Billionaires are gobbling up this hot growth stock — and I want it in my ISA!

This investor has been scouring the latest regulatory filings by hedge fund managers and noticed one growth stock already on his ISA buy list.

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Following billionaire investors for ISA ideas can be a smart move. After all, these professional money managers usually have long careers of picking stocks that beat the market’s average return.

Fortunately, Wall Street’s top investors must disclose their holdings every quarter. Although these public filings can be delayed by up to 45 days, they still offer a valuable glimpse into their portfolios, revealing what they’ve been buying and selling.

In Q2 2023, several notable hedge funds bought Nvidia stock as it started to skyrocket. Glancing through the latest filings for Q2 2024, I noticed that a few billionaires have been scooping up shares of Uber Technologies (NYSE: UBER). For example:

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  • Daniel Loeb of Third Point increased his holding in Uber by an eye-raising 320%
  • David Tepper of Appaloosa Management upped his stake by 10.3%
  • John Armitage of Egerton Capital acquired $129m worth of shares, marking a new position

Here’s why this hot growth stock, which has doubled in 18 months, is on my own buy list.

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Scaling up profits

First off, I’m impressed at how Uber continues to grow. In the second quarter, its monthly active platform consumers rose 14% year on year to reach 156m. Trips on the platform grew 21%.

CEO Dara Khosrowshahi commented: “Uber’s growth engine continues to hum, delivering our sixth consecutive quarter of trip growth above 20%, alongside record profitability…The Uber consumer has never been stronger — more people are using the platform, and more frequently, than ever before.”

The earnings growth has really caught my eye because many doubted (myself included) that the ride-hailing and food delivery firm would ever reach significant profitability. But the firm’s quarterly net cash from operating activities and free cash flow both jumped over 50%, to $1.8bn and $1.7bn, respectively.

Wall Street now forecasts between $8bn and $9.7bn in free cash flow by the end of 2026. That would be an incredible rise from the $390m generated in 2022.

The consensus earnings per share (EPS) forecast for 2026 is $3.04, which would represent a 250% increase from last year. This puts the stock on a forward P/E ratio of about 23.5 for 2026.

As a long-term investor, I find that valuation acceptable.

Untapped digital ad opportunity

I also see huge adjacent growth opportunities. For example, the firm has started expanding its advertising business, offering various ad formats that can be displayed within the Uber apps and during rides.

The company has amassed a mountain of first-party data from users, including ride histories, food orders, preferences, and more. It can leverage this to offer highly targeted advertising opportunities to marketers.

In the second quarter, its revenue run-rate from advertising exceeded $1bn. However, it’s barely scratched the surface of this lucrative opportunity.

Meanwhile, its Uber One subscription service is now in 28 countries. I fully expect that to grow worldwide over time.

Increased gig economy regulation is a risk though, as is Tesla‘s ‘robo-taxi’ ambitions, which could one day disrupt Uber.

To counter the autonomous risk, it’s partnered with Alphabet‘s self-driving Waymo unit in the US and with Chinese electric vehicle maker BYD outside. The latter deal will “collaborate on future BYD autonomous-capable vehicles to be deployed on the Uber platform”.

I reckon this growth stock has all the necessary ingredients to be a massive long-term winner for my portfolio.

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Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Ben McPoland has no position in any of the shares mentioned. The Motley Fool UK has recommended Alphabet, Nvidia, Tesla, and Uber Technologies. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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