Looking for smart investment ideas amid a broad stock market sell-off? Mimicking the activity of the world’s most successful investors is a good place to start.
You may recall that markets tanked during the first three months of 2022. While most investors were running for the hills, the world’s most successful investors were buying up shares of their favorite businesses. Here are the largest stock purchases Warren Buffett, Michael Burry, and Ray Dalio made while the market tanked.
Warren Buffett and Chevron
In the first quarter, the biggest addition Warren Buffett’s holding company, Berkshire Hathaway, made was the oil and gas producing giant Chevron (NYSE: CVX).
Buffett had already started investing heavily into Chevron before Russia, the world’s largest oil exporter, incited severe sanctions against itself by invading Ukraine. During the first three months of 2022, he raised Berkshire’s stake in Chevron more than fivefold to $25.9 billion. Now, it’s Berkshire’s fourth-largest equity holding.
Shares of Chevron offer a dividend that has risen 31% over the past five years. Now, the stock offers a 3.8% yield that could increase at an even faster rate in 2022 and beyond. Earlier this year, Chevron told investors it can generate enough cash from operations to cover dividend payments and planned capital expenditures and buy back more than 25% of its shares outstanding if crude oil prices hover at $75 per barrel through 2026.
Lately, Brent crude has been trading for more than $110 per barrel. Nobody knows when prices will fall back. With no end to Russia’s invasion of Ukraine in sight, though, oil prices and Chevron’s cash flows could remain elevated for years to come.
Ray Dalio and Medtronic
Ray Dalio is by many measures the most successful hedge fund manager alive. Bridgewater Associates, the fund he started in his apartment in 1975, focuses on macroeconomic trends and famously predicted and prepared for the housing market crash of 2008. Dalio’s fund posted a 9.5% gain that year while nearly all of its peers reported heavy losses.
The business Dalio bet the most on during the first quarter was Medtronic (NYSE: MDT), the world’s largest medical device maker. Economies of scale allow it to compete on pricing with smaller competitors and generate a healthy profit at the same time.
Medtronic stock is a great way to bet on rising global healthcare costs because it’s nearly impossible to open your eyes in any hospital room on Earth without seeing a bunch of the company’s products. It’s also a dividend investor’s dream come true. In May, the company raised its payout for the 45th consecutive year and it hasn’t been dragging its feet, either. The payout has grown by a 16% compound annual growth rate over the past 45 years.
Michael Burry and Booking Holdings
Michael J. Burry became one of America’s most famous investors thanks to his role in Michael Lewis’ best-seller, The Big Short. More recently, his bold investment in GameStop sparked one of the most dramatic short squeezes Wall Street has ever seen.
It seems that Burry is betting on a shift away from consumer goods and toward experiences. The largest addition to Burry’s portfolio this year has been Booking Holdings (NASDAQ: BKNG). While buying up Booking Holdings, he made waves on Wall Street by betting heavily against Apple, which is coincidently the largest equity holding in Berkshire Hathaway’s portfolio.
Booking Holdings owns a variety of travel-related businesses including Booking.com, Priceline, Rentalcars.com, Kayak, and OpenTable.
Booking Holdings looks like a great stock to buy now because global travel trends are on the rise again. The company reported $27 billion in gross bookings during the first quarter, an increase of 129% from the previous-year period and a new company record. This was especially impressive because, in early March, the company suspended services in Russia and Belarus while suffering from an unusually high level of cancellations throughout Europe.
Blindly following successful money managers can lead to disaster, but it looks like Burry’s got the right idea here. If two years of COVID-19-related lockdowns plus war in Europe can’t stop Booking’s businesses from outperforming, I don’t think anything can.
Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway (B shares), and Booking Holdings. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.