Five of Wall Street’s most-prominent billionaire asset managers have picked out some of their favorite stocks for the new year.
The changing of the calendar brings new opportunities for retail investors and billionaire money managers alike. The second year of Wall Street’s bull market rally saw the Dow Jones Industrial Average S&P 500, and Nasdaq Composite respectively climb by 13% 23%, and 29%, with all three indexes reaching numerous record-closing highs.
Despite this sensational rally, Wall Street’s top billionaire investors continue to find perceived-to-be bargains. Based on Form 13Fs, which allow investors to see which stocks the smartest and most-successful asset managers have been buying and selling each quarter, billionaires are piling into five magnificent companies for 2025 — and artificial intelligence (AI) juggernaut Nvidia isn’t one of them.
Image source: Getty Images.
Warren Buffett: Domino’s Pizza
Wall Street’s most-prominent billionaire money manager, Berkshire Hathaway‘s Warren Buffett, has been a net seller of stocks to the tune of $166.2 billion over the previous eight quarters (ending Sept. 30, 2024). But one stock that’s caught his fancy amid this selling spree is fast-food restaurant chain Domino’s Pizza (DPZ 0.44%). Berkshire’s 13F shows that Buffett’s company purchased 1,277,256 shares of Domino’s stock in the September-ended quarter.
One of the likeliest reasons Domino’s Pizza caught the attention of the Oracle of Omaha is the trust the former has built up with its customers. Domino’s shifted its marketing strategy in the late 2000s to one that admitted prior mistakes and vowed to win back hungry consumers. Its transparent advertising campaigns, loyalty programs, and ongoing process and product innovation, have since worked wonders.
Domino’s Pizza has also been executing on its growth initiatives. The newest five-year plan, dubbed “Hungry for MORE,” focuses on new products, tech-driven operating efficiency that’s designed to improve output and the company’s supply chain, and relies on its franchisees to enhance the value of the Domino’s brand.
With the company well on its way to a 31st consecutive year of international same-store sales growth, Buffett clearly wanted his piece of the pie.
Terry Smith: Apple
The so-called “Warren Buffett of the U.K.,” billionaire Terry Smith of Fundsmith, was also on the hunt for a good deal throughout 2024. Interestingly enough, he settled on tech goliath Apple (AAPL 0.20%), which is a stock that Warren Buffett sold more than 615 million shares of between Oct. 1, 2023 and Sept. 30, 2024.
Smith oversaw the purchase of 224,004 shares of Apple stock in 2024, and it may well have to do with the company’s market-leading capital-return program. Since the start of fiscal 2013 (Apple’s fiscal year ends in late September), Apple has repurchased more than $725 billion worth of its own stock, which has had a notably positive impact on its earnings per share (EPS). Continuing to aggressively buy back its stock has made Apple more fundamentally attractive to value-focused investors.
Apple’s Services segment is giving investors plenty of reason to smile, as well. Although sales of the company’s physical products have stagnated, Services revenue has been rising by a double-digit percentage. A focus on subscription services should help lift Apple’s operating margin and smooth out the sales fluctuations that usually accompany major iPhone upgrade cycles.
The one thing to note about Apple is that its stock is historically pricey. Even with buybacks boosting its EPS, Apple is valued at 40 times trailing-12-month earnings. Unless iPhone sales meaningfully pick up in fiscal 2025, this valuation is a tough pill to swallow.
Image source: Chipotle Mexican Grill.
Philippe Laffont: Chipotle Mexican Grill
Billionaire Philippe Laffont of Coatue Management, who’s overseeing almost $27 billion in assets under management (AUM) and tends to gravitate to tech and healthcare companies, drifted from his norm during the third quarter and piled into fast-casual restaurant chain Chipotle Mexican Grill (CMG -0.12%). Coatue’s 13F shows that 4,575,054 shares of Chipotle were purchased.
Chipotle’s promise to use responsibly raised meats and locally sourced vegetables (when possible) has resonated with its customers. The company’s management team realized a long time ago that its customers would willingly pay more for food that’s deemed to be higher quality. Thus, higher food costs have never been much of a concern for Chipotle Mexican Grill.
Innovation has also played a key role in its ongoing success. For instance, the rollout of dedicated mobile-order drive-thru lanes (known as “Chipotlanes”) in 2018 really helped Chipotle thrive during and after the pandemic.
But in similar fashion to Apple, Chipotle’s overwhelming success is already reflected in its valuation. Maintaining a forward price-to-earnings (P/E) ratio of 44 with same-store sales growth in the mid-to-high single digits might prove difficult in the new year.
Chase Coleman: Taiwan Semiconductor Manufacturing
Tiger Global Management’s billionaire asset manager Chase Coleman, who’s overseeing $23.4 billion in AUM, also has a tendency to put his fund’s capital to work in high-growth/blue-chip tech and healthcare stocks. During the third quarter, the magnificent stock that caught Coleman’s attention was none other than world-leading chip fabricator Taiwan Semiconductor Manufacturing (TSM -2.03%). Coleman added 564,090 shares to increase his fund’s stake to north of 3.6 million shares.
While the AI revolution has predominantly revolved around Nvidia in each of the last two years, the story is now evolving to data center infrastructure and the practical application (via software) of AI solutions. One of the companies that stands out as a seemingly surefire winner is Taiwan Semi, which should enjoy a healthy backlog of orders tied to the rise of AI.
There’s also more to Taiwan Semiconductor than meets the eye. While AI is undoubtedly its key growth driver at the moment, this chip-fab leader provides more than just high-performance computing solutions. For instance, it’s the primarily provider of processing chips used in Apple’s domestically dominant iPhone, as well as some of the most-popular central processing units for laptops and desktop computers.
The big concern for Taiwan Semiconductor in 2025 is whether or not the AI bubble will burst. Although the company enjoys a hearty order backlog and is, as noted, operationally diverse, every next-big-thing investment spanning three decades has endured an early stage bubble.
Bill Ackman: Nike
The fifth magnificent stock that’s being gobbled up by billionaire investors comes courtesy of Bill Ackman at Pershing Square Capital Management. Ackman is an activist investor known for taking sizable positions in an effort to effect operating changes and/or earn board seats. The goal for activist investors is to unlock value for shareholders. During the third quarter, Ackman’s Pershing Square piled into footwear giant Nike (NKE -1.11%) by purchasing 13,240,206 shares.
While the broader market has soared, shares of Nike have hit the skids. Former CEO John Donahoe, who recently stepped down, aimed to embrace technology and build Nike’s direct-to-consumer platform. However, Donahoe lacked significant retail footwear experience, and his inability to reinforce Nike’s wholesale partnerships came back to bite. Nike’s fiscal 2025 sales are expected to decline by 10%.
New CEO Elliott Hill is attempting to return Nike to its roots by focusing on the sports products and marketing messages that made it popular with consumers. As is often the case with retail turnaround campaigns, it’ll be a process and not something that flips at the drop of a dime.
There is, however, an intriguing value proposition if Nike can right the ship and increase sales once more in the U.S. and China. Nike delivered $3.95 in adjusted EPS in fiscal 2024. Simply getting back to this level in the coming years would represent the company’s lowest forward P/E ratio in a long time.
