2 Stocks Owned by Billionaires That Could Outperform the S&P 500 Over the Next 5 Years

Beating the market is the goal of every growth investor. There’s no better place to look for stocks that can beat the market than top billionaire investors who have a vested interest in growing and protecting their wealth.

Bill Ackman of Pershing Square Capital Management and former Microsoft CEO and co-founder Bill Gates is a great source of promising stock market investment ideas. Let’s take a look at two of his top stocks that can outperform the S&P 500 index over the next five years.

1. Alphabet (Google)

Bill Ackman’s net worth is $9 billion, according to Forbes magazine. His company has generated annualized returns of 16% for investors over the past 20 years through the end of 2023, which far exceeds the S&P 500 Total Return 10% per year.

Ackman’s firm opened a position in Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) Last year, it still held a large stake in the stock, worth more than $2 billion in the first quarter. Strong growth in the digital advertising market has led to a string of strong financial results that have sent the stock up 26% over the past year.

The stock has been battered recently by the market’s decline and Alphabet’s loss to the government in its antitrust lawsuit. A federal court ruled that Google’s dominance in search was illegally achieved through anticompetitive behavior. It’s unclear what the remedies will be for Google, but its underlying strengths will still make it a solid investment for long-term investors.

Google has a wide competitive gap The company relies on billions of users for its services. It has valuable data to train its artificial intelligence (AI) models. This gives the company excellent growth prospects in the digital advertising market, valued at $298 billion, according to Statista.

Another reason to like the stock is the company’s financial strength. It generated $60 billion in free cash flow on $328 billion in revenue over the past year. This allows the company to accelerate its investments in AI infrastructure and data centers for future growth.

Alphabet is demonstrating the potential of its AI capabilities best on Google Cloud, where it is enjoying strong momentum. Google Cloud revenue grew 28% year over year in the second quarter. The company says more than 2 million developers are using its generative AI solutions.

Investors can now buy the stock at a much lower forward price-to-earnings ratio of 21. At that valuation, the stock should generate a yield in line with Wall Street’s estimate of long-term earnings growth of 17% per year. That should be enough to easily outperform the S&P 500.

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2. Coupang

Forbes Bill Gates’ net worth is estimated at $130 billion, and much of Gates’ fortune is earmarked for the philanthropic efforts of the Bill and Melinda Gates Foundation. The foundation holds a portfolio of U.S. stocks worth $45 billion as of the end of the first quarter. One of its holdings is Coupang (NYSE: CPNG)the leading e-commerce platform in South Korea, a position the foundation has held since early 2021.

Coupang is…