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Did These Two Tech-Focused Investors Get Their Top Picks Right?

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Technology has always been a hot sector and investors that bought shares in good tech stocks managed to make fortunes over the years. However, among thousands of companies, only a few manage to stand out, and only a small number of investors earned large returns from playing in the tech sector. With the third quarter almost over, we’ve decided to take a closer look at some of the top picks of two outstanding tech-focused investors: Daniel Benton of Andor Capital Management and Philippe Laffont of Coatue Capital Management (pictured). Therefore, let’s take a closer look at the returns of these companies to see whether these two investors (and others as well) got them right.


We follow the companies in which hedge funds prefer to invest their capital as part of our small-cap strategy, which involves imitating 15 most popular small-cap picks among over 700 hedge funds. Why small-caps? Because we have conducted extensive backtests that covered the period between 1999 and 2012, which showed that, contrary to the general opinion, hedge funds’ top picks, which are mostly represented by large- and mega-cap companies, slightly underperformed the S&P 500 Total Return Index. On the other hand, their top small-cap ideas generated returns 95 basis points above the benchmark. Our strategy went live in August 2012, and since then it has returned 118%, beating the S&P 500 ETF (SPY) by some 60 percentage points (see more details here).

Philippe Laffont
Philippe Laffont
Coatue Management

Both Andor and Coatue have over half of their equity portfolios invested in the tech sector. Andor’s largest holding as of the end of June is represented by Tesla Motors Inc (NASDAQ:TSLA), on which Mr. Benton has been bullish for several years and saw an impressive appreciation of its holding after the stock skyrocketed. At the end of June, Andor held 1.0 million shares of Tesla Motors Inc (NASDAQ:TSLA), unchanged over the quarter, but the $268.26 million stake accounted for almost a quarter of its equity portfolio. During the third quarter, however, the stock inched down by 4.23%, slightly offsetting the year-to-date growth, which currently stands at 15%. Moreover, despite the significant growth of the stock, Tesla Motors Inc (NASDAQ:TSLA) has yet to win the approval of the majority of investors, because at the end of June only 26 of those from our database held $1.39 billion worth of stock, representing 4.10% of the company’s shares (by comparison, 104 funds held shares of GM).

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The next company that we should mention is Apple Inc. (NASDAQ:AAPL), which ranked on the first spot in Coatue’s 13F and represented Andor’s third-largest holding. Both investors increased their stakes: Andor doubled it to 500,000 shares, while Coatue added 859,600 shares and reported ownership of 8.55 million shares in its latest 13F, which amassed over 10% of its equity portfolio. Even though both of these bullish moves might reward investors in the long-term, so far, Apple Inc. (NASDAQ:AAPL)’s stock has slid by over 8% since the end of June and is less than 4% in the green year-to-date. However, the company seems to be on track with its developments and financial performance, and investors like it. In the latest round of 13F filings, Apple Inc. (NASDAQ:AAPL) ranked as the second-most popular stock, being included in the equity portfolios of 144 investors. With its new products being released and the next round of 13F filings approaching fast, it will be interesting to see if Apple manages to keep its leading spot in our database.

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Another company that both Messrs. Benton and Laffont seem to be fond of is Avago Technologies Ltd (NASDAQ:AVGO), whose stock hasslid by over 4.60% since July 1. In their latest 13F filings, Andor disclosed ownership of 625,000 shares, up by 79% on the second quarter, while Coatue’s stake was trimmed by 35% to 4.53 million shares. The company represented Andor’s second and Coatue’s third-largest position. Despite the slight decline, Avago Technologies Ltd (NASDAQ:AVGO)’s stock has appreciated by over 26% since the beginning of the year. What’s also important is that amid this appreciation, the stock has witnessed significant popularity among investors from our database. A total of 72 funds held stakes equal to almost 14% of the company’s shares at the end of June, compared to only 46 funds with long positions in Avago Technologies Ltd (NASDAQ:AVGO) a quarter earlier.

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