After generating stellar returns in 2015 by increasing its exposure to information technology sector, Matrix Capital Management is again relying heavily on information technology stocks to outperform its peers this year. The latest 13F filing submitted by the Massachusetts-based hedge fund revealed that stocks from the information technology sector amassed over 52% of the value of its US equity portfolio at the end of March 2016, up from 41% at the end of 2015. The filing also revealed that Matrix Capital Management’s US equity portfolio, which was worth $2.05 billion as of March 31, was remarkably top-heavy going into the second quarter as its top 10 equity holdings alone accounted for over 90% of its portfolio value at that time. Founded in 1991 by famous venture capitalist Paul Ferri and Julian Robertson protégé David Goel, Matrix Capital Management was one of the best-performing funds in 2015 among the hedge funds tracked by Insider Monkey with its long positions in companies worth over $1 billion generating a weighted average return of 17.4% during the year. Considering the fund’s performance and its bullishness on the tech sector, in this post, we will be discussing the top-five tech stocks it was betting on heading into the second quarter.
We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).
#5 Knowles Corp (NYSE:KN)
– Shares Owned by Matrix Capital Management (as of March 31): 3.53 million
– Value of Holding (as of March 31): $46.52 million
Matrix Capital Management increased its stake in specialty audio component supplier Knowles Corp (NYSE:KN) by 81% during the first quarter, making the company its fifth largest tech holding at the end of that period. Knowles Corp (NYSE:KN) became an independent, publicly-traded company in February 2014 after it was spun off from Dover Corp (NYSE:DOV). While shares of Knowles Corp (NYSE:KN) held on to the levels they started trading at for about six months after its separation from Dover Corp, they have been on a perpetual decline since September 2014 and currently trade down 6.5% year-to-date. In February this year, the company revealed that its planning to sell its speaker/receiver component business to focus on higher margin products. Three months following that announcement, on May 20, it announced that it has entered into an agreement to sell that unit to Asian investment firm Loyal Valley Innovation Capital for an undisclosed sum. Ric Dillon‘s Diamond Hill Capital also increased its stake in Knowles Corp during the first quarter, by 16% to 698,452 shares.