John Griffin’s Top Tech Picks: Did Apple Inc (AAPL) Make The Cut?

BLUE RIDGE CAPITALApple Inc (NASDAQ:AAPL) is the top stock choice among the world’s richest hedge fund managers. As discussed in our feature with the Wall Street Journal’s MarketWatch, over 40% of the funds we track choose to hold the stock in their portfolios, taking the top spot in many instances. We’re going to take a longer look at one of those Apple Inc (NASDAQ:AAPL) bulls.

John Griffin, manager of Blue Ridge Capital, is the big brother of all so-called “tiger cubs,” which is the name given to mentees of famed investor Julian Robertson. Since launching Blue Ridge in the mid nineties, Griffin has amassed quite the group of investors, and currently manages just over $11 billion in assets under management.

Like all hedge funds, Blue Ridge has its fingers in many different asset classes, though it is particularly bullish on American equities. Griffin’s fund has over half of its capital in U.S. stocks, reporting a $6.6 billion 13F portfolio last quarter. Here’s a longer look. Of those holdings, nearly a fifth are invested in the technology sector, primarily in some of the market’s biggest behemoths, with none bigger than Apple Inc (NASDAQ:AAPL). Let’s take a look at Blue Ridge’s top two tech picks in greater detail.

Apple Inc (NASDAQ:AAPL)

No shocker here. Apple Inc (NASDAQ:AAPL) is currently Blue Ridge’s top stock pick, accounting for 6.6% of the fund’s portfolio for a total value of $438.9 million as of the end of last quarter. Of the funds we track, Griffin has the fifteenth largest position in the tech giant, with other tiger cubs like Philippe Laffont, Rob Citrone and Chase Coleman’s Tiger Global Management, each holding stakes worth more than $800 million. Other notable fund managers with an interest in Apple Inc (NASDAQ:AAPL) include David Einhorn and Jim Simons.

At the end of last quarter, Griffin increased his position in Apple Inc (NASDAQ:AAPL) by 4%, and in the time since, the stock has returned a shave over eight percentage points. As has been widely covered throughout the blogosphere, Apple hit $705 a share in the middle of September before falling back down to its current trading range of $630. The company has been through a lot in recent weeks, from a wild patent ruling against Samsung to its Maps snafu. While there are reasons to be bearish, we’re still talking about the Apple Inc (NASDAQ:AAPL) here.

The tech giant recently hit an all-time market cap high, topping even what Microsoft Corporation (NASDAQ:MSFT) reached during the height of the dot-com bubble. Despite the recent selloff, shares of Apple Inc (NASDAQ:AAPL) have still gained a whopping 56.2% since the start of 2012, and are surprisingly undervalued at the moment. Apple sports a PEG ratio of 0.68 even though analysts expect annual EPS growth in excess of 20% over intermediate term, and even more, it trades at a trailing P/E ( 14.9X) below both its industry average (16.4X) and its five-year historical average (21.9X).

Google Inc (NASDAQ:GOOG)

Similar to Apple Inc (NASDAQ:AAPL), Google also trades at a discounted earnings multiple. The company, which lost close to 8% after accidentally releasing a Q3 earnings miss in the middle of the trading day. At just over 20 times earnings, Google is 30% cheaper than the Internet content and information industry’s average (28.6X). Interestingly, the earnings of competitors like Apple Inc (NASDAQ:AAPL), Microsoft (14.7X),  and Yahoo! Inc. (NASDAQ:YHOO) (18.0X) are less sought after than those of Google.

Foreign search engine peers Baidu.com, Inc. (NASDAQ:BIDU) and Yandex NV (NASDAQ:YNDX) trade at more expensive P/Es, sporting multiples of 28.9X and 33.0X respectively. When growth is factored into the equation, however, we can begin to understand the picture a bit more clearly. With a PEG of 1.22, Google is fairly valued, but above the likes of Apple Inc (NASDAQ:AAPL) which was mentioned above, Baidu (0.70), and Yandex (0.93). Of its peers, only Microsoft is more expensive than Google from an earnings growth standpoint, with a PEG of 1.67. Yahoo trades nearly at parity with its primary search competitor.

While Yandex and Baidu have government-related concerns built into their discounts, the undervaluation of Apple Inc (NASDAQ:AAPL) is more of an enigma. At its current state, it seems like investors are hyperactively trading the stock at the sight of any news, forgetting the company’s real growth prospects. While it’s always possible that the loss of Steve Jobs is still in those investors’ minds, Tim Cook has proven himself a more than adequate successor. Apple Inc (NASDAQ:AAPL) reports its Q4 earnings on October 25th; analysts are expecting EPS of $8.85, a 25% growth from the same time last year.

In 2013, consensus is predicting that Apple Inc (NASDAQ:AAPL) will reach an EPS of $53.45, a near-doubling since 2011. By comparison, Google is expected to finish next year with earnings up 38.5% from 2011, while Microsoft (12.3%) and Yahoo (35.7%) expect slower growth.

Griffin’s Blue Ridge Capital holds over $300 million worth of Google in its portfolio, good for 4.6% of its total 13F holdings. Similar peers are bullish with Griffin in this stock, including Coleman and Laffont, while the infamous Ken Fisher also holds a $419 million position. Over the last quarter, Griffin was less bullish on Google than Apple Inc (NASDAQ:AAPL), as he chose to keep his holdings in the company flat.

Due to its superior growth prospects and cheaper valuation, we can perhaps understand why Griffin is placing a larger bet on Apple Inc (NASDAQ:AAPL) than Google. Judging by our empirical studies that show individual investors who mimic or “monkey” top-notch hedge funds can beat the market by 7% a year, we’d say its not a bad idea if you weight your portfolio the same.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!