4 Stocks Top Managers Are Buying

Susan Dziubinski: Each quarter, we take a look at the recent transactions of some of the top money managers around—who we call our Ultimate Stock-Pickers. Why? Because the portfolios of well-respected money managers can be fertile hunting ground for new stock ideas to investigate further.

Today we’re looking at the four stocks that were the most widely purchased securities among our Ultimate Stock-Pickers last quarter.

4 Stocks Top Managers Are Buying

1. Alphabet GOOGL
2. Linde LIN
3. United Parcel Services UPS
4. Amazon.com AMZN

Eight of our Ultimate Stock-Pickers bought Alphabet GOOGL stock. Internet media giant Google is a wholly owned subsidiary that generates around 99% of Alphabet’s revenue. The unsettled macroeconomic environment has put pressure on its ad business, and Morningstar recently reduced its fair value estimate on the stock as a result. But we expect ad revenue growth to pick up in the second half of 2023 and are pleased to see continued strong growth in the firm’s subscription and cloud businesses. The stock trades at a substantial discount to our $154 fair value estimate and we think shares are attractive.

Five top managers purchased Linde LIN stock. Linde is the largest industrial gas supplier in the world, with operations in more than 100 countries. Linde had a good fourth quarter, continuing to enjoy strong margin expansion, and we’ve raised our fair value estimate as a result. We’re bullish on the firm long-term, believing that it’s poised to capitalize on an acceleration in clean energy opportunities driven by the Inflation Reduction Act in the U.S. The stock is trading around our fair value estimate of $359, and we’d wait for a larger margin of safety before picking up shares.

Five of our Ultimate Stock-Pickers picked up shares of United Parcel Service UPS. UPS is the world’s largest parcel delivery company and it produces operating margins well above those of its competitors FedEx FDX and DHL Express. Management’s package revenue and volume outlook for 2023 look good, but we remain cautious in light of the upcoming negotiations with the Teamsters Union, which we think may lead to sizable wage hikes. We think UPS stock is worth $179 per share, and shares are trading a bit above that.

Lastly, five of our top managers also bought stock in Amazon.com AMZN. We think macroeconomic issues will weigh on Amazon in the near term, and we recently trimmed our fair value estimate as a result. But long term, we expect Amazon to experience healthy growth driven by e-commerce proliferation, Amazon Web Services, and web advertising. We think shares are attractive, trading well below our $137 fair value estimate.

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Morningstar senior analysts Ali Mogharabi, Dan Romanoff and Matthew Young, and analyst Krzysztof Smalec contributed the research behind this segment.

Watch “3 of the Best Stocks to Spend Your Tax Refund On” for more from Susan Dziubinski.