By Andrew Button, The Motley Fool Canada
Believe it or not, billionaire investors are selling off NVIDIA (NASDAQ:NVDA) shares in record numbers. Among the investors who have sold NVIDIA in recent months are:
Stanley Druckenmiller, one of the first investors in NVIDIA in early 2023;
Ken Griffin of Citadel Advisors is one of the world’s highest-paid hedge fund managers.
David Shaw of DE Shaw.
Appaloosa David Tepper.
Steve Cohen of Point72.
That’s quite an impressive list. Anyone hoping to ride the NVIDIA AI bonanza should consider that the so-called “smart money” is on the other side of the trade. Meanwhile, if you’re looking to buy stocks, here are some big Canadian companies that billionaires are buying in bulk right now. In this article, we explore the Canadian stocks that billionaires can’t get enough of.
Brookfield
Brookfield Inc. (TSX:BN) is a Canadian financial conglomerate that has been bought by billionaires such as Bill Ackman and Bruce Flatt (CEO of the company). Additionally, Oaktree’s Howard Marks acquired shares in Brookfield, but not through a direct purchase, but through a cash-and-stock deal when Brookfield acquired Oaktree. It is not clear if Marks still holds the BN shares he received in the deal.
Of the three shareholders mentioned above, perhaps the most interesting is Bill Ackman. Ackman is a “buy-and-hold” activist investor known for holding companies for the long term. It makes sense that he would buy shares in a company run by Flatt because he believes in the company, and it’s unclear whether it would make sense for Marks to receive BN shares in the deal. Ackman is the most interesting and unexpected of the three.
Interest rate sensitive companies
Bill Ackman’s investment in Brookfield may be a play on lower interest rates. Ackman has been making a number of interest-rate related bets this year. For example, he shorted the 30-year U.S. Treasury bond when he predicted the yield would rise to 5.5%, which was a successful trade for Ackman and his team.
The story continues
The reason Ackman is now betting on lower interest rates for Brookfield is that Brookfield is a very interest-rate sensitive company. It is highly leveraged and very indebted, though it is spread across partially owned subsidiaries and tied up in certain real estate. Brookfield is not going to suffer a catastrophe because it has managed its debt well, but it does have significant interest payments on its debt. If interest rates fall further, Brookfield’s interest expenses will fall and its profits will rise.
Other virtues
Considering how Bill Ackman has been thinking about the markets lately, his bet on Brookfield is likely at least partially a bet on falling interest rates, but there are a number of other factors he may be keeping an eye on, including:
Great reputation. When Howard Marks sold Oaktree to Brookfield, he said Brookfield’s strong reputation was one of the reasons he decided to sell. Having a good reputation makes it easier to get into a deal, and Brookfield has done a ton of deals in recent years.
Fast-growing insurance business. Brookfield’s insurance business is growing rapidly, generating capital that Brookfield can invest.
75% stake in Brookfield Asset Management, a highly successful asset management firm with a 45% profit margin, generating significant cash for Brookfield.
Any of the above could explain why Ackman and other billionaires are buying Brookfield, and either way, they’re good enough reasons to consider investing in the stock today.
The post Billionaires are selling Nvidia and buying this TSX stock appeared first on The Motley Fool Canada
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Fool contributor Andrew Button has invested in Brookfield. The Motley Fool has invested in and recommends Brookfield. The Motley Fool recommends Brookfield Asset Management, Brookfield Corporation, and Nvidia. The Motley Fool has a disclosure policy.
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