I’m always looking for inspiration when it comes to finding quality stocks to buy. One of the best ways to find some is to check top portfolio managers’ holdings.
Morningstar produced an article in May about U-Wen Kok and the fund she manages, Victory RS Global Fund (MUTF:RSGGX). Kok, based in San Francisco, is from Toronto, where I’m from, so I was intrigued by her story and investing performance.
RSGGX is an all-world fund investing in developed and emerging markets. Kok and her team look for companies that possess strong earnings quality, operational efficiencies, sound management, favorable growth characteristics, and attractive valuations.
Morningstar gives it a five-star rating out of 330 global large-stock blend funds. It has 98 holdings with a weighted average market cap of $622 billion. The top 10 holdings represent 28.7% of the portfolio. The top three sectors by weight are technology (23.4%), financials (16.36%), and consumer discretionary (11.05%).
My top three picks will come from those three sectors.
Apple (AAPL)
Representing the tech sector is Apple (NASDAQ:AAPL) with a 4.6% weighting, the second-highest in the fund behind only Microsoft (NASDAQ:MSFT) at 4.8%. I considered Microsoft, but the potential to generate revenue from artificial intelligence has me leaning toward the iPhone maker.
I recently discussed what the next major catalyst would be for Apple stock. Not a big surprise, it’s AI that could drive its share price 25% higher. If that happens, forget a $3.5 trillion market cap, and start thinking about $5 trillion in 18 to 24 months.
It all has to do with the iPhone upgrade cycle. Up until Apple launched Apple Intelligence in June, there really was no spark to push its share price higher. However, with the iPhone 16 coming in September and AI incorporated into iOS 18, approximately 270 million iPhones haven’t been upgraded in over four years.
“‘The Street is now starting to slowly recognize that with Apple Intelligence on the doorstep, in essence, Cupertino will be the gatekeepers of the consumer AI Revolution,’ they said, with 2.2 billion iOS devices globally and 1.5 billion iPhones,” Investopedia recently reported.
Up 20% in the past month, the Apple party could just be getting started.
JPMorgan Chase & Co. (JPM)
JPMorgan Chase & Co. (NYSE:JPM) represents the financial sector with a weighting of 1.7%, putting it in the top 10 holdings in the eighth spot.
Revenue in the second quarter was $50.2 billion, up 22% from a year ago. Net income was $18.1 billion, up 25% from the second quarter of 2023. Earnings per share came in at $6.12. It was a blowout quarter considering anlays were expecting EPS of $4.15 on revenue of $42.03 billion.
JPM stock is up nearly 21% in 2024 and 43% over the past year. On June 28, JPMorgan said it would raise its quarterly dividend payment by a dime to $1.25 a share. The annual rate of $5 yields a reasonable 2.4%. At the same time, the bank announced that the board had approved a $30 billion new common share repurchase program. It started on July 1.
The key to its June 28 press release were Dimon’s words about its financial strength suggesting that it had a “fortress balance sheet with substantial excess capital.”
In other words, it will be ready no matter what happens to the economy.
Ulta Beauty (ULTA)
Last up is Ulta Beauty (NASDAQ:ULTA), which represents the consumer discretionary sector with a 1% weighting.
I haven’t spent much time covering the beauty retailer since former CEO Mary Dillon left in June 2021. Replaced by Dave Kimball, the stock has been a roller coaster in the two years since.
In April, it lost almost 23% after the company said its growth for the first quarter was expected to be slower than anticipated. However, its share price seems to have bottomed here and is increasing.
It reported Q1 2024 results on May 30. They were better than expected, with earnings per share of $6.47, or 23 cents higher than the analyst estimate. Revenues were $10 million better than the consensus at $2.73 billion.
However, it did lower guidance, with revenues now expected to be $11.55 billion at the midpoint, $200 million lower than its previous outlook for 2024. On the bottom line, it expects EPS of $25.60, down a dollar from earlier in the year.
The company is taking several steps to regain some market share it may have lost in recent months. It’s a work in progress.
Aggressive investors will want to buy the dip.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a LONG position in AAPL.
