Whether you’re an everyday investor or a professional money manager who’s been putting your money to work on Wall Street for decades, last year was rough. When the finish line was reached for 2022, all three major U.S. stock indexes had delivered their worst returns in 14 years.
But there was a standout: Amid the proverbial rubble, the iconic Dow Jones Industrial Average (^DJI) stood tall with a loss of a modest 9% in 2022. That compares to the 33% decline the growth-focused Nasdaq Composite endured.
The Dow Jones consists of 30 generally profitable, time-tested, and multinational businesses. In other words, these mature companies are industry leaders that money managers have been counting on for decades to help their funds build wealth. The Dow’s 30 components can also be a smart place to turn during periods of heightened uncertainty, such as a bear market.
Based on 13F filings with the Securities and Exchange Commission (SEC) in mid-November, it’s abundantly clear that many of Wall Street’s most successful billionaire investors want to own stocks in the Dow Jones Industrial Average. What follows are four Dow stocks billionaire money managers simply can’t stop buying.
The first Dow Jones Industrial Average stock successful billionaire investors can’t seem to get enough of is payment processor Visa (V -0.13%). Billionaire Ole Andreas Halvorsen of Viking Global Investors more than doubled his fund’s stake by purchasing 2.79 million shares of Visa during the third quarter. Ray Dalio’s Bridgewater Associates followed suit with a purchase of more than 725,000 shares of Visa stock.
The beauty of Visa’s operating model is threefold. First, it’s able to take advantage of disproportionately long periods of economic expansion. Even though Visa is cyclical, recessions tend to be short lived. As U.S. and global gross domestic product climb over time, so does Visa’s profit potential.
Secondly, Visa finds itself with sustained growth opportunities in developed and emerging markets. Visa holds nearly a 53% share of credit card network purchase volume in the U.S. (the No. 1 market for global consumption), and it was the only one of the major four payment networks to significantly expand its share following the Great Recession (2007-2009). Meanwhile, it likely has a multidecade runway to organically or acquisitively expand into underbanked emerging markets with its smart payment technology.
Third, management’s fiscal discipline kept Visa away from lending. Though acting as both a payment processor and lender could allow Visa to double-dip during the good times, it would eventually expose the company to loan losses during inevitable recessions. By sticking to payment processing and avoiding lending, Visa has positioned itself to bounce back as quickly as possible from downturns.
Billionaire money managers have also been pretty excited about the prospects of energy stock Chevron (CVX 0.09%). Warren Buffett’s Berkshire Hathaway and Israel Englander’s Millennium Management respectively gobbled up 3.92 million shares and 3.9 million shares of the integrated oil and gas giant in the September-ended quarter.
Chevron offers investors a way to take advantage of above-average crude oil and natural gas prices. Even before Russia invaded Ukraine and threw a gigantic monkey wrench into Europe’s energy needs, the global energy supply chain was struggling because of the COVID-19 pandemic. Energy companies were forced to pare back their capital expenditures for years, which has made boosting supply difficult for many drillers. In other words, it’s created a recipe for sustainably higher crude oil and natural gas prices.
Chevron brings the safety of its integrated operating model to the table as well. While its upstream drilling assets generate the highest operating margins, Chevron also owns transmission pipelines, chemical plants, and refineries. These are assets that can provide predictable operating cash flow and/or hedge against downside in the price of crude oil and/or natural gas.
Like many big oil companies, Chevron also has a mammoth capital-return program. Management pledged to repurchase up to $15 billion worth of its common stock last year. Further, the company is parsing out one of the largest nominal-dollar dividends on the planet.
A third Dow stock billionaire investors haven’t been able to stop buying is cloud-based customer relationship management (CRM) software solutions provider Salesforce (CRM -0.65%). The latest round of 13F filings showed that billionaire Ken Griffin of Citadel Advisors, along with Halvorsen at Viking Global Investors, respectively purchased 2.67 million shares and 2.4 million shares of Salesforce stock.
CRM software is used by consumer-facing businesses to expand on their existing customer relationships in order to improve sales. Most notably, CRM software can run predictive analyses to determine which customers would be likeliest to try or buy a new product or service.
What helps Salesforce stand out is its absolute dominance of the CRM arena. Last May, an IDC report ranked Salesforce No. 1 in global CRM revenue for the ninth consecutive year. More impressively, Salesforce’s share of the CRM market has been expanding every year. In 2021, it accounted for 23.8% of worldwide CRM revenue, which is more than its four closest competitors on a combined basis. CRM software is a sustained double-digit growth opportunity, and Salesforce has the lion’s share of this fast-paced trend.
Investors have also come to appreciate CEO Marc Benioff’s ability to pull levers, when necessary. Benioff has been the mastermind behind a number of earnings-accretive acquisitions, such as MuleSoft, Tableau Software, and Slack Technologies. He’s also the one who made the call to reduce the company’s workforce by 10% three weeks ago to account for a weakening U.S. and global economy.
The fourth Dow stock billionaire money managers can’t stop buying is telecom company Verizon Communications (VZ 1.99%). The third quarter saw Griffin of Citadel Advisors, Jim Simons of Renaissance Technologies, and Englander of Millennium Management pile into Verizon, with respective purchases of 4.78 million shares, 4.36 million shares, and 2.78 million shares.
This buying interest among billionaire investors likely has to do with Verizon’s operating predictability. Owning a smartphone and having wireless access have practically become necessities. The result is a very low churn rate in virtually any economic environment, and therefore predictable operating cash flow for Verizon. Wall Street tends to love when things are predictable.
These billionaire investors can also look forward to the 5G revolution being a sustainable, organic growth catalyst for Verizon through at least mid-decade. The first major upgrade to wireless download speeds in roughly 10 years should provide an incentive for businesses and consumers to upgrade their wireless devices. Anything that encourages more high-margin data consumption is, ultimately, a positive for Verizon’s wireless division.
Broadband is the other key catalyst that billionaire investors can appreciate. Verizon spent a small fortune to acquire the C-band spectrum needed to offer 5G broadband to homes and businesses. Steadily adding broadband clients should bolster the company’s operating cash flow and provide margin-boosting bundling opportunities.