The stock market is the greatest wealth-building machine ever created, and it's available to anyone with a little money to invest. Over a quarter of those on the Forbes 400 list of the richest people in America built their wealth on Wall Street.
You can tag along with the most successful investors by following their disclosures with the Securities and Exchange Commission (SEC). Every quarter, investors with over $100 million under management are required to report their holdings on SEC form 13F.
The filings for the second quarter revealed that prominent billionaires continue to favor holding shares of elite tech companies, including the FAANG stocks, which are the following:
Meta Platforms (formerly Facebook) (NASDAQ: META)
Apple
Amazon (NASDAQ: AMZN)
Netflix
Alphabet (formerly Google)
Some of the most respected billionaire investors are favoring two stocks on this list that control a growing slice of the $699 billion digital advertising market.
1. Amazon
Amazon is the largest holding for Daniel Loeb's Third Point and Andreas Halvorsen's Viking Global Investors. Amazon is widely known as a go-to shopping destination for over 200 million Prime members, but the online tech titan also has fast-growing revenue streams in several non-retail businesses, and one of those is retail media advertising.
Retail media is the fastest-growing market within digital advertising. It is projected to grow 22% in 2024 to reach $140 billion. Amazon is growing right along with it. The company's advertising revenue grew 20% year over year in the second quarter.
Amazon's advertising revenue is mostly driven by sponsored ads, which the company displays on product pages. But it's also expanding its ad business on Prime Video, where it's in the early stages of growth. The appeal for brands is to get their products in front of a large customer base across Amazon's consumer-facing properties. Brands can advertise their product on a popular e-commerce platform where customers can easily click and make a purchase, which is why retail media is such a fast-growing market.
Amazon's trailing advertising revenue is $51 billion, and at the rate it's growing, it could have a significant impact on the company's profitability. North American operating income jumped 58% year over year last quarter, while Amazon's international segment turned a year-ago loss into an operating profit of $273 million.
Billionaire investors are generally looking for strong companies with clear catalysts for profitable growth, and that's why Loeb and Halvorsen have large bets on Amazon. Analysts expect Amazon's earnings to grow at an annualized rate of 22%, which could send the stock soaring in the coming years.
2. Meta Platforms
Chase Coleman's Tiger Global Management held a $3.7 billion stake in Facebook owner Meta Platforms in Q2 -- the firm's top holding. Meta has enormous advantages in the digital advertising market with over 3.2 billion daily active people across its family of apps, including Instagram, Messenger, and WhatsApp.
The recovery in the broader ad market over the last year has benefited Meta's share price. Revenue grew 22% year over year in Q2. The company's share of digital ad spending was 21.3% in June, according to eMarketer, which is far higher than competing platforms. The second closest competitor is Alphabet's YouTube at just 5.6% a share.
Meta must walk a delicate line, monetizing its platform with ads while not disrupting the user experience. Meta's large share and recent growth indicate it has mastered this ability to deliver relevant ads that blend with users' interests. In fact, recent improvements to its apps are driving up user engagement.
Meta's investments in artificial intelligence (AI) are paying off, with Meta AI bringing better content recommendations on Facebook and Instagram. This feature is powered by Meta's Llama large language model and has led to billions of search queries by users, which can grow ad impressions and revenue. In Q2, Meta saw a 10% increase in the number of ad impressions and the average price per ad.
AI could drive 94% of ad revenue by 2029, according to GroupM. Meta has tremendous resources to invest in AI infrastructure to create more sophisticated AI models that can benefit advertisers, improve the user experience, and ultimately generate big returns for shareholders.
Analysts expect Meta's earnings to grow at annualized rate of 17% in the coming years. The stock's forward price-to-earnings ratio is just 24 using 2025 earnings estimates, which is very attractive relative to growth expectations.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Ballard has positions in Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, and Netflix. The Motley Fool has a disclosure policy.
Billionaires Are Betting Big on These FAANG Stocks, and This $700 Billion Opportunity Explains Why was originally published by The Motley Fool