The S&P 500 has soared in recent times, delivering two consecutive years of double-digit gains, and investors -- from billionaires to small retail investors -- have piled into some of the biggest winners. I'm talking about technology stocks, and, more specifically, players operating in the high-growth area of artificial intelligence (AI).
It's a great idea to add these sorts of companies to your portfolio, as the AI market continues to progress through its early chapters and a lot more growth lies ahead. But savvy investors aren't only sticking with the stocks that have delivered big in recent quarters. They're also looking at some of the down-on-their-luck players that offer fantastic long-term prospects. Today, you can pick up this sort of stock for a bargain and potentially see it soar in the months or years to come.
Philippe Laffont, the founder of Coatue Management, has done just that, recently buying shares of a beaten-down growth stock that Wall Street predicts will surge 80% in the coming 12 months. Billionaire investors are a valuable source of inspiration along the investing path since they've built up a strong understanding of the market, and their strategies clearly have worked.
It doesn't make sense to blindly do what billionaires are doing, but it's a smart idea to take a look at their latest moves and consider whether they may be right for you. Is Coatue's latest bet a potentially winning one that you should follow?
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Laffont's focus on innovation
Laffont started out working as an analyst for the renowned Tiger Management, one of the first hedge funds -- and one that largely beat the S&P 500 for nearly 20 years. He went on to open his own fund -- Coatue -- in 1999, with a focus on technology and innovation. The fund manages more than $29 billion in stocks, and its biggest holdings are Amazon, Meta Platforms, and Taiwan Semiconductor Manufacturing.
This shows a clear bet on the future of AI, a $200 billion market today that's forecast to reach beyond $1 trillion by the end of the decade. But, at the same time, Laffont and his team recognize growth opportunities outside of this space, including stocks that haven't won over most other investors in recent quarters.
And this brings me to Laffont's latest move. In the most recent quarter, this billionaire opened a new position in a stock that's lost nearly 80% over the past three years -- that's after soaring during early pandemic days. I'm talking about Moderna(NASDAQ: MRNA), a leading maker of coronavirus vaccines. The biotech, with its revolutionary mRNA vaccine technology, fits right in with Laffont's strategy of investing in innovators.
In the fourth quarter, Coatue bought 191,074 shares of Moderna, representing a market value of $7.9 million, according to a filing with the SEC. This clearly isn't a huge bet for a fund of Coatue's size -- and the stock's dropped 25% since the end of last year -- but the holding is still a vote of confidence in what lies ahead for this down-but-not-out biotech company.
From stock market star to losses
Moderna stock soared 2,300% over a year and a half -- ending in August 2021 -- after it developed a coronavirus vaccine in record time, then commercialized it to generate billions of dollars in revenue and profit. But in the later stages of the pandemic, as vaccine demand dropped, so did earnings -- and investor interest in the stock. Moderna could be considered a victim of its success. Its coronavirus vaccine, which first attracted investors in droves, later drove them away as they worried about the company's dependence on this product beyond the pandemic.
Since, Moderna has won approval for its respiratory syncytial virus (RSV) vaccine, but the product hasn't brought in as much revenue as expected. This and the lower revenue prospects of the coronavirus vaccine moving forward have weighed heavily on Moderna's share performance.
What most investors are ignoring -- but Laffont isn't
But Laffont is likely focusing on information that many other investors have been ignoring: Moderna's late-stage pipeline remains strong, and the company aims to win as many as 10 product approvals by 2027.
If Moderna even makes it half of the way to this goal, the company could generate significant revenue growth in the years to follow. And it's important to remember that Moderna isn't only a respiratory virus vaccine company. It also develops candidates for latent viruses, oncology, rare diseases, and more. In fact, its oncology vaccine candidate is involved in multiple phase 3 and phase 2 trials so it's nearing the finish line, though there's no guarantee of success.
Should you follow Laffont into Moderna shares right now?
Yes, if you don't mind some risk and are willing to hold on for a few years. Moderna hasn't been an investor favorite for quite some time, and it's impossible to predict how long the shares will remain in the doldrums, even though Wall Street's estimates call for a double-digit gain in the coming 12 months. But the company is making progress toward a goal that should supercharge revenue -- the potential launch of many products. That means investors like Laffont who picked up shares today may reap great rewards a few years down the road.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Meta Platforms, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.
