If you’re looking for good stocks to invest in, following proven professionals is usually a good place to start. Luckily for us, institutional investors with billions under management must regularly disclose their stock purchases.
These three already successful investors have recently made large purchases of some dividend-paying stocks. Here’s why they were so keen to fill their portfolios with these stocks during the second quarter.
1. Allied Financial
Allied Financial (NYSE: ALLY) was one of the biggest purchases Warren Buffett made in the second quarter. The holding company he has run since 1965, Berkshire Hathaway acquired more than 21 million shares of online banking. This equates to almost 7% of Ally’s outstanding shares.
At recent prices, Ally Financial stock offers a nice yield of 3.3% that could increase significantly over the next few years. Buffett is famous for buying big companies at bargain prices and Ally certainly fits the bill. The stock is currently trading slightly below its book value.
Ally is a direct-to-consumer bank with many auto loans on its books, but no physical footprint to maintain. This makes it extremely profitable and the bank does not hesitate to distribute additional cash to its shareholders. Ally has increased its dividend by 150% over the past five years. Significant share buybacks reduced its number of shares outstanding by more than 30% during the same period.
2. Constellation Energy
David Tepper put Appaloosa Management on the map by focusing on distressed assets. His recent bet on Constellation Energy (NASDAQ: CEG) doesn’t raise as many eyebrows as the trades that made him famous, but this one is interesting.
Constellation Energy is a clean energy provider, primarily in the form of nuclear, wind and solar power. The company is barely profitable, but it started paying quarterly dividends this year. The stock is currently offering a yield of 0.7% which is not very tempting.
Despite Constellation’s less-than-thrilling track record, Tepper acquired 2.7 million shares of the company in the second quarter. That makes it 9.7% of Appalossa’s total portfolio and it’s a new holding.
Appaloosa is likely looking forward to the rapid increase in demand for clean energy spurred by the recently passed Inflation Reduction Act of 2022. The new law includes production tax credits for nuclear power and hydrogen, two areas in which Constellation Energy has a large footprint.
3. CVS Health
Ray Dalio and Bridgewater Associates bought 1.9 million shares of SVC Health (NYSE: CVS) during the second trimester. It was one of the biggest bets Bridgewater made in the second quarter.
At recent prices, CVS Health shares are offering a decent 2.2% yield that investors can reasonably expect to rise. The company is famous for having thousands of retail pharmacies, but it also has a pharmacy benefits manager with over 110 million plan members. CVS Health also owns Aetna, a healthcare benefits manager that reliably collects insurance premiums from approximately 35 million Americans.
Declining COVID-19 vaccinations reduced the retail segment’s contribution to net income, but this challenge did not prevent overall second-quarter earnings from growing 6% year-over-year. other. It was the company’s diversified operation that allowed profits to grow despite a retail operation suffering from a COVID-19 hangover.
The acquisition of Aetna caused CVS Health to suspend increasing its dividend for a few years, but the company resumed annual increases this year with a big 10% increase. Despite the multi-year hiatus, CVS Health’s dividend has more than tripled over the past decade. With America’s endless demand for health care, the next decade could be another big one for this company and its investors.
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Ally is an advertising partner of The Ascent, a Motley Fool company. Cory Renauer has no position in the stocks mentioned. The Motley Fool fills positions and recommends Constellation Energy Corporation. The Motley Fool recommends CVS Health and CVS Health Corporation. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.