It is one of the market’s great paradoxes. Although today’s tech giants are some of the largest companies in the world, many of them are growing at double-digit percentage rates. While the law of large numbers has befallen Apple Inc. (NASDAQ:AAPL), and to an extent Microsoft Corporation (NASDAQ:MSFT), Facebook Inc (NASDAQ:FB), Alphabet Inc (NASDAQ:GOOGL), and Amazon.com, Inc. (NASDAQ:AMZN) are still growing rapidly. In this article, we analyze the five tech giants more in depth and use recently filed 13F data to see how hedge funds adjusted their portfolios in these names during the first quarter.
We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see the details here).
#5 Amazon.com, Inc. (NASDAQ:AMZN)
– Number of Hedge Fund Holders (as of March 31): 133
– Total Value of Hedge Fund Holdings (as of March 31): $14.7 billion
– Hedge Fund Holdings as Percent of Float (as of March 31): 5.30%
Of the 766 elite funds that Insider Monkey tracks, Amazon.com, Inc. (NASDAQ:AMZN) was included in the equity portfolios of 133 funds at the end of the first quarter, down from 141 in the fourth quarter. Hedge funds are for the most part still long Amazon.com because they like the company’s seemingly unbeatable strategy of driving down margins for everybody else and slowly gaining market-share until reaching critical mass. Because of Amazon’s strategy, the company has expanded into many different verticals and has grown revenues rapidly. With the emergence of its highly profitable cloud division, Amazon’s revenue growth will likely translate to profit growth in the future too. Although the stock trades at a nose-bleed forward P/E of 71, Amazon could prove cheap in a decade’s time if its growth initiatives bear fruit.
#4 Microsoft Corporation (NASDAQ:MSFT)
– Number of Hedge Fund Holders (as of March 31): 144
– Total Value of Hedge Fund Holdings (as of March 31): $20.83 billion
– Hedge Fund Holdings as Percent of Float (as of March 31): 4.80%
Although the decline of the PC market caught Microsoft Corporation (NASDAQ:MSFT) off-guard and the company totally missed the boat on social and search, Microsoft still dominates the Enterprise segment, and it is rapidly catching up in the cloud space. Microsoft’s Office is still the main productivity suite used by millions of companies around the world and the company’s cloud division is rapidly growing. With a dividend yield of 2.88% and a reasonable forward P/E of 17.32, the stock is arguably a value play and could rally substantially if the company’s HoloLens becomes a hit.