An Investor Bets Big on These Five Tech Stocks; Should You Follow Him?

Founded in 1988, Giovine Capital, managed by Thomas Giovine, holds a relatively small equity portfolio, worth around $130.4 million as of the end of September. Focusing on the long-term horizon, Giovine has a low turnover rate and in the third quarter did not close any positions, though it did trim its stakes in 35 holdings. Moreover, the fund initiated two new positions and raised its exposure to seven stocks. Overall, the portfolio is highly diversified across sectors, with consumer discretionary, tech, and industrial stocks amassing the largest portions. In this article we will focus on Giovine’s top tech picks.

But why are we interested in the picks of Giovine? The reason is simple: Giovine is one of over 700 funds that we track as part of our investment strategy. We believe that imitating some of the investments that these investors are collectively bullish on can generate significant returns. The key is to follow these funds into their best small-cap ideas, the top 15 of which have returned 102% since August 2012, beating the S&P 500 ETF (SPY) by around 53 percentage points (see more details here).

Giovine’s fifth tech pick is Verisk Analytics, Inc. (NASDAQ:VRSK), in which the fund revealed holding 17,405 shares worth $1.29 million. Verisk is engaged in risk information provision for insurance, healthcare, and financial services companies, among other sectors. The stock has advanced by around 9.5% since the beginning of the year and is trading at around 21.80-times forward earnings. Verisk Analytics, Inc. (NASDAQ:VRSK) recently acquired Infield Systems, which will become part of its Wood Mackenzie business, improving its supply chain and upstream capabilities. Overall, 37 funds from our database held shares of Verisk Analytics, Inc. (NASDAQ:VRSK) at the end of June.

In Autodesk, Inc. (NASDAQ:ADSK), Giovine reported holding 39,920 shares valued at $1.76 million. Following a 42% growth in the last month, the stock is up by 7% since the beginning of the year and can gain even more ground, since it has recently become an activist target. Scott Ferguson’s Sachem Head Capital initiated a 5.7% activist stake in Autodesk, Inc. (NASDAQ:ADSK) this week and expressed its intention to engage in discussions with the firm’s management. Passive investors often tend to jump on a stock following an activist, so we might see an increase in Autodesk, Inc. (NASDAQ:ADSK)’s popularity. As of June 30, 45 funds among those that we track reported holding 19.70% of the company’s outstanding stock.

On the next page, we are going to take a look at Giovine’s much larger tech picks, such as QUALCOMM, Inc. (NASDAQ:QCOM), Yahoo! Inc. (NASDAQ:YHOO), and Apple Inc. (NASDAQ:AAPL).

In QUALCOMM, Inc. (NASDAQ:QCOM), Giovine disclosed a $2.52 million stake that contains 46,915 shares. Qualcomm’s stock has recently taken a hit on the back of disappointing guidance provided by the company for its current fiscal year and is down by 28% year-to-date. However, activist Barry Rosenstein of JANA Partners has recently reiterated its bullish position on QUALCOMM, Inc. (NASDAQ:QCOM) and said that the company is trading at less than ten-times earnings, below the industry average and is therefore much better positioned than its semiconductor peers. JANA Partners held 28.82 million shares of QUALCOMM, Inc. (NASDAQ:QCOM) at the end of June.

Yahoo! Inc. (NASDAQ:YHOO) represents Giovine’s second-largest tech holding, the fund owning 100,116 shares worth $2.89 million as of the end of September. Yahoo’s stock has lost 32% since the beginning of the year, for many reasons, including its large equity position in Alibaba, which has been slumping amid a weak macroeconomic environment. Therefore, the performance of Yahoo! Inc. (NASDAQ:YHOO)’s stock is highly correlated with Alibaba and the upcoming spinoff of that stake will remove some of the pressure. Activist Jeff Smith of Starboard Value, who played a key role in Yahoo’s decision to spin-off its position in Alibaba, said during a recent interview that the value of the spinoff is currently not reflected in Yahoo! Inc. (NASDAQ:YHOO)’s stock price. Starboard held 3.55 million shares of Yahoo at the end of June.

Finally, Giovine’s top tech pick is Apple Inc. (NASDAQ:AAPL), in which the fund reported ownership of 47,250 shares worth $5.21 million. Despite being the largest company in terms of market cap, Apple Inc. (NASDAQ:AAPL)’s stock is still pretty cheap, trading at around 12-times forward earnings. The tech giant has a large buyback program and pays a decent dividend, which should drive the stock price higher. One of Apple Inc. (NASDAQ:AAPL)’s biggest fans is billionaire activist Carl Icahn, who during the recent Dealbook conference reaffirmed his stance on the Cupertino company, calling Apple “the greatest company in the world” due to its cheap valuation. However, the low price is due to investors’ concerns over the company’s dependence on a single product, even though so far it has not been a big issue.

Disclosure: None