In this article, we analyze what Superinvestors are currently buying. We look at Superinvestors like Warren Buffett, Charlie Munger, Michael Burry, Stanley Druckenmiller, Bill Miller and Seth Klarman and analyze their collective 13F filings.
We will go through the 5 most common stocks that Superinvestors bought in Q2 2021 and analyze them.
The fifth stock on the list is Walt Disney. Due to the impact of the pandemic, Disney had a pretty bad season in 2020, when revenues fell by $4 billion and EBIT fell by $15 billion. This is what Superinvestors saw in Q2 and decided to jump in.
From the data for the previous 4 years, Disney increased its revenue by an average of 6% per year, while free cash flow has increased by 13% per year.
|Growth in %||–||8%||17%||-6%||6%|
|Free Cash Flow||8,720,000||9,830,000||1,730,000||3,596,000||–|
|Growth in %||–||13%||-82%||108%||13%|
Superinvestors who bought this stock are mainly interested in Disney plus. Disney estimates Disney Plus will have between 230 million and 209 million global subscribers by the time the service is 5 years old, in late 2024.
It is interesting how Disney plus launched 2 years ago and as of July 3, 2021, has 116 million subscribers. For comparison, Netflix launched in 2007 and has 209 million subscribers. Although there are now many more people online and the pandemic has accelerated this all further, the growth that Disney has achieved is still remarkable.
The next very liquid stock among Superinvestors on the fourth spot is Walt Disney’s big competitor, Netflix. Netflix is currently number 1 in streaming services with 209 million subscribers, behind Prime Video with 175 million subscribers and Disney plus with 116 million subscribers.
Netflix revenue is growing steadily, net income too, but the cash flow is worrying, which under normal circumstances isn’t that big (or even positive).
|Growth in %||–||35%||28%||24%||26%|
|Free Cash Flow||-2,012,970||-2,893,011||-3,140,357||1,929,154||–|
|Growth in %||–||44%||9%||-161%||-76%|
Given the small growth of subscribers recently and the strengthening of competition, Netflix is in a difficult position to raise cash flow. If the company raises the prices of its services, it could come in a non-competitive position and this could reduce the company’s subscribers in the future.
The third-place took e-commerce giant Amazon. With revenue growth of 20% in 2019 and 37% in 2020, we can still call this fifth biggest company in the world a growth stock.
The tech giant showed an incredible continuous increase in net sales and operating income. Net sales have grown by an average of 30% over the last five years and operating income by an average of 69%.
|Net sales in %||–||31%||31%||20%||38%||30%|
|Operating income in %||–||-2%||203%||17%||57%||69%|
Amazon makes money through its retail (online and physical stores), third-party seller services, subscriptions, and others.
|Net Sales (in USD)||2018||2019||2020||Average|
|Growth in %||–||15%||40%||27%|
|Growth in %||–||0%||-6%||-3%|
|Third-party seller services||42,745||53,762||80,461||–|
|Growth in %||–||26%||50%||38%|
|Growth in %||–||36%||31%||33%|
|Growth in %||–||37%||30%||33%|
|Growth in %||–||39%||-85%||-23%|
|Total Growth in %||–||20%||37%||28%|
If we look at the data for the last three years, the growth in the online store was 27% on average. But Amazon also has other segments which are driving huge growth.
For example, third-party seller services which include commissions, shipping fees, and other services, are growing at 38% on average.
Furthermore, they have a subscription segment, which is growing at a rate of 33%. These are mostly fees associated with Amazon Prime memberships, as well as digital video, audiobook, music, ebook, etc.
A surprising increase in net income is also happening in AWS (Amazon web services) at the growing rate of 33% in the last two years. AWS stands for cloud platform, offering over 200 fully-featured services from data centers globally.
The smallest amount of revenue comes from advertising services and other services offerings (Other).
Amazon is an interesting business, it has a lot of growing segments and Superinvestors see it as an opportunity. It has a sufficient market capitalization and it is no wonder that Superinvestors like it.
The next stock on the line that Superinvestors adore in 2021 is Facebook. Facebook stock continues to grow. It is a really solid business.
With 2.89 billion monthly active users as of the second quarter of 2021, Facebook is the biggest social network worldwide. It doesn’t have debt and has huge cash flows.
|Growth in %||–||27%||22%||24%|
|Growth in %||–||-16%||58%||21%|
|Free Cash Flow||15,359||21,212||23,632||–|
|Growth in %||–||38%||11%||25%|
Revenue is growing at a rate of 24% on average for the last two years and net income an average of 21%.
Facebook generates substantially all of our revenue from advertising (98%). Their advertising revenue is generated by displaying ad products on Facebook, Instagram, Messenger, and third-party affiliated websites or mobile applications. Marketers pay for ad products either directly or through their relationships with advertising agencies or resellers, based on the number of impressions delivered or the number of actions, such as clicks, taken by users.
Other revenue (2%) consists of revenue from the delivery of consumer hardware products, net fees they receive from developers using their Payments infrastructure, and revenue from various other sources.
Facebook’s business is easy to understand, it has a high margin and doesn’t show any high risk of slowing down in foreseeable future.
The top 1 stock Superinvestors are buying is Alibaba. This is currently a very hot stock among all investors, not just Superinvestors. And that is for good reason.
Alibaba stock has been on a sharp downtrend since November even with amazing fundamentals like strong earnings and sales growth. Increased regulatory risks have weighed on Alibaba stock and other Chinese stocks in recent months.
Alibaba has multiple e-commerce businesses across China and Southeast Asia that make the largest share of total revenue (about 77%). It also has Cloud Computing that is growing at a fast pace and accounts for 8% of the revenue. Other segments of revenue are logistic services, digital media, and entertainment, etc.
|Growth in %||–||51%||35%||41%||42%|
|Free Cash Flow||95,335,000||101,332,000||135,221,000||188,601,000||–|
|Growth in %||–||6%||33%||39%||26%|
If we look at the revenue of Alibaba over the last 4 years, we can see that it has risen by an average of 42%. In addition, free cash flow grew at a rate of 26%.
Many investors are fearful of Alibaba’s delisting in the United States and other regulatory risks. These include blocking the Ant Group’s IPO, a $2.75 billion fine, and potential access to customer data to implement in CCP’s credit scoring system.