Nearly everyone likes bargains. That’s true no matter how much money you have. Even billionaires go bargain hunting at times.
We saw an example of this in the first quarter of 2024. Billionaire Ken Griffin bought several stocks for his Citadel hedge fund — and you can bet he expected good returns on his investments. Here are three stocks Griffin bought in Q1 that rank among Citadel’s largest holdings.
1. Hess
Hess (NYSE: HES) ranked as Citadel’s third-largest holding at the end of the first quarter. This lofty ranking was due to Griffin’s aggressive buying of the oil stock. During Q1, he purchased over 8.8 million shares of Hess, increasing Citadel’s stake by nearly 18x in the process.
Griffin probably liked Hess’ valuation. The stock currently trades at 15.3 times forward earnings. Its forward earnings multiple was at a similar level throughout Q1.
However, I suspect that the billionaire’s biggest reason for buying more shares of Hess was that he was betting the pending acquisition of the company by Chevron goes through. Hess shareholders recently approved the deal. If the transaction closes, Citadel and other Hess shareholders will receive a premium of nearly 17% to the current share price.
2. Amazon
Amazon (NASDAQ: AMZN) was already a top holding for Citadel going into Q1. It was the hedge fund’s fifth-largest position at the end of the quarter thanks to Griffin’s buying an additional 352,000-plus shares.
Based on many commonly used valuation metrics, Amazon doesn’t appear to be much of a bargain. For example, its shares trade at over 38 times forward earnings and nearly 8.6 times book value.
However, the company has been notoriously difficult to value using earnings-based metrics because it has invested heavily to drive future growth. Now, though, Amazon is focusing on boosting its profitability. The stock also sports a lower price-to-earnings multiple than it’s had throughout much of the last 10 years.
3. Bank of America
Bank of America (NYSE: BAC) trailed behind Amazon as Citadel’s sixth-largest holding at the end of the first quarter. The big bank stock moved into this spot as a result of Griffin increasing his hedge fund’s stake in BofA by nearly 390% in Q1.
After declining significantly in the first three quarters of 2023, Bank of America stock has rebounded strongly. It’s beating the S&P 500 handily so far this year with a gain of over 17%.
The stock is still attractively valued, though. Its forward price-to-earnings ratio of under 12.3 is well below the S&P 500’s forward earnings multiple of 21.1 and the S&P 500 financial sector’s average multiple of 15.5.
Are these stocks still good picks?
We won’t know if Griffin continued to buy these stocks in the second quarter until Citadel’s 13F regulatory filing is submitted in August. However, I think all three are still good picks.
There’s still a chance that Chevron’s acquisition of Hess could be derailed. However, Chevron is confident the deal will close later in 2024. I expect the transaction to finalize and enable investors who buy Hess stock at the current price an opportunity to make a relatively quick profit.
I like Amazon’s growth prospects. Amazon Web Services (AWS) should benefit tremendously as organizations build generative AI applications in the cloud. Advertising has emerged as a major new growth driver for Amazon. I predict the company’s earnings will keep growing.
As previously mentioned, Bank of America’s valuation is a big plus. I view the company as one of the top technological innovators in the banking industry. BofA’s forward dividend yield of over 2.4% should also increase the stock’s total return.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Amazon, Bank of America, and Chevron. The Motley Fool has positions in and recommends Amazon, Bank of America, and Chevron. The Motley Fool has a disclosure policy.
Billionaire Ken Griffin Goes Bargain Hunting: 3 Stocks He Just Bought was originally published by The Motley Fool
Source: finance.yahoo.com