Tilson’s Favorite Big-Cap Stocks: BRK-B, AMZN, GOOGL, FB

Whitney Tilson’s email to investors discussing his favorite big-cap stocks and tech giant earnings.

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Q3 2020 hedge fund letters, conferences and more

Empire Financial's Favorite Big-Cap Stocks

1) When we launched our first newsletter, Empire Investment Report, on April 17, 2019, we told our subscribers to build a solid foundation for their portfolio before they started buying the higher-risk-but-hopefully-higher-return smaller stocks that we'd be recommending.

Michael Mauboussin’s 10 Attributes of Great Investors [Pt.1]

michael mauboussin, Credit Suisse, valuation and portfolio positioning, capital markets theory, competitive strategy analysis, decision making, skill versus luck, value investing, Legg Mason, The Success Equation, Think Twice: Harnessing the Power of Counterintuition, analysts, behavioral finance, More Than You Know: Finding Financial Wisdom in Unconventional Places, academics , valuewalkIn 2016, Michael J. Mauboussin completed his 30th year on Wall Street. The analyst, who was working at Credit Suisse at the time, decided to celebrate by reflecting on the ten attributes of great investors he had observed over the previous three decades. He published his ideas in a report in August 2016. I've summarised Read More

This core consisted of large positions in four of our favorite big-cap stocks: Berkshire Hathaway (BRK-B), Amazon (AMZN), Alphabet (GOOGL), and Facebook (FB).

As you can see in this table, these stocks have, collectively, nearly tripled the return of the S&P 500 Index since then (using prices as of 9:45 a.m. this morning):

Big-Cap Stocks

The three tech giants reported exceptionally strong earnings after the close yesterday: Facebook's earnings per share ("EPS") of $2.71 handily beat analysts' estimates by $0.80... Amazon's EPS of $12.37 beat estimates by nearly $5... and Alphabet's EPS of $16.40 also beat estimates by $5.

Since our initial recommendation, both Facebook (excluding the one-time $5 billion payment to the Federal Trade Commission for its role in the 2018 Cambridge Analytica scandal) and Amazon have grown their trailing-twelve-month free cash flows by more than 50%, which makes Google's robust 19% growth look weak!

And it doesn't look like they're slowing down anytime soon...

Tech Giant Earnings

Amazon is on pace for $375 billion in revenues (a growth rate of 33% year over year) in 2020... Google for $175 billion (9% year-over-year growth)... and Facebook for a (measly) $84 billion (19% growth year over year).

The chart below shows Amazon's third-quarter revenue since 2009 (blue bars), with the percentage growth (red line). It's astonishing to see revenue growth accelerating as such a large company!

Big-Cap Stocks

I remain as bullish as ever on these stocks... and we'll update subscribers further in our next issue of Empire Investment Report. If you aren't already a subscriber, you can sign up right here.