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.
Berkshire Hathaway (BRK-B) added $4.3 billion of exposure to Alphabet while reducing its stake in Apple.
Apple has 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’m taking a more risk-averse approach to my equity holdings at the moment and rebalancing towards a heavier weighting in fixed income. But I also understand that that is not the strategy that the average investor will follow.
Growth stocks have still outperformed their value counterparts so far this year, and the immense 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 Claus rally or more dovish monetary policy have reason to hold onto their positions in these growth stocks and potentially consider adding for another near-term rally.
That’s not necessarily the base case I would choose, but for those in this camp, here are three growth stocks from top million-dollar manufacturers that still look like solid buying opportunities right now.
I have thought for a long time Alphabet (NASDAQ:GOOG) is one of the most fairly valued mega-cap tech stocks on the market. It turns out that I was not the only one who had this opinion, with Berkshire Hathaway (NYSE:BRK-B) recently added $4.3 billion of exposure to this world-class cloud and search giant.
This bet is intriguing, considering the fact that Berkshire has been reducing its Apple (NASDAQ:AAPL) in recent months. More on that action later.
But with a changing of the guard at the top coming up, the question is whether Berkshire’s new investment team will maintain the same approach as its predecessor. Assuming that’s the case, and that Buffett had a say in this decision (he’s still the CEO), this is a very interesting add-on.
At around 24x earnings, with a rock-solid balance sheet and strong growth driven by the company’s core cloud computing business (and less pressure on the hunt after the company reported growth here, so there are no notable AI headwinds at least yet for investors to worry about), there’s a lot to like about how Alphabet is positioned long-term. This growth could be amplified if the company’s Gemini big language model gains momentum.
Well, now let’s move on to the other Berkshire holding that I think investors should pay attention to right now.
Apple is a world-class consumer discretionary company, with an absolutely iconic product in the iPhone that has revolutionized the way we interact at scale. With over 60% market share in the US, this is the clear winner in terms of market penetration and long-term earnings growth potential.
The company has done an incredible job of catalyzing its brand to drive industry-leading levels of profitability over time. With one of the most dedicated customer bases out there and network effects driven by the company’s portfolio of products and services, this is a company that has become expensive, but there is a reason for that.
One of the most intriguing theses I’ve heard lately about why Apple might be undervalued relative to its Magnificent 7 peers is the lack of spending on AI initiatives. While other competitors go bankrupt trying to be the most aggressive in their pursuit of AI dominance, Apple has fallen behind. But with growing concerns about the future profitability of these investments, I think Apple could be doing quite well.
I have to admit, netflix (NASDAQ:NFLX) is a company that I have been very bearish on in the past. Part of this had to do with the company’s valuation multiple and lack of profitability in recent years. Although in more recent quarters, Netflix has demonstrated its ability to monetize its user base, with strong EPS growth numbers that have resulted in the company essentially growing 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 free, ad-supported tier, there’s a lot to like about both organic growth and earnings growth driven by greater efficiency and monetization efforts.
If Netflix can continue to release more than 1,000 new series and movies each year, this company has a model that could really take off. With lower-cost international content generating a significant share of views on Netflix’s core platform, this is a stock that could have plenty of room to operate in a merger situation.
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