Billionaires are betting big on these FAANG stocks, and this $700 billion opportunity explains why

The stock market is the greatest wealth generating machine ever created and is available to anyone with a little money to invest. More than a quarter of those on the Forbes 400 list of America’s richest people built their fortunes on Wall Street.

You can tag along with the most successful investors by following their disclosures to the Securities and Exchange Commission (SEC). Each quarter, investors with more than $100 million under management are required to report their holdings on SEC Form 13F.

Second-quarter filings showed that top billionaires continue to favor holdings of elite tech companies, including FAANG stocks, which are as follows:

• Meta platforms (formerly Facebook) (META 2.26%)
• Apple
• Amazon (AMZN 2.50%)
• Netflix
• Alphabet (formerly Google)

Some of the most respected billionaire investors favor 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 the shopping destination for more than 200 million Prime members, but the online tech titan also has fast-growing revenue streams in several non-retail businesses, one of which is media advertising. retail.

Retail media is the fastest growing market in digital advertising. It is projected to grow by 22% in 2024 to reach $140 billion. Amazon is growing with it. The company’s advertising revenue rose 20% year over year in the second quarter.

Amazon’s advertising revenue is primarily driven by sponsored ads, which the company displays on product pages. But it is also expanding its advertising business on Prime Video, where it is in the early stages of growth. The appeal for brands is to get their products in front of a large customer base on Amazon’s consumer properties. Brands can promote 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 bottom line ad revenue is $51 billion, and at the rate it’s growing, it could have a significant impact on the company’s profitability. Operating income in North America rose 58% from last year, while Amazon’s international segment turned a year-ago loss into an operating profit of $273 million.

Billionaire investors generally look for strong companies with clear catalysts for profitable growth, which is why Loeb and Halvorsen have big bets on Amazon. Analysts expect Amazon’s earnings to grow at an annual rate of 22%, which could push the stock higher in the coming years.

2. Meta Platforms

Chase Coleman’s Tiger Global Management took a $3.7 billion stake in Facebook owner Meta Platforms in Q2 — the company’s largest holding. Meta has huge advantages in the digital advertising market, with more than 3.2 billion people active daily on its family of apps, including Instagram, Messenger and WhatsApp.

The recovery in the broader ad market over the past year has benefited Meta’s share price. Revenue rose 22% year-over-year in Q2. The company’s share of digital ad spending was 21.3% in June, according to eMarketer, which is much higher than competing platforms. The second closest competitor is Alphabet’s YouTube, with just a 5.6% share.

Meta has to walk a fine line, monetizing its platform with ads without disrupting the user experience. Meta’s high share and recent growth indicate that it has mastered this ability to deliver relevant ads that mesh with user interests. In fact, recent improvements to its apps are increasing user engagement.

Meta’s investments in artificial intelligence (AI) are paying off, with Meta AI bringing better content recommendations to Facebook and Instagram. This feature is powered by Meta’s Llama large language model and has driven billions of user search queries, which can increase impressions and revenue. In Q2, Meta saw a 10% increase in ad impressions and average cost 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 user experience, and ultimately generate high returns for shareholders.

Analysts expect Meta’s earnings to grow at an annual 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.