3 Favorite Stocks of Top Managers

Today we’re looking at three stocks that were among the top-10 holdings of our Ultimate Stock-Pickers last quarter. Who are the Ultimate Stock-Pickers? The Ultimate Stock-Pickers are a collection of 26 different investment managers who we think are among the best in the industry. We review their portfolios each quarter to uncover new investment ideas.

Not all of these stocks are undervalued today, but they’re fine watchlist candidates.

First up is Alphabet GOOGL. Alphabet dominates the online search market with Google’s global share above 80%, via which it generates strong revenue growth and cash flow. We expect continuing growth in the firm’s cash flow, and we remain confident that Google will maintain its leadership in the search market. We foresee YouTube contributing more to the firm’s top and bottom lines, and we view investments of some of that cash in moonshots as attractive. Whether they will generate positive returns remains to be seen, but they do present significant upside. We think shares are worth $2,925 each.

Next is Microsoft MSFT. Microsoft has reinvented itself into a cloud leader. In our view, Microsoft has become one of two public cloud providers that can deliver a wide variety of platform as a service and infrastructure as a service solutions at scale. Additionally, Microsoft has accelerated the transition from a traditional perpetual license model to a subscription model. The company has also embraced the open-source movement. Finally, Microsoft exited the low-growth, low-margin mobile-handset business and is driving gaming to be more cloud-based. These factors have combined to drive a more focused company that offers impressive revenue growth with high and expanding margins. We think shares are worth $278.

And finally, there’s Comcast CMCSA. Comcast’s core cable business, which accounts for more than half of the firm’s value, enjoys significant competitive advantages. The NBCUniversal acquisition has added shareholder value, in our view, through a combination of a reasonable purchase price and strong execution. Moreover, Comcast has steadily gained market share over its primary competitors, phone companies like AT&T and Verizon, as high-quality Internet access has become a staple utility in more households. With a network than can be upgraded at modest incremental cost, we expect Internet access share will continue to shift in Comcast’s favor, enabling the firm to gain additional scale efficiencies. We assign Comcast a fair value of $56 per share.

Senior analyst Ali Mogharabi, analyst Dan Romanoff, associate analyst Malik Khan, and director Mike Hodel provided the research behind this segment.