The technology sector is home to many of the most attention-grabbing stocks in the market: Apple. Google. Microsoft. 13F filings allow investors to follow the activity of hedge funds in the technology sector on a quarterly basis and decide which of the hedge funds’ top stock picks, if any, are a good fit for their own portfolio. Here are the 10 most popular stocks in the technology sector of the market among hedge funds:
1. Apple (AAPL): AAPL, in addition to being one of the largest market cap companies in the stock market, has many attributes that attract hedge fund attention. It has a very strong brand, has achieved remarkable growth over the past several years, and it is one of the most profitable companies in the market with a huge cash hoard. Yet it still carries a price-to-earnings ratio of less than 15. A total of 134 hedge funds had positions in Apple at the end of March, among them D.E. Shaw (see other positions held by D.E. Shaw) which owned 2 million shares (though it hedged the risk of these shares with 1.8 million puts).
2. Google (GOOG): The second most common technology stock held by hedge funds was Google. The market leader in the search engine business could be found in the portfolios of 115 hedge funds, including Andreas Halvorsen’s Viking Global (learn more about Viking Global's portfolio) which initiated a $675 million position in the stock in the first quarter of 2012. 110 hedge funds had held GOOG the previous quarter, indicating that hedge fund positions had generally increased. However, Google has actually fallen about 13% so far this year.
3. Microsoft (MSFT): While hedge funds show more favor to Apple, over a hundred of them (103 to be exact) had positions in Microsoft at the end of March. Tiger Cub Rob Citrone’s Discovery Capital Management (see more of Citrone's stock picks) had 2.5 million shares at the end of 2011 which it increased to 11.6 million in the first quarter of 2012. Microsoft is up about 9% so far this year, underperforming its rival Apple (which is up about 50%), but still making a good return for investors. Microsoft trades at a P/E of less than 11 and pays a 2.7% dividend yield, so it might be an alternative to Apple for more value-oriented investors.
4. Qualcomm (QCOM): The digital telecom business QCOM, which was held by 78 different hedge funds, was the fourth most popular technology stock. This number was up from 66 hedge funds with Qualcomm stock at the end of December. Lone Pine Capital, a $17 billion fund managed by Stephen Mandel that also owned large stakes in Google and Apple, owned 7.7 million shares of QCOM and has been a long-time holder of the stock (see what else Lone Pine Capital owned). QCOM’s share price has fluctuated this year but is currently about flat compared to early January, with a P/E just below 17.
5. Cisco (CSCO): There were 66 funds with bullish positions in Cisco at the end of the first quarter, a slight increase from the 60 who had owned the stock at the end of 2011. One of the top holders of Cisco was First Eagle Investment Management, with 41.7 million shares at the end of March (see other stock picks from First Eagle). First Eagle had owned 9.6 million shares at the beginning of 2011 and increased its stake over the course of the year. Cisco has a P/E of less than 12, a large amount of cash on its balance sheet, and has fallen about 14% so far in 2012.
6. Yahoo (YHOO): Several hedge funds exited their positions in Yahoo in the first quarter, but 60 remained allowing it to be the sixth most widely held technology stock among hedge funds. Yahoo is down about 3% so far this year, but this performance is substantially better than Google, the market leader in the search engine business. Yahoo trades at a P/E close to 18- higher than many of these other technology companies- despite challenges to its core business, little revenue growth, and a much less respected brand. Dan Loeb’s Third Point (research more of Dan Loeb's favorite stocks) was the largest hedge fund holder of the stock as Loeb attempts to make changes at the company.
7. Oracle (ORCL): There were 59 hedge funds with ORCL positions. Oracle makes an interesting value stock with a price-to-earnings ratio of 15; on a forward basis, the company’s price-to-earnings ratio falls to 10. This factor is likely helping drive investment. William von Mueffling’s $2 billion Cantillon Capital Management is the largest hedge fund holder, with 8.4 million shares after adding to his position over much of the past year (see Cantillon's other holdings). With the stock up 11% so far in 2012 (though flat compared to the end of March) this fund has likely earned a decent profit.
8. EMC (EMC): The stock was owned by 56 hedge funds at the end of March. EMC is priced more for growth compared to these other technology stocks with a P/E of 20.5, although the company has achieved good revenue and earnings growth recently and analysts expect the P/E based on forward earnings to be about 12, much more in line with the technology sector. Ken Fisher’s Fisher Asset Management (see more stocks owned by Ken Fisher) owns 21.8 million shares of the company, more or less unchanged from a year ago. The stock is up about 10% so far this year, roughly even with the NASDAQ.
9. Intel (INTC): There were 50 hedge funds in Intel at the end of March. Intel was Renaissance Technologies 7th largest holding, with a position of $272 million (find more stock picks from billionaire Jim Simons’ hedge fund). Intel is slightly underperforming the market this year, though it is up about 3% and pays a dividend yield of 3.3%, high for a technology company. At a P/E of slightly less than 11- with a forward P/E dipping below 10- it could also be considered a value stock.
10. Baidu (BIDU): There were 47 hedge funds with positions in Baidu at the end of March, up from 43 at the beginning of the year. Baidu is an Internet search engine whose China connection pushes its P/E up to 33. John Thaler’s JAT Capital Management had been moving in and out of BIDU over the past several months but maintained its position of 1.2 million shares over the first quarter of 2012 (learn what else was in Thaler's portfolio). Its share price is down about 12% this year, similar to Google’s, so investors have the opportunity to get into BIDU at a lower price than these hedge funds.