Following billionaire investors can be worth your while, especially because they could have a long record of delivering excellent returns. One of the more successful fund managers is Chase Coleman of Tiger Global Management. Coleman founded the firm in 2001 and currently has a net worth of over $5 billion, according to Forbes .
At the end of Q2 2024, Tiger Global's top two holdings were Microsoft (NASDAQ: MSFT) and Meta Platforms (NASDAQ: META) , with $6 billion in combined market value in these " Magnificent Seven" stocks . Here's why they are smart buys for the long term.
1. Microsoft
Tiger Global has held a position in Microsoft since 2018, making it its second-largest holding. As of the second quarter, Tiger Global held 5.3 million shares worth nearly $2.4 billion. Over the last six years, the stock has climbed over 300%, compared to the S&P 500 's 145% total return including dividends.
Microsoft is unstoppable on many fronts. More than 1.3 million businesses use Microsoft Office, and its Windows operating system holds a commanding 72% share of the desktop market.
This has been the heart of Microsoft's business for many years, and the new Copilot artificial intelligence (AI) assistant is proving to be an opportunity to further monetize its software. In the June-ending quarter, revenue from productivity software and other services grew 11% year over year, with Microsoft 365 consumer subscriptions reaching 82.5 million.
However, most investors are interested in the stock for its burgeoning cloud services business. Microsoft Azure is in a solid competitive position, having gained significant market share against the leader Amazon Web Services.
According to Statista, the cloud enterprise market opportunity is estimated to reach $773 billion in 2024. Following such an opportunity, Microsoft spent $14 billion in capital expenditures last quarter alone, during which half of that went toward data centers and other infrastructure needs to support long-term growth.
Microsoft is ramping up investment across cloud and AI software while still reporting growing profits. Earnings increased by 10% year over year last quarter, and the Wall Street consensus has the company's earnings settling at an annualized rate of 13% over the next several years.
Not all companies in technology are able to invest in AI and show profitable growth. For example, another leading cloud company, Snowflake , expects margins to be under pressure in the near term as it ramps up investment in AI hardware like graphics processing units (GPUs) .
Microsoft's ability to deliver strong earnings growth while it makes these capital investments is why it's truly a best-in-class AI stock to buy for the long term.
2. Meta Platforms
Meta is Tiger Global's largest holding, with 7.4 million shares worth $3.7 billion at the end of June. Coleman's firm has held a position in the stock since 2016. It has delivered a market-crushing return of 360% over the last eight years.
Meta is another Magnificent Seven stock that has great growth prospects. Global digital ad spending is expected to grow to $870 billion by 2027, according to Statista. This is an attractive opportunity for Meta's family of apps, including Instagram, WhatsApp, and Messenger, which are monetized with ads and have over 3.2 billion daily active users.
AI will play a crucial role in helping the company deliver more relevant content to users, thereby encouraging more investment from advertisers who want their brands in front of a highly engaged pool of users. Meta already has over $14 billion this year in capital expenditures to support its technology infrastructure, including data centers and servers.
Meta has clear advantages in the digital ad market, and it's already seeing results. Revenue was incredibly strong in the second quarter, up 22% year over year. Management said that ad revenue within online commerce on its apps was the largest contributor to that growth.
Like Microsoft, Meta is positioned to benefit from AI while still reporting strong earnings growth to support shareholder returns. The company's earnings jumped 73% year over year last quarter.
It won't continue to grow earnings that strongly since management wants to ramp up the capacity to train more advanced AI models for its business to prepare for future growth, but it's committed to efficiently allocating capital across the business.
Wall Street analysts expect Meta to report long-term earnings growth of 19% on an annualized basis. The stock trades at a market average price-to-earnings multiple of 25, which should lead to excellent returns for investors.
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. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, 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 Amazon, Meta Platforms, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy .
Most Popular
Comments / 0