In the backdrop of Wall Street’s recent volatility, investors are turning to established, time-tested companies for stability. While FAANG stocks have traditionally served this purpose, the focus has shifted to companies that have recently undergone stock splits. A stock split is a cosmetic change allowing companies to adjust share prices without impacting market cap or performance.
Since July 2021, notable companies, including Nvidia, Amazon, and Alphabet, have executed forward splits, attracting attention for their robust performance. Based on Form 13F filings, billionaires are particularly keen on three stock-split stocks as they approach 2024.
Amazon: Ten prominent billionaires have invested in Amazon during the September-ended quarter, including Jeff Yass, Ole Andreas Halvorsen, and Steven Cohen. Amazon’s appeal lies in its rising operating cash flow, driven by Amazon Web Services (AWS), subscription services, and advertising. With over 200 million global Prime subscribers and a dominant position in e-commerce, Amazon is well-positioned for growth.
Additionally, Amazon’s stock, despite recent gains, is considered relatively cheap based on its historical forward-year cash flow.
Alphabet: Nine billionaires added Alphabet shares during the third quarter, highlighting the company’s strong market position. Google, Alphabet’s search engine, commands nearly 92% of worldwide internet search share, providing it with a secure moat. The growth of Alphabet’s cloud infrastructure service segment, Google Cloud, also contributes to its appeal.
Valued at 14 times forward-year cash flow and 20 times forward-year earnings, Alphabet is historically cheap compared to its past trading patterns.
Tesla: Four billionaire investors increased their holdings in Tesla during the September-ended quarter. Tesla’s allure may stem from the recent launch of the Cybertruck and the significant number of refundable deposits received. As the leading electric vehicle manufacturer in North America, Tesla is on track for its fourth consecutive year of profitability.
However, challenges lie ahead, with potential demand issues indicated by multiple price cuts and rising inventory levels. Elon Musk’s role, marked by innovation but also scrutiny, adds complexity to Tesla’s outlook.
While these stock-split stocks present compelling opportunities, investors should consider potential challenges and conduct thorough due diligence.
