With just over a month left in this fiscal year, many investors are looking to rebalance their portfolios and reposition their holdings for what could be a more volatile year ahead.
Berkshire Hathaway (BRK-B) added $4.3 billion in exposure to Alphabet while reducing its stake in Apple.
Apple spent less on AI initiatives than its Magnificent 7 peers.
Netflix (NFLX) now trades at 32 times earnings after demonstrating improved monetization and profitability.
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In my personal portfolio, I am currently taking a riskier approach to my equity holdings and rebalancing them toward a greater weighting in fixed income. But I also understand that this is not the strategy that the average investor will follow.
Growth stocks have consistently outperformed their value counterparts year-to-date, and the huge rally we’ve seen in some of the market’s top growth stocks may have stalled for a short time, but investors betting on an upcoming Santa rally or more accommodative monetary policy have reason to maintain their positions in these growth stocks and potentially consider adding to them for another short-term rally.
This isn’t necessarily the base case scenario I would choose, but for those in this camp, here are three top millionaire growth stocks that still appear to be solid buying opportunities right now.
I thought for a long time Alphabet (NASDAQ: GOOG) is one of the most fairly valued mega-cap technology stocks on the market. It turns out I wasn’t the only one with this view, with Berkshire Hathaway (NYSE: BRK-B) recently added $4.3 billion in exposure to this world-class search and cloud giant.
This bet is intriguing, considering Berkshire has scaled back its operations Apple (NASDAQ:AAPL) holdings over the past few months. We’ll talk about this later.
But with a changing of the guard at the top coming, the question is whether Berkshire’s new investment team will take the same approach as its predecessor. Assuming this is the case and Buffett had a say in this decision (he’s still the CEO), this is a very interesting addition.
With earnings about 24 times higher, with a strong balance sheet and plenty of growth potential driven by the company’s core cloud computing business (and less pressure on search after the company reported growth here, so no notable AI headwinds at least for now for investors), there’s a lot to like about how Alphabet positions itself for the long term. This growth could be amplified if the company’s large Gemini language model gains momentum.
Okay, now let’s move on to Berkshire’s other holding company, which I think investors may want to pay attention to right now.
Apple is a world-class consumer discretionary company, with an absolutely iconic product, the iPhone, that has revolutionized the way we interact on a massive scale. With over 60% market share in the United States, it is the clear winner in terms of market penetration and long-term profit growth potential.
The company has done an incredible job of catalyzing its brand to achieve industry-leading levels of profitability over time. With one of the most loyal customer bases in the market and network effects driven by the company’s portfolio of products and services, it’s a business that has become expensive, but there’s a reason for that.
One of the most intriguing theses I’ve heard recently about why Apple might be undervalued relative to its Magnificent 7 peers is this: lack of spending on AI initiatives. While other competitors have gone broke trying to be the most aggressive in their quest for AI domination, Apple has lagged behind. But with growing concerns about the future profitability of these investments, I think Apple might actually be in a pretty good place.
I have to admit, Netflix (NASDAQ: NFLX) is a company that I have been very pessimistic about in the past. This is partly explained by the company’s valuation multiple and the lack of profitability in past years. However, in more recent quarters, Netflix has shown its ability to monetize its user base, with strong EPS growth numbers that have allowed the company to grow essentially within its valuation multiple.
Now trading at a much more reasonable multiple of 32 times earnings, driven by high-margin growth and continued monetization of the company’s ad-supported free tier, there is much to like in terms of both organic growth and earnings growth driven by improved efficiency and monetization efforts.
If Netflix can continue to release over 1,000 new series and movies each year, this company has a model that could really take off. With more lower-cost international content driving a significant share of views on Netflix’s main platform, this is a title that could have a lot of room to perform in a merger-type situation.
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