The Smartest People on Wall Street Are Buying These 3 Stocks -- Should You Follow?

Whether you've just started to invest or are a pro at it, it's tempting to track what stocks the "smartest" minds on Wall Street have been buying and selling. One mistake investors often make, though, is to blindly emulate bigwigs' portfolios without realizing that not every stock fits their individual goals and risk perception. It's only after analyzing the stocks a little more deeply that you should make any investment decision.

Our Motley Fool contributors, for instance, picked three stocks that some of the smartest investors are buying to find out if they're worth your money. Here's what they have to say about GW Pharmaceuticals (NASDAQ: GWPH), Mastercard (NYSE: MA), and Disney (NYSE: DIS).

A trendsetter

George Budwell (GW Pharmaceuticals): GW Pharmaceuticals has attracted numerous blue-chip investors and top fund managers alike over the past few years. However, this mid-cap biopharma stock might make a great pickup for retail folk as well.

What's the scoop? GW became the first company ever to bring a cannabis-based drug to market in the U.S. last year with its antiepileptic medication Epidiolex. The FDA green-lit Epidiolex in mid-2018 as a treatment for two childhood forms of epilepsy known as Dravet syndrome and Lennox-Gastaut syndrome. And since its launch, GW has been able to rapidly secure favorable reimbursement status for the drug with a number of top third-party payers in the United States. This broad insurance coverage, in kind, has helped Epidiolex's initial sales ramp up to far exceed expectations.

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The best might be yet to come, however. GW recently announced positive late-stage results for Epidiolex as a treatment for patients suffering from seizures stemming from a genetic disorder called tuberous sclerosis complex (TSC). The big deal is that TSC's commercial opportunity dwarfs that of Dravet syndrome and Lennox-Gastaut syndrome combined.

What's the key takeaway? Epidiolex now has a clear line of sight at generating more than $2 billion in annual sales with this latest clinical win. GW's stock, in turn, should have a lot more room to run. Underscoring this point, the biopharma's shares are trading at less than three times this peak sales forecast. That's an outright bargain for a biopharma stock, especially for one with a well-differentiated product on the market.

A long-term fintech play

Neha Chamaria (Mastercard): Mastercard has been a longtime favorite among Wall Street bigwigs, with even legendary investors like Warren Buffett and Joel Greenblatt owning the stock. Buffett's Berkshire Hathaway, for instance, has held shares of Mastercard for almost eight years now. To further give you an idea about how popular the stock is, consider that as many as 25 hedge funds added Mastercard shares to their portfolios in the last quarter of 2018.

So what's made Mastercard such a hit? Several factors, such as operating in a near-duopoly in the global payments processing industry with Visa, an asset-light business model, operating margins north of 50%, and steady growth in earnings and cash flows over the years.

Remarkably, a global trend underpins Mastercard's growth and investing thesis: the war on cash, or simply the consumer shift from cash to cashless modes of payments such as credit and debit cards and mobile wallets. So when financial institutions like banks issue a Mastercard-branded card, the company processes all transactions made with the card and earns fees for it.