The stock market is made up of thousands of companies. Combined with the fact that the regular, retail investor has an unprecedented amount of data available to them for making decisions, this makes investing appear to be a tedious task where one is always at the risk of either missing out on the next Apple or making a blunder based on missing out on a key piece of information.
These apparent traps are compounded by the fact that these days the stock market is at continuous odds with what most people think will happen. The American conversation has been full of predictions of a recession after the Federal Reserve's aggressive interest rate hike cycle made conducting business quite difficult. With the fear of a recession on the horizon, the stock market doesn't perform too well either. However, the market is doing just fine. Don't believe us? Well, the NASDAQ 100 index is up by 34% year to date, the S&P 500 has gained 12%, the Dow Jones Industrial Average has returned 1.8%, and the New York Stock Exchange (NYSE) still hasn't lost money.
So this makes us wonder if listening to all the predictions of gloom and doom is really worth it. Well, they might be since the market these days is responding to sector specific trading signals. This is evident when we look at the NASDAQ's gains. The index, dominated by the technology sector, is seeing a recovery in the industry that was gutted in 2022. And the others, particularly the S&P and the NYSE, which are a balanced bunch representing firms from all walks of lives, are wary of a broader softening environment in the wake of a year long battle with inflation and high interest rates.
As if this weren't enough, there are some folks who believe that a recession might be a good thing for the stock market. Or at least that's what the chief executive officer of Destination Wealth Management Mr. Michael Yoshikami believes. In an interview with CNBC in late May, the head of the firm that enables the rich to manage their money shared his take on the current back and forth in the media about a recession. His thinking really isn't that complicated, and it involves understanding the actions of the Federal Reserve in case the economy does not cool down. Mr. Yoshikami believes that if this is the case then the Federal Reserve might not reduce the interest rates or could even hike them further. Given that stock market sentiment is actually a reflection of investors' estimates of what will happen in the future, a robust economy stands the risk of shaping investor sentiments towards further hikes and as a result making money flow out of the market and into safe haven assets, money market accounts, or bank savings accounts.
Speaking of safe haven, the U.S. dollar has been long considered the asset of choice for risk aversion fueled by the fact that the U.S. government is unlikely to fail its debt obligations. While the U.S. might not fail anytime soon as both Congress and Senate just passed another extension of the debt ceiling, the current macroeconomic environment might not bode well for the Treasury this time around. At least that's what is on the mind of Otavio Costa, Portfolio Manager at Crescat Capital. In a recent Twitter thread, he shared that after the debt deal, Treasury is likely to issue debt fast, but as opposed to previous issues, this time around it might not find willing buyers. According to Mr. Costa, foreign investors will consider the effects of these securities on existing debt held by banks and the risk of the Federal Reserve raising interest rates. Higher rates reduce the price of current bonds and the risk of future interest rate hikes makes investors wary of buying more debt due to this fact. The soft treasuries market also reduces the appetite for U.S. bonds for central banks, and according to the portfolio manager, if central banks consider making gold account for 40% of their reserves, they could inject as much as $32 trillion into the gold market to cause the price to shoot by a whopping 25%.
So is gold primed to shine and should you bid farewell to the stock market? Well, Ken Fisher of Fisher Investments believes that gold is quite volatile, explaining that:
There's nothing wrong with gold. It's a commodity, it's volatile. The fact is sometime people think of it this way, sometimes they think of it that way. Lately they've been thinking maybe it's an inflation hedge. Mind you, over all those decades I just talked to you about, there was always inflation. You follow that? And it didn't hedge that inflation very well. Number two, what can we say about it in the very long term? That it has a return that's positive, a little bit lower long term average than, let's say, long term U.S. Treasury Bonds. With a higher volatility then bonds. That doesn't shock you very much. Because bonds are expected to have fairly low volatility. Mind you on the other hand over those same time periods, very long time period, it has about the half the return of stocks, with an actually markedly higher volatility than stocks. That's the point that surprises people. Lower return, higher volatility. Gold gets about 80% of its, maybe 85% of its long term total return from about 15% of time periods. Whereas stock thrives about two thirds of the time period, bond thrives a little more than that. If you can predict gold, you need no advice from me whatsoever.
Mic. Drop. So, it's not gold, it's not bonds, but it's stocks. To make your journey easier, we took a look at some A-rated stocks and decided to see which have received the blessings of billionaires. Out of these, the top picks are Visa Inc. (NYSE:V), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT) .
10 A-Rated Stocks Billionaires Are Loading Up On
Our Methodology
To make our list of A-rated companies that billionaires are investing in, we first compiled a list of 34 large companies in terms of revenue and market capitalization that have their debt rated higher than A by Fitch, Moody's, and S&P. Then, the number of billionaire hedge funds that had bought their shares was determined. The final list of A-rated stocks bought by billionaires is as follows.
Exxon Mobil Corporation (NYSE:XOM) is one of the largest oil companies in the world. It is a diversified firm, that explores, refines, transports, and sells petroleum products. The firm is based in Irving, Texas.
By the end of this year's first quarter, 73 of the 943 hedge funds part of Insider Monkey's database had held a stake in Exxon Mobil Corporation (NYSE:XOM). The firm's largest shareholder is Rajiv Jain's GQG Partners with a $2.1 billion stake.
Along with Alphabet Inc. (NASDAQ:GOOG), Visa Inc. (NYSE:V), and Microsoft Corporation (NASDAQ:MSFT), Exxon Mobil Corporation (NYSE:XOM) is an A-rated stock that billionaires are piling into.
Chevron Corporation (NYSE:CVX) is another oil giant. Like Exxon, it also operates at all ends of the oil supply chain. The firm is headquartered in San Ramon, California.
After looking through 943 hedge funds for their first quarter of 2023 investments, Insider Monkey discovered that 64 had invested in Chevron Corporation (NYSE:CVX). Its largest investor in our database is Warren Buffett's Berkshire Hathaway owning 132 million shares that are worth $21 billion.
Johnson & Johnson (NYSE:JNJ) is one of the oldest healthcare companies in the world. Set up in 1886, the firm sells both pharmaceutical and general wellness products. These cover a range of use cases, such as cancer patients, babies, and everyday use. It is based in New Brunswick, New Jersey.
By the end of 2023's first quarter, 86 of the 943 hedge funds part of Insider Monkey's database had held a stake in the healthcare company. Johnson & Johnson (NYSE:JNJ)'s largest hedge fund investor is Ken Fisher's Fisher Asset Management with a $967 million stake.
7. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Billionaire Investors As of Q1 2023: 17
The Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the largest contract chip manufacturing firm in the world. It is capable of making the most advanced semiconductors in the world and counts nearly every major semiconductor designer in its list of customers. The firm is based in Hsinchu, Taiwan.
After digging through 943 hedge fund portfolios for this year's first quarter, Insider Monkey discovered that 102 had invested in the chipmaker. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)'s largest hedge fund investor is Ken Fisher's Fisher Asset Management with a $2.3 billion investment.
Apple Inc. (NASDAQ:AAPL) is the largest technology company in the world. It sells hundreds of billions of dollars of products each year ranging from a variety of gadgets from smartphones, to tablets, laptops, and smartwatches. The firm is headquartered in Cupertino, California.
As of Q1 2023, 131 of the 943 hedge funds part of Insider Monkey's database had bought the firm's shares. Apple Inc. (NASDAQ:AAPL)'s largest investor is none other than Warren Buffett's Berkshire Hathaway with a $150 billion investment.
Visa Inc. (NYSE:V), Apple Inc. (NASDAQ:AAPL) Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT) are some hot stocks finding favor with billionaires.
