News

Few investors deserve the adjective "legendary." Ken Griffin is one of them. He founded Citadel in 1990. It now ranks as the most successful hedge fund of all time.

With Citadel's portfolio including thousands of holdings, it isn't surprising that Griffin owns all the "Magnificent Seven" stocks. However, three appear to be his favorites.

1. Nvidia

Citadel owns a larger position in Nvidia (NASDAQ: NVDA) than any other individual stock. The only bigger holding for the hedge fund is the SPDR S&P 500 ETF Trust. At the end of 2023, Citadel's stake in Nvidia totaled $1.8 billion.

Importantly, Griffin continued to add to Citadel's stake in Nvidia in the fourth quarter of 2023. He bought an additional 1.58 million shares, increasing his hedge fund's position in the chipmaker by nearly 77%.

We can easily guess why the billionaire investor likes Nvidia so much. The company's graphics processing units (GPUs) have enjoyed staggering demand as organizations scrambled to build, train, and run generative AI applications.

2. Amazon

Microsoft isn't too far behind Nvidia as the second-largest Magnificant Seven holding for Citadel. However, I wouldn't say the tech giant is Griffin's second-favorite Magnificent Seven stock for a simple reason: He sold nearly 16% of Citadel's stake in Microsoft in Q4. But it's a different story with Amazon (NASDAQ: AMZN).

At the end of 2023, Amazon ranked behind Microsoft as Citadel's third-largest individual stock holding. Griffin is clearly bullish about Amazon, evidenced by his increase of Citadel's stake in the stock by almost 223% in Q4.

What is so attractive about Amazon? I'd put improving profitability near the top of the list. Griffin also undoubtedly recognizes the tremendous opportunity AI presents for Amazon Web Services (AWS).

3. Meta Platforms

Meta Platforms (NASDAQ: META) is Citadel's fifth-largest position excluding the big stake in the SPDR S&P 500 ETF Trust. Exiting 2023, Citadel owned 2.46 million shares of the social media giant worth over $869 million.

Before Q4, Meta wasn't nearly as big of a holding for the hedge fund. Griffin bought 1.37 million shares in the last quarter of 2023, increasing Citadel's stake in Meta by 127%. As was the case for the other top Magnificent Seven stocks, the hedge fund also owned call and put options for Meta.

I think Griffin likes Meta for some of the same reasons he likes Amazon. Meta's bottom line has improved significantly thanks in part to cost-cutting initiatives. The company also should have a major growth opportunity with AI, albeit in some different ways than Amazon.

Are these Magnificent Seven stocks smart picks now?

Nvidia, Amazon, and Meta have retreated from their all-time highs in recent weeks. I wouldn't be surprised if they fall further. However, significant pullbacks would create excellent buying opportunities for all three stocks, in my view.

Competition is increasing in the AI chip market. I don't expect Nvidia to command as formidable a market position going forward as it has so far. On the other hand, the demand for AI chips will almost certainly continue to increase. Nvidia's innovation should keep it on top.

Amazon isn't in danger of giving up its leadership in e-commerce. Its AWS unit might lose market share to other cloud providers, but I still expect it to deliver strong growth as organizations move their apps and data to the cloud. I also look for Amazon to do what it's always done and find new avenues for growth.

Meta has demonstrated the resilience of its social media platforms. AI-powered business messaging could be a key growth driver for the company for years to come. I also like Meta's decision to open up its Horizon virtual reality operating system to third-party device makers.

Does Ken Griffin still view these Magnificent Seven stocks as good picks? We should find out in a few weeks when Citadel discloses its 2024 first-quarter holdings.

Should you invest $1,000 in Amazon right now?

Before you buy stock in Amazon, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.

*Stock Advisor returns as of April 22, 2024

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Keith Speights has positions in Amazon, Meta Platforms, and Microsoft. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.