Following the stock picks of billionaire investors can be a great source of profitable investment ideas. These investors are interested in preserving and growing wealth, so they don't make an investment unless they see relatively low downside risk and a favorable probability of being right.

But it's important to remember that even Warren Buffett doesn't have a perfect batting average. To be a successful investor, it's important to think for yourself and not blindly follow the advice of someone else, even if they have built a fortune in the stock market. That said, let's look at two top consumer brands that notable billionaires have been buying, and whether it makes sense to follow their lead.

1. Nike

The world's leading footwear brand has seen its share price fall 50% from its previous peak. Nike (NKE 1.13%) brought in a new CEO -- longtime company veteran Elliott Hill -- to turn things around. Billionaire Bill Ackman clearly sees excellent return prospects from current share prices, as his firm, Pershing Square Capital Management, has been scooping up shares for the past three quarters. Pershing Square held more than 18 million shares at the end of the fourth quarter worth $1.4 billion.

Nike has used deals with celebrity athletes and marketing strategies to grow into a massive sportswear conglomerate. Even with sales down, it generated an impressive $49 billion in trailing revenue, with two-thirds of its business coming from footwear sales.

Hill is faced with the task of returning this elite sportswear brand to growth. Sometimes macroeconomic headwinds have a way of exposing weaknesses in the strongest brands. Nike was stuck with too much inventory as demand faded, which has hurt the company's performance. In the most recent quarter, revenue fell 9% over the year-ago quarter, while net income dropped 26%.

Ackman usually buys stocks that are trading below what his firm estimates they are worth, and therefore can earn an above-average return. However, Nike stock isn't cheap by traditional measures. Its price-to-earnings (P/E) ratio is just under 24 at the time of writing, which is less than the S&P 500 P/E of 29, but that's still within Nike's historical trading range.

Over the last 10 years, Nike's revenue grew at a compound annual rate of 6%, while earnings per share grew 10%. Ackman is probably counting on improving margins to grow earnings at higher rates in the next several years; otherwise, the stock may not deliver market-beating returns given its already high P/E.

Nike is focusing on doubling down on sports and performance products, such as running and basketball shoes. Recent adjustments have shown progress, with positive customer response to recent releases, such as the Ja 2 and Pegasus 41.

However, management has made it clear that the turnaround is not going to be easy, especially with ongoing macroeconomic headwinds. Nike is looking to clear aged inventory to prepare for new products coming out this fall, which could be the start of its turnaround.

Analysts expect Nike's sales to be down 10% in fiscal 2025 before improving to about 2% growth in fiscal 2026, according to Yahoo! Finance. Nike should be successful under Hill's leadership, but I wouldn't be in a hurry to buy the stock. The stock is not likely to move materially higher until there is better visibility on improving sales performance, and that could take at least a few quarters. But over the next five years, the stock could deliver returns on par with the major market indexes, with the potential to beat the market's average return if Nike can deliver higher margins.

2. Starbucks

Starbucks (SBUX 0.96%) has struggled amid a cautious consumer spending environment. The stock has underperformed over the past few years, but the share price has risen 18% since it announced the hiring of Brian Niccol as its new CEO, who led Chipotle Mexican Grill to profitable growth in recent years.

Even with the stock trading higher at the end of 2024, two billionaire fund managers were buying more shares, Stephen Mandel of Lone Pine Capital and Andreas Halvorsen's Viking Global Investors. Mandel increased his firm's stake by nearly 60% to 6,475,057 shares, while Viking Global tripled the size of its position.

Starbucks has a massive global base of more than 40,000 stores, making it a convenient stop for people's morning commutes. It has grown from humble beginnings in Seattle to be a globally recognized brand. Over the last year, it made $3.5 billion in net income on $36 billion of revenue.

Like Nike, the stock is not cheap by traditional metrics. The stock's 36 P/E looks expensive. Even looking ahead to next year's consensus earnings estimate, the stock still appears to be fairly valued at a 31 forward P/E.

Starbucks wasn't a fast-growing company even before the downturn last year. Its 10-year average annualized sales growth was 8%, while earnings grew 9%. Mandel and Viking Global are obviously looking ahead to what Niccol will bring to Starbucks that could enhance its sales and earnings performance.

At Chipotle, Niccol was able to improve margins to grow earnings at much higher rates than revenue. While Starbucks' efforts to improve the customer experience may hurt earnings in the near term, investors should expect similar results under Niccol's leadership.

Starbucks is investing to improve service speed and technology, which could improve sales through higher customer satisfaction. It's also simplifying the menu, which could lead to less inventory spending and higher earnings.

Starbucks is probably worth a higher P/E multiple than Nike, given the repeat business it gets from customers throughout the year. Still, the stock's recent run has pushed its P/E toward the high end of its historical trading range. Investors might want to wait for the chance to buy at a lower valuation before starting a position.