Following billionaire investors in their ISA ideas can be a smart move. After all, these professional money managers usually have long careers picking stocks that outperform the market’s average return.

Fortunately, Wall Street’s top investors are required to disclose their holdings every quarter. Although these public disclosures can be made up to 45 days late, they still provide valuable insight into their portfolios and reveal what they’ve been buying and selling.

In the second quarter of 2023, several well-known hedge funds bought NVIDIA stocks when they started to skyrocket. When I looked at the latest filings for the second quarter of 2024, I noticed that some billionaires were buying shares of Uber Technologies (NYSE: UBER). For example:

• Third Point’s Daniel Loeb increased his stake in Uber by an incredible 320%

• David Tepper of Appaloosa Management increased his stake by 10.3%

• John Armitage of Egerton Capital acquired shares valued at $129 million, marking a new

That’s why this hot growth stock, which has doubled in value in 18 months, is on my own buy list.

Increase profits

First of all, I’m impressed with how Uber continues to grow. In the second quarter, the number of monthly active users on the platform increased 14% year over year to 156 million. Rides on the platform increased 21%.

CEO Dara Khosrowshahi commented: “Uber’s growth engine continues to run strong. We’re seeing ride growth of over 20% for the sixth consecutive quarter and record profitability. Uber’s user base has never been stronger – more people are using the platform and using it more often than ever before..”

The earnings growth caught my attention, as many (including me) doubted the ride-hailing and food delivery company would ever reach meaningful profitability. Yet the company’s net cash flow from operations and free cash flow both grew over 50% to $1.8 billion and $1.7 billion, respectively.

Wall Street is now forecasting free cash flow of between $8 billion and $9.7 billion by the end of 2026. That would be an incredible increase from the $390 million generated in 2022.

The story continues

The consensus earnings per share (EPS) forecast for 2026 is $3.04, representing a 250% increase from the previous year. This gives the stock a P/E ratio of about 23.5 for 2026.

As a long-term investor, I consider this valuation to be acceptable.

Untapped opportunities for digital advertising

I also see great growth opportunities in adjacent areas. For example, the company has started to expand its advertising business and offers various advertising formats that can be displayed in the Uber apps and during rides.

The company has amassed a mountain of first-party data on users, including driving histories, food orders, preferences and more, which it can use to offer marketers highly targeted advertising opportunities.

In the second quarter, advertising revenue exceeded $1 billion. But that’s not even the tip of the iceberg of this lucrative opportunity.

The Uber One subscription service is now available in 28 countries. I firmly believe that this service will continue to grow worldwide over time.

However, increased regulation of the gig economy is a risk, as is TeslaThe company’s “robo-taxi” ambitions could one day outdo Uber.

To counteract autonomous risk, the company works with alphabet‘s self-driving Waymo unit in the US and with the Chinese electric vehicle manufacturer BYD out. The latter deal will be “Collaboration on future BYD autonomous vehicles to be deployed on the Uber platform“.

I am convinced that this growth stock has all the necessary prerequisites to become a big winner for my portfolio in the long term.

The post “Billionaires are gobbling up this hot growth share – and I want it in my ISA!” appeared first on The Motley Fool UK.

Further reading

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Ben McPoland does not own any of the stocks mentioned. The Motley Fool UK has recommended Alphabet, Nvidia, Tesla, and Uber Technologies. The views on companies mentioned in this article are those of the author and may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2024