If you are looking for good stocks to invest in, one strategy is to follow the “smart” money, which means looking at stocks that professional institutional investors such as hedge funds and asset managers are investing lots of money in. An even better strategy is to follow the institutional investors that have quite literally become billionaires due to their long and successful investing careers.
With markets experiencing lots of volatility, it’s also a good idea to look at large, well-established companies in the Dow Jones Industrial Average that have the size and capacity to withstand recessions and difficult market conditions. Here are three Dow stocks that billionaire investors are buying hand over fist.
1. Warren Buffett: Chevron
Warren Buffett and his company Berkshire Hathaway made a big bet on the large U.S. oil producer Chevron (NYSE: CVX), growing their stake from 38 million shares to 159 million shares in the first quarter of the year.
Berkshire’s stake in Chevron is now worth more than $23.7 billion. The company makes up 7.7% of Berkshire’s portfolio, and is tied for the portfolio’s third-largest holding. Chevron’s stock is one of the few winners out there this year, up more than 24% in 2022. Russian oil bans and embargoes due to the country’s ongoing invasion of Ukraine have driven up the cost of oil and made domestic oil producers much more valuable.
After hitting all-time highs, Chevron’s stock has sold off a bit and no one exactly knows where oil prices may go long term. But the company is a strong dividend stock and earlier this year raised its long-term projections for capital returns and operating cash flow.
2. George Soros: Salesforce
In the first quarter of this year, regulatory filings show that George Soros, who runs Soros Fund Management, added 106,250 shares of Salesforce (NYSE: CRM), increasing the fund’s position in the cloud giant by close to 70%.
And it looks like Soros made a timely move. Following Salesforce’s most recent earnings report, shares rebounded after what has still been a difficult year for the company. For the first quarter of fiscal 2023, Salesforce delivered earnings and revenue that beat analyst estimates and raised guidance. Investors were pleased because they had been very worried about demand heading into the quarter, considering everything going on in the economy.
Salesforce still has tremendous untapped potential. Its market opportunity continues to grow as companies digitize their operations and move to the cloud. The company said that its serviceable addressable market will top $13 billion in 2022 and then grow to $33.5 billion by 2029.
3. David Tepper: Microsoft
David Tepper’s Appaloosa Management increased its stake in the tech giant Microsoft (NASDAQ: MSFT) by 25% in Q1. Microsoft now makes up roughly 4.5% of Appaloosa’s portfolio. Like most tech stocks, Microsoft has struggled this year and the stock is down more than 26% in 2022. But for the first three months of the year, the company beat estimates on earnings and revenue and also provided solid guidance that seemed to please Wall Street analysts.
Microsoft can fare well in times of inflation due to its strong brand, which gives it pricing power. The company also provides a lot of infrastructure and products to businesses, which are unlikely to trim their tech budgets even when times get tough.
Finally, Microsoft has one of the strongest balance sheets in the world. At the end of March, the company carried more than $104 billion of cash, cash equivalents, and short-term investments on its balance sheet. Microsoft is one of two companies that have a higher credit rating than the U.S. government, making it the perfect company to invest in during these difficult market conditions.
Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway (B shares), Microsoft, and Salesforce, Inc. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.