26 millionaires and billionaires can do no wrong. The one stock that everyone buys

Tracking what the smart money buys can be a useful investment strategy. While following blindly anyone, be it a billionaire investor or a guy writing on the internet, is never a good idea, using companies bought by investment gurus as a springboard for your own analysis can be profitable.

That’s because investors, rich or not, rarely agree. Where one sees a potential gold mine, another sees the stock as fool’s gold. But sometimes the stars align and a consensus forms behind a stock that everyone seems to agree is a unique opportunity.

This happened recently, when more than two dozen millionaire and billionaire investors gathered in one stock. When this happens, it can be a signal to small investors that they should also consider.

Earlier this year, medical products supplier Solventum (NYSE: SOLV) was spun off from an industrial conglomerate 3M (NYSE:MMM) and 26 different hedge fund managers stepped in to buy the stock.

Some were relatively small positions, such as Mario Gabelli’s $248,000 position at Gamco Investors. Others, like BlackRockHis (NYSE:BLK) position of over half a billion dollars was substantial. But the average of the 26 super investors was over $68 million.

Key points about this article:

• Following the stock moves of billionaire investors is a good way to narrow down the universe of stocks to consider, as long as you don’t blindly follow their lead.
• One stock that has more than two dozen investment gurus excited is a healthcare company Solventum (SOLV), a recent spin-off of an industrial conglomerate 3M (MMM).
• If you’re looking for action with huge potential, be sure to grab our free copy brand new “Next NVIDIA” report.. It has a software stock where we are sure it has 10x potential.

A business aligned for growth

It is probably not surprising that these millionaires and billionaires sought Solventum. 3M has been in decline for several years, saddled with mounting legal liabilities, including over so-called “forever chemicals” and faulty earplugs for the military. He is a defendant named in over 6,200 cases. But the healthcare stock has been the company’s growth vehicle.

It generated about $8.2 billion in revenue for 3M in 2023, up 1% year over year, but 56% of that came from its MedSurg division, which makes advanced wound care products and surgical solutions such as sterilization products, surgical drapes and antiseptics . Dental products and health information systems each contributed another 16% to the total. Purification and filtration products make up the rest.

Solventum is targeting a total addressable market worth $93 billion, growing 4% to 6% per year. So, we are not talking about a semiconductor stock that is expected to double in size every few years, but as a mature player that has been in business for over 70 years, Solventum is looking forward to safe and stable growth.

A slow start

3M completed the spinoff on April 1, and SOLV stock immediately turned south. It started trading at $69 a share, but fell over the next few months to a low of $47 a share, a loss of nearly a third of its value.

This obviously did not deter asset managers who stepped in to buy the stock. No doubt they saw the challenges he faced but still accepted.

When 3M did the split, it cheated the medical product supplier $8.3 billion in long-term debt and another $1.8 billion due within a year. However, management says it is focused on paying that figure over the next 24 months.

While 3M has been a dividend king for over 50 years in which it raised its dividend before cutting it in half earlier this year, its debt load suggests we won’t see another dividend from Solventum for a while time.

However, things are changing for the better.

Picking up speed

Although the stock remains below the post-spinoff offer price, SOLV stock is up 46% from its lows. Organic sales rose 1.3 percent in the second quarter to $2.08 billion, while adjusted operating income of $430 million produced margins of nearly 21 percent. Adjusted earnings of $1.56 per share helped lift the stock.

Solventum also raised its guidance for the full year. Where it had previously forecast a flat sales decline of 2%, it now expects revenue to rise by as much as 1% from last year. Adjusted EPS of $6.30 to $6.50 is well ahead of its previous outlook of $6.10 to $6.40 per share. Management still anticipates generating $700 million to $800 million in free cash flow.

The healthcare company seems to be slow but constant growth stock. As it sheds its spin-off costs, minimizes its debt and can now fully target its market, Solventum is a stock for all investors to consider, not just the money class.

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