking Global Investors continued to hoard Nvidia (NVDA -2.25%) shares during the third quarter, expanding its stake by over 2.2 million shares. While other billionaires such as David Tepper sold Nvidia shares last quarter, individuals like Lee Ainslie of Maverick Capital and Samantha McLemore of Patient Capital Management continued to buy or hold strong positions in Nvidia.
While some investors might be tempted to sell after witnessing impressive gains, the necessity for faster graphics processing units (GPUs) to process data presents an enormous market opportunity that should offer Nvidia robust revenue growth for several more years, consequently, excellent returns for investors.
During the Aug. 28 earnings call, CEO Jensen Huang promised, "Every single data center will have GPUs in the future." This $1 trillion worth of data center infrastructure transitioning to accelerated computing, or GPUs, motivates data centers to expedite data processing to tackle demanding workloads, such as training AI models, including generative AI. These models drive the development of new, productivity-enhancing tools, allowing companies to innovate more swiftly.
Due to this trend, Huang anticipates Nvidia's data center business to surge substantially the following year. Nvidia's total revenue grew by triple digits over the previous year, with the data center sector contributing 87% to the company's revenue in the latest quarter.
Analysts predict a 47% revenue and earnings surge for Nvidia in the upcoming year, according to Yahoo Finance. Meanwhile, the stock trades at a forward price-to-earnings (P/E) ratio of 33 based on next year's earnings estimate. Viking Global Investors might believe the valuation is undervalued enough to drive further returns for Nvidia investors in 2025.
2. Nike
Bill Ackman's Pershing Square has alternated between buying and selling Nike (NKE -0.91%) stock recently. Pershing Square purchased a position in Q4 2017 before selling out the following quarter in 2018. However, Nike's challenges with increasing sales in a tough retail landscape plummeted the share price to its lowest level in four years, which seems to have led Ackman to believe that Nike's share price does not reflect its long-term potential.
Pershing Square repurchased a position in Nike in Q2 and amped up its stake to more than 16.2 million shares in Q3.
Despite struggling to grow sales in this environment, Nike has the capacity for strong performance. Unlike the average clothing retailer, the sportswear industry is relatively resistant to fashion trends, allowing brands like Nike to produce excellent returns for investors for years prior to this recent setback.
Nike is working on enhancing its sportswear offerings through innovation, which should help the company regain its footing over the next few years, escalating sales. It's hopeful that the appointment of new CEO Elliott Hill, a 32-year Nike veteran, will bring fresh ideas to the table during this pivotal time, potentially boosting the company's stock price within the next year or so.
With the stock's P/E hovering around 21 at present, Nike's stock appears to offer investors its best value in over a decade.
- In light of the extensive research required for managing their clients' wealth, top-tier finance managers like Andreas Halvorsen of Viking Global Investors might be closely examining the potential for significant returns from investing in Nvidia's robust market opportunity in graphics processing units (GPUs).
- As Pershing Square Holdings continues to invest in Nike, Bill Ackman might be considering the long-term potential of the company, despite its current sales challenges, given its history of excellent returns in the sportswear industry and the potential for growth through innovation and strong leadership.
