June 17, 2024
Billionaire investor Warren Buffett has reduced his stake in Apple recently


Warren Buffett, the legendary US investor known as the Oracle of Omaha, says that you should never bet against America.

This adage from the revered 93-year-old billionaire has held true recently.

Wall Street has been hitting record highs: the Dow Jones Industrial Average recently topped 40,000 for the first time ever.

So can small investors in the UK cash in – or have they missed the boat?

City experts believe there is still plenty of money to be made on the ‘Street of Dreams’ – Wall Street – where so many fortunes have been won.

Investors who backed the ‘Magnificent Seven’ US tech stocks have been rewarded with huge gains.

These companies – Amazon; Google owner Alphabet; Apple; Instagram and Facebook group Meta; Microsoft; Nvidia and Tesla – have prospered thanks to the artificial intelligence (AI) boom.

Billionaire investor Warren Buffett has reduced his stake in Apple recently

Nvidia makes the superfast chips that power ChatGPT, the most high-profile AI system.

Although Nvidia shares have risen by 205pc over the past 12 months and the others have scaled the heights, Tesla is lagging behind other members of the Mag 7. 

This is causing experts to turn their attention to other US stocks which have been overlooked.

It is significant that the largest holding in Warren Buffett’s investment fund, Berkshire Hathaway, is Apple – but he and his team have reduced this stake lately.

Bank of America, Coca-Cola and Kraft Heinz remain the stalwarts of the portfolio. Among the other major US corporations he holds shares in are American Express and the oil giants Chevron and Occidental.

All of them are likely to benefit when US interest rates are finally cut.

It’s never a bad idea for investors to ask themselves what Warren Buffett would do. These holdings could be a message to those who have invested in the Mag 7 – either directly, by buying shares, or indirectly, through a fund.

Profits for the Mag 7 are forecast to climb by 38pc in the first quarter of this year, against 2.4pc for the wider S&P 500. So it’s worth staying faithful to these heroes.

But it may also be time to look elsewhere. A good starting place, according to experts, are these ‘Terrific 12’.

Shopify lets businesses set up online stores, and it did well during the pandemic when firms had to seek customers online

Shopify lets businesses set up online stores, and it did well during the pandemic when firms had to seek customers online

Shopify

Value: £60bn

Shares this year: Down 26pc

Analysts at Goldman Sachs believe Shopify is one to back.

Shopify – a website that allows businesses to set up online stores – boomed during the pandemic when firms were pushed to go digital.

Its shares have slumped in recent months following weaker demand, but some experts believe its longer-term prospects are good.

Goldman Sachs says the stock’s underperformance this year makes it attractive to investors because they can buy in at a cheap price, and cash in as and when the shares recover.

Dell is best known for its laptops, but it looks set to grow thanks to the rise of artificial intelligence

Dell is best known for its laptops, but it looks set to grow thanks to the rise of artificial intelligence

Dell Technologies

Value: £83bn

Shares this year: Up 101pc

As the buzz around artificial intelligence continues to grow, investors have been on the hunt for stocks that will cash in on the hype without breaking the bank.

Dell – best known for its laptops – fits the bill, according to Derren Nathan, an analyst at Hargreaves Lansdown.

‘It has been riding the coat-tails of the boom in artificial intelligence,’ he explains.

Its shares have surged in recent months, but it is still relatively cheap compared to rivals.

Its growth prospects ‘aren’t to be sniffed at’, Nathan notes.

Synopsys, based in California, is riding the waves of the artificial intelligence boom

Synopsys, based in California, is riding the waves of the artificial intelligence boom

Synopsys

Value: £69bn

Shares this year: Up 15pc

Another firm set to benefit from AI mania is software group Synopsys, which produces parts for chip designers.

The company has already seen a boost in revenues and looks set to cash in as the US government pumps more money into tech, says Garry White, chief investment commentator at Charles Stanley.

Significant investment from Washington is likely to bolster firms such as Synopsys, allowing investors to reap the benefits eventually.

Thermo Fisher Scientific makes devices such as this radiation detector

Thermo Fisher Scientific makes devices such as this radiation detector

Thermo Fisher Scientific

Value: £178bn

Shares this year: Up 10pc

Garry White believes life sciences group Thermo Fisher Scientific is a good bet without much risk.

The company produces scientific instruments and lab equipment for pharmaceutical, biotech and diagnostics research. It could do well as people in the US and elsewhere live longer and have greater health needs.

‘The biopharmaceuticals industry is growing rapidly and an investment in Thermo gains exposure to the industry, without taking on risk associated with drug development,’ he says.

The California base of Baker Hughes, which is one of the world's largest oilfield services firms

The California base of Baker Hughes, which is one of the world’s largest oilfield services firms

Baker Hughes

Value: £25bn

Shares this year: Down 7pc

Baker Hughes, one of the world’s largest oilfield services companies, has been a bit of a disappointment on Wall Street in recent months.

Not only has it grappled with weaker commodity prices but it has also seen a slump in orders.

Nonetheless, Derren Nathan of Hargreaves Lansdown says the breadth of Baker Hughes’s services mean its new energy business, which includes green hydrogen and carbon capture, will drive future revenues.

A distribution warehouse operated by GXO in Derby, which is used to handle products made by Nestle

A distribution warehouse operated by GXO in Derby, which is used to handle products made by Nestle

GXO

Value: £5bn

Shares this year: Down 18pc

Dan Cruickshank of Orbis Investment suggests GXO may be one to buy.

The global logistics business recently acquired Wincanton, based in Chippenham, Wiltshire.

GXO makes long-term deals with corporations such as Adidas to handle their online operations, assuming the responsibility for every aspect of fulfilling and delivering e-commerce orders. So it could do well if the shift to online shopping continues.

GXO is one of the largest holdings in the Orbis Global Equity fund.

Dr Pepper is one of the top drinks brands owned by Keurig Dr Pepper. Investing in the firm could prove better value for investors than Coca-Cola or Pepsi

Dr Pepper is one of the top drinks brands owned by Keurig Dr Pepper. Investing in the firm could prove better value for investors than Coca-Cola or Pepsi

Keurig Dr Pepper

Value: £37bn

Shares this year: Up 2pc

Drinks giant Keurig Dr Pepper is seen as a bargain by analysts.

It could prove better value for investors than Coca-Cola or Pepsi, according to Dan Coatsworth, investment analyst at AJ Bell.

Despite owning a large portfolio of drinks brands, including Dr Pepper and 7up, shares are still roughly a fifth cheaper than its competitors.

So it could bring some fizz for investors looking to buy a brand they know at a decent price.

A Ford Fiesta production line at the Cologne plant in Germany

A Ford Fiesta production line at the Cologne plant in Germany

Ford

Value: £38bn

Shares this year: Up 1pc

The auto industry has faced hard times. But as the hype around electric cars continues to fade, investors are finding comfort in traditional car makers which also offer hybrid options.

Interactive Investor expert Rodney Hobson believes car giant Ford is ‘well worth considering as a buy’.

The company recently decided to delay the launch of its larger electric cars by two years to 2027 and has seen appetite grow for its hybrid models.

Shares have slipped in recent months, but experts now say it could be prime time to swoop as the group is expecting profits to edge higher this year.

Mastercard has a global reach and is in a strong position to gain market share, according to some experts

Mastercard has a global reach and is in a strong position to gain market share, according to some experts

Mastercard

Value: £334bn

Shares this year: Up 6pc

Despite the rise of contactless and Apple Pay, Mastercard is still the backbone of a lot of transactions. Its global reach also makes it even more appealing than major rival Visa, which makes most of its money in the US.

Analysts at Hargreaves Lansdown say areas such as cyber security and analytics could push growth in the future.

Garry White from Charles Stanley says this puts the group in an even stronger position to gain market share.

But Derren Nathan of Hargreaves cautions that the shares are already very highly valued. That means it is under a lot of pressure to deliver great results – and that spells possible volatility in the share price.

Otis Worldwide has been producing lifts for 170 years, and also makes and maintains escalators

Otis Worldwide has been producing lifts for 170 years, and also makes and maintains escalators

Otis Worldwide

Value: £32bn

Shares this year: Up 8pc

The 170-year-old lift manufacturer Otis could take your portfolio to the next level, according to Garry White.

Unlike its biggest rivals, Kone and Schindler, Otis’s exposure to China is quite limited. This is a benefit at the moment due to the property crisis afflicting that country, which means less building and lower demand for lifts.

Otis, which also makes and maintains escalators, recently told Wall Street its full-year results are likely to be better than previously thought.

INVESTMENT TRUSTS

Individual stock selection can be nerve-wracking, but there is an alternative – an investment trust. This is a quoted company that owns shares in other companies.

Currently the share prices of many trusts are at a ‘discount’ to their net asset value (NAV). This means that they could prove to be a bargain route to the US market, if you are prepared to be patient and happy to take a bet.

The Allianz Technology Trust holds a wide range of firms, including Meta and Microsoft

The Allianz Technology Trust holds a wide range of firms, including Meta and Microsoft 

Allianz Technology Trust

Allianz Technology Trust holds some of the tech titans such as Meta, Microsoft and Nvidia, but also some lesser-known innovative corporations, giving spread of exposure to the sector.

Bill Ackman, the chief executive of Pershing Square, speaking at a global technology conference in California in 2017

Bill Ackman, the chief executive of Pershing Square, speaking at a global technology conference in California in 2017

Pershing Square

This fund is more about Main Street America than Silicon Valley. It owns names such as Universal Music, Chipotle, Domino’s Pizza and Hilton Worldwide. The trust’s manager is the hugely influential Bill Ackman – a legendary investor but also an increasingly pivotal figure in the debate over free speech on the campuses of American universities, such as Harvard.

Pershing Square is at a discount of 27pc, meaning that it represents a real thrill ride. While contemplating whether such an escapade is for you, take a look at Ackman’s posts on X (formerly Twitter). He is becoming almost as closely followed as Buffett.

How Britons can invest in US stocks 

British investors can buy American stocks through an online broker but may pay a higher trading or administration fee.

UK-based shareholders of US companies must fill in a W-8 BEN form which allows them to pay a reduced tax rate on the investment.

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