Following the smart money on Wall Street can help you find great investment ideas. But you have to take the ideas with a grain of salt, because some big-name investors may be willing to take on more risk than you should be shouldering. To that end, some very big investors have been buying shares of software-as-a-service leader…
Salesforce.com (NYSE:CRM) and precious metals streamer Royal Gold (NASDAQ:RGLD), two names worth a close look today. However, those jumping into biotech start-up Harpoon Therapeutics (NASDAQ:HARP) may be early to the party. Here’s what you need to know about this trio of smart-money favorites.
The original SaaS play
Brian Stoffel (Salesforce): Ken Fisher has a brilliant track record as a money manager. Today, his fund has more than $94 billion in assets under management. During the first quarter of 2019, he made a substantial increase to one of his positions — buying almost 2 million shares of Salesforce. It currently stands as the 25th-largest position his fund owns (note: the fund owns well over 750 stocks).
It might seem like Fisher is late to the game on Salesforce. After all, shares have advanced 1,500% over the past decade. But the company — which was the first major player in the economy to capitalize on the software-as-a-service (SaaS) business model — continues to show robust growth. It has continually shown that it can grow sales at a clip above 20% per year — no small feat for a $120 billion company.
So does that make Salesforce a good stock for you? That depends entirely on your outlook and goals. The company brought in a hefty $3.3 billion in free cash flow over the past year. Shares trade for 36 times that amount. That’s not outrageously expensive — but it’s also far from cheap.
An investment in Salesforce is an investment in a founder-led company that is leading the SaaS revolution. And it hasn’t been shy about strategic acquisitions — including the recent all-stock purchase of Tableau — to further this leading position. At the end of the day, if mergers prove fruitful and demand for software keeps growing, Salesforce provides broad exposure to this important industry.
Going for the gold
Reuben Gregg Brewer (Royal Gold): Ten investment companies added at least two million shares each of Royal Gold in the first quarter, including names like Apollo, Citi, Lazard, and Wells Fargo. Why would some of the smartest people on Wall Street be jumping aboard this precious metals streaming company?
Gold, which makes up nearly 80% of the company’s revenues, is considered a “safe haven” investment. When Wall Street is tanking, investors often buy gold to protect the value of their portfolios. With the S&P 500 Index near all-time highs and the swift and dramatic market moves over the past year or so, it makes sense that smart investors are adding a little more diversification to their portfolios. Gold has historically been a great choice for that…
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