During the coronavirus pandemic, many investors were scrambling to readjust their portfolios. While a few billionaire investing legends like Warren Buffett dumped stakes in some of America's top companies, a few decided to pick up some bargains. One notable player was Saudi Arabia's $300 billion sovereign-wealth fund. Read on to find out what they found and what they bought!
Bargain hunting in America
Saudi Arabia's $300 billion sovereign-wealth fund called The Public Investment Fund has spent the past quarter finding bargains in America's top corporations after the coronavirus-led market crash. According to a filing with the US Securities and Exchange Commission (SEC), the wealth fund has taken minority stakes in a variety of American companies, covering a diverse range of sectors that amounts to $7.7 billion.
Here's what they've snapped up:
- $713.7 million in Boeing
- $495.8 million in Disney
- $521.9 million in Facebook
The fund also disclosed a $827.7 million investment in oil giant British Petroleum (BP) through its New York listed entity, a $487.6 million in Bank of America, $522 million in Citigroup and $513.9 million in Marriott International. In the past, the fund has also bought stakes in other well-known companies such as Uber and Tesla.
The aim of the PIF fund is to "seek strategic opportunities both in Saudi Arabia and globally that have strong potential to generate significant long-term returns while further benefitting the people of Saudi Arabia and driving the country's economic growth." This has been on instruction from Crown Prince Mohammed bin Salman who tasked the fund to diversify the country's economy away from oil by investing in companies unrelated to the oil industry.
While many claim this is a bold strategy for the country who is suffering from lower oil revenue and a weakening economy, other billionaire investors have also used the recent market crash as an opportunity to top up their portfolios. These include:
- George Soros of Soros Fund Management buying stakes in Disney
- David Einhorn of Greenlight Capital buying stakes in Disney, Tesla and Berkshire Hathaway
- Stanley Druckenmiller's Duquesne Family Office buying stakes in Disney while slashing stakes in Snap and Uber
- Dan Loeb of Third Point buying stakes in Amazon and Disney
The most common theme between a lot of these different investors is Disney. Let's have a look at its share price in more detail.
How to trade Disney shares
Below is the long-term, monthly price chart of Disney's (DIS) share price:
Source: Admiral Markets MetaTrader 5, DIS, Monthly - Data range: from 1 October 2008 to 20 May 2020, accessed on 20 May 2020 at 10:30 pm BST. Please note: Past performance is not a reliable indicator of future results.
With Admiral Markets UK Ltd you can trade Contracts for Difference (CFDs) in shares from 15 of the largest stock exchanges in the world. This product allows you to go long and short a market. You can learn more about the advantages and risks in the 'What is CFD Trading?' article.
Before the coronavirus-led market crash, Disney's share price was steadily rising. In fact, its share price traded in a tight price range of $121 - $91 between 2015 and 2019. While the share price broke higher in 2019, it did not manage to hold on to those gains in the early part of 2020.
Interestingly, the sell-off pushed the price all the way back down to a long-term horizontal support level at around $86. From this level, buyers have taken control in the short-term. The bounce is more evident on the weekly chart as shown below:
Source: Admiral Markets MetaTrader 5, DIS, Weekly - Data range: from 21 December 2014 to 20 May 2020, accessed on 20 May 2020 at 11:30 pm BST. Please note: Past performance is not a reliable indicator of future results.
While the bounce higher in Disney's share price is interesting, traders will now be eyeing the $121 price level. This used to be a historical resistance line when the share price was trading in a range between 2015 and 2019. If buyers can break above here there may be more upside yet to come - perhaps all the way to the all-time high price level.
However, fundamentally there are issues with the company's income stream. Disney's parks and resorts (Disneyworld) is one of the company's biggest moneymakers. The lockdown instigated by governments to stop the spreading of Covid-19 has massively affected one of Disney's top revenue streams.
What has some investors leaning towards a more bullish bias is the fact the company just launched Disney+, at a time when subscriptions to streaming services have been on the rise. Of course, the backing of some major heavyweight hedge fund managers has also helped buyers stay in control in the short-term.
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