In this article, we will discuss the 10 best tech stocks to buy now.
The technology sector remains an attractive investment avenue for investors around the globe, whether they are novices just starting out their investment journey, or seasoned investors like Warren Buffett, Cathie Wood, Ken Griffin, and John Armitage, whose investment portfolios are brimming with tech stocks.
The COVID-19 pandemic affected industries and markets worldwide, however, if a sector thrived during the global health crisis, it had to be the technology sector. Tech companies like Zoom Video Communications, Inc. (NASDAQ:ZM), experienced a pandemic-driven growth of 369% in Q4 2020, and an increase in market cap of $58 billion as compared to the year before the global COVID-19 pandemic.
According to Forrester, the US tech industry outlook is positive, with the budget for the technology sector expected to increase by 7.4% in 2021 and 6.7% in 2022. As companies adjust to the new normal, they will automate more processes and shift to the cloud, which will result in strong software spending: 10% growth in software spending is expected in 2021 and 11% in 2022.
Higher investment in technology equipment is expected in the upcoming years, due to data center capacity expansion, 5G buildout, and growing electronics content in automotive and industrial applications.
Some of the most popular tech stocks among hedge funds are the Big Five US tech giants, namely Amazon.com, Inc. (NASDAQ:AMZN), Facebook, Inc. (NASDAQ:FB), Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL).
Our Methodology
With this context in mind, let’s discuss the 10 best tech stocks to buy now. We considered the hedge fund sentiment around each stock, analysts’ ratings, long-term growth potential, and fundamentals while selecting these stocks.
Why are we using hedge fund popularity as a metric in our stock selection methodology?
Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the S&P 500 ETF (SPY). Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
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Best Tech Stocks to Buy Now
10. salesforce.com, inc. (NYSE:CRM)
Number of Hedge Fund Holders: 108
Salesforce.com, inc. (NYSE:CRM) is a Californian software company, best known for its cloud-based solutions. The company markets itself primarily as a customer relationship management (CRM) service provider. salesforce.com, inc. (NYSE:CRM)’s suite of applications also targets marketing automation, customer service, application development, and data analytics.
Out of the 873 hedge funds monitored closely by Insider Monkey, 108 funds were bullish on salesforce.com, inc. (NYSE:CRM), with stakes valued at $11.76 billion, at the end of June. This is compared to 91 hedge funds in the previous quarter, with stakes worth $8.83 billion.
On September 24, Rishi Jaluria, an RBC Capital analyst, kept an Outperform rating on salesforce.com, inc. (NYSE:CRM). He raised the price target to $325 from $310.
RV Capital Management mentioned salesforce.com, inc. (NYSE:CRM) in its Q2 2021 investor letter. Here is what they had to say:
“Part 5: A New Investment in Salesforce.com
The assertion that mega caps can also be mispriced is a good segue to our second new investment in Salesforce.com. Salesforce is one of the largest software companies in the world with a market value of around US$ 250 bn. It is best known for its customer relationship management or “CRM” solution, known as its Sales Cloud. It has three additional clouds (“Service,” “Marketing” and “Commerce”) as well as a thriving platform business with both owned and 3rd party software solutions.
I first came across Salesforce in 2013. I was invested in Bechtle, a German company that provides companies with their in-house IT. I kept hearing about a strange new concept called “the Cloud” and wanted to get up to speed on the topic in case it was a risk to Bechtle. As a result, I picked up a copy of “Behind the Cloud”. It documents how Salesforce.com pioneered cloud-based software and revolutionised the software industry.
Since then, I have followed Salesforce from a distance and visited it several times in San Francisco. I did not consider it seriously as an investment though as for much of the period, I had not yet overcome my aversion to loss-making companies.
This changed in December last year when Salesforce announced the acquisition of Slack (a former investment of the Business Owner Fund, described in my 2020 half-year letter) for US$ 27 bn. On the date of announcement, Salesforce’s market value fell by around US$ 20 bn. Effectively, the market was saying that Slack was almost worthless, which, as an enthusiastic owner of Slack, I disagreed with. Initially, I decided to keep our Slack stock and roll it into Salesforce (as part of the consideration was in Salesforce’s own stock). As Salesforce’s price fell further in the subsequent months, I bought its stock directly to make it a full-size position post the closing of the Slack acquisition…” (Click here to see the full text)
9. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 113
The next top tech stock to buy now according to our research is Netflix, Inc. (NASDAQ:NFLX), a California-based online streaming service and an original programming production company. Netflix, Inc. (NASDAQ:NFLX) offers subscription-based access to films and TV series to customers around the globe. Netflix, Inc. (NASDAQ:NFLX) is categorized as a Silicon Valley high-tech company, and is one of the most trusted global brands. As of Q2 2021, Netflix, Inc. (NASDAQ:NFLX) reported approximately 209 million paying customers.
As of the end of the second quarter of 2021, 113 hedge funds tracked by Insider Monkey were long Netflix, Inc. (NASDAQ:NFLX), with reported stakes of $13.2 billion.
Benjamin Swinburne, a Morgan Stanley analyst, kept an Overweight rating on the stock, raising the price target to $675 from $650.
Polen Capital mentioned Netflix, Inc. (NASDAQ:NFLX) in its Q2 2021 investor letter. Here is what they said:
“For Netflix, we believe the underlying businesses for the company remain strong. With Netflix, we anticipate content spending to moderate as subscriber growth continues, which we believe should result in attractive double-digit earnings and cash flow growth over the next five years and beyond.”
8. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders: 135
Another great tech stock to buy now is Uber Technologies, Inc. (NYSE:UBER), a mega company that has made transportation feasible for millions with its mobility-as-a-service business model. The San Francisco-based company serves customers in more than 900 metropolitan cities around the world.
At the end of June, 135 hedge funds in Insider Monkey’s elite database were bullish on Uber Technologies, Inc. (NYSE:UBER), up from 130 in the previous quarter.
Mark Mahaney, an Evercore ISI analyst, added Uber Technologies, Inc. (NYSE:UBER) to the “Tactical Outperform List”, while keeping an Outperform rating on the stock with a price target of $70. He believes that Uber Technologies, Inc. (NYSE:UBER) is one of the least risky stocks to invest in, and its growing position as a food delivery service adds even more value to the shares.
Uber Technologies, Inc. (NYSE:UBER) is quite popular amongst the smart money, making it a feasible investment, just like Amazon.com, Inc. (NASDAQ:AMZN), Facebook, Inc. (NASDAQ:FB), Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL).
ClearBridge Investments mentioned Uber Technologies, Inc. (NYSE:UBER) in its Q2 2021 investor letter. Here is what they said:
“The pandemic has also brought attention to the question of gig worker employment status for companies, including ClearBridge holdings Uber and Lyft. In the U.K., Uber proactively classified its drivers as “workers” ahead of final rulings from the British court system. The worker status in the U.K. is a designation between self-employed and employed status that entitles drivers to minimum wage, holiday pay and in some cases a pension.
ClearBridge has engaged with Uber on labor issues since its IPO, and we have given feedback over that time to the CEO, CFO, Chief Legal Officer and Investor Relations on labor relations as well as strategy and communications. Uber’s agreement on this designation is ahead of other competitors in the market and the legal mandate represents a step forward in the company’s thinking about labor. The agreement represents a short-term hit to earnings, yet in some ways it places Uber ahead of the market in its ability to balance labor and shareholder interests. Workers benefit from improved conditions, with new contributions amounting to roughly 3% of a driver’s earnings, while Uber establishes more certainty on costs and visibility into its regulatory environment and operation conditions in the future.”
7. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 138
Apple Inc. (NASDAQ:AAPL)’s Macintosh operating system is one of the most widely used and well-liked among masses. As of 2021, Apple Inc. (NASDAQ:AAPL) is the fourth largest smartphone and computer manufacturer. The company has extremely loyal customers and Apple Inc. (NASDAQ:AAPL) is one of the most valuable brands in the world.
As of the end of the second quarter of 2021, 128 hedge funds tracked by Insider Monkey were bullish on Apple Inc. (NASDAQ:AAPL), up from 127 in the previous quarter.
Evercore ISI analyst Amit Daryanani kept an Outperform rating on Apple Inc. (NASDAQ:AAPL)’s shares, with a $180 price target on October 15. He said that Apple Inc. (NASDAQ:AAPL) had great chances to expand in the digital advertising market over the next few years.
ClearBridge Investments mentioned Apple Inc. (NASDAQ:AAPL) in its Q1 2021 investor letter. Here is what they said:
“As we actively manage holdings and position sizes, we look to regularly recycle capital into more compelling opportunities. Maintaining our valuation discipline, we sharply reduced our position in Apple, whose shares more than doubled following our initial purchase in mid-2019 with an earnings multiple rising from the low-to-mid teens to nearly 30x.”
6. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 143
PayPal Holdings, Inc. (NASDAQ:PYPL) is an American financial technology company that offers online money transactions via its digital payment system. The company operates in most countries, allowing a safe online alternative to paper money and manual transfer of funds.
The stock is quite popular among hedge funds. 143 hedge funds in Insider Monkey’s database were bullish on PayPal Holdings, Inc. (NASDAQ:PYPL) at the end of June. This is compared to the same number of hedge funds in the previous quarter as well. Axel Capital Management is the leading stakeholder in PayPal Holdings, Inc. (NASDAQ:PYPL), with stakes valued at $11.4 million.
Here is what Wedgewood Partners has to say about PayPal Holdings Inc. in its Q3 2021 investor letter:
“Top performance detractors for the first quarter include PayPal. PayPal reported +40% growth in total payment volume to $311 billion during the second quarter’s most recent report. In spite of this impressive growth, the stock detracted from performance as the market became overly concerned about the pace at which its legacy eBay business rolled off. Despite the stock’s premium valuation, we continue to hold PayPal as a core position and think eBay represents short-term noise in PayPal’s longer-term drive to become a “super-app” with payments at its core.”
5. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 146
Alibaba Group Holding Limited (NYSE:BABA) is a Chinese multinational technology company focusing on e-commerce and retail. The company specializes in customer-to-customer, business-to-customer, and business-to-business sales, integrated and safe online payment systems, shopping search engines, and cloud computing services.
At June end, 146 hedge funds observed by Insider Monkey were long Alibaba Group Holding Limited (NYSE:BABA), up from 135 in the previous quarter.
KeyBanc analyst Hans Chung kept an Overweight rating on Alibaba Group Holding Limited (NYSE:BABA)’s share as of October 1, but lowered the price target from $250 to $200. He expects lower Q2 growth owing to weaker than expected macro.
Polen Capital Management mentioned Alibaba Group Holding Limited (NYSE:BABA) in its Q2 2021 investor letter. Here is what they had to say:
“Alibaba also detracted from performance as the company continues to remain under regulatory scrutiny from both the Chinese State Administration for Market Regulation on antitrust concerns and the U.S. Securities and Exchange Commission on ADR listing requirements. Despite the regulatory overhang, we believe that Alibaba’s competitive positioning and growth outlook remains intact, even if the company must pay fines or modify some business practices. We viewed the current valuation at <20x next twelve month’s earnings as a compelling opportunity to add to our position. Alibaba is the second largest position in the Portfolio.”
4. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 155
As of the end of June, 155 hedge funds in Insider Monkey’s database were bullish on Alphabet Inc. (NASDAQ:GOOG), down from 159 in the previous quarter.
On October 12, JP Morgan analyst Doug Anmuth kept an Overweight rating on Alphabet Inc. (NASDAQ:GOOG), stating a price target of $3250. He said that company shares were up 60% year-to-date, and Alphabet Inc. (NASDAQ:GOOG) continues to be the most liked, best owned, and least discussed Big Five stock.
Alphabet Inc. (NASDAQ:GOOG) announced earnings for the second quarter on July 27. The actual EPS was $27.26, exceeding estimated EPS by $8.16. Similarly, the revenue for Alphabet Inc. (NASDAQ:GOOG) was $61.88 billion, beating estimates by $5.8 billion.
Wedgewood Partners mentioned Alphabet Inc. (NASDAQ:GOOG) in its Q3 2021 portfolio. Here is what they said:
“Alphabet’s core Google search business accelerated to multiyear highs, up nearly +70% driven in part by advertisers rushing to the Company’s Android platform. We estimate Android runs on nearly three-quarters of all smartphones; however, its share of ad spend is lower. Recent policy changes to Apple’s iOS operating system have made it more difficult for advertisers to get a return on its ad spend across the Apple ecosystem. These changes should help close the gap between Android and iOS advertising share and sustain Alphabet’s torrid growth.”
3. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 238
Out of the 873 hedge funds in Insider Monkey’s extensive database, 238 funds were long Microsoft Corporation (NASDAQ:MSFT), with stakes worth $62.46 billion at the end of June.
The quarterly earnings for the second quarter were announced by Microsoft Corporation (NASDAQ:MSFT) on July 27. The reported earnings per share were valued at $2.17, beating estimates by $0.24. Microsoft Corporation (NASDAQ:MSFT)’s revenue of $46.15 billion also exceeded estimates by $1.85 billion.
Baron Opportunity Fund mentioned Microsoft Corporation (NASDAQ:MSFT) in its Q2 2021 investor letter. Here is what the fund said:
“Shares of Microsoft Corporation, a cloud-software leader and provider of software productivity tools and infrastructure, rose during the quarter following a strong earnings report highlighting solid demand for its broad product stack and continued momentum migrating its business to the cloud. Microsoft was a top contributor in the period because it trades at reasonable free cash flow and earnings valuations, has cloud and digital transformation tailwinds at its back, reported a solid March quarter, and beat Street expectations by a wide margin. Microsoft’s results continued to be strong across the board, with Azure cloud computing revenues up 46% in constantcurrency (“cc”) terms and commercial cloud bookings growth of 38% cc, the best in years. Microsoft also reported robust profitability growth, with operating income expanding 31% and GAAP earnings up 45%. We believe the company is well positioned for continued solid growth and profitability through market share gains as more companies look to transform and digitize their businesses as they move operations to the cloud.”
2. Facebook, Inc. (NASDAQ:FB)
Number of Hedge Fund Holders: 266
Facebook, Inc. (NASDAQ:FB) is one of top American tech stocks to invest in. The California-based multinational technology corporation operates primarily as a social networking service, with over 2.9 billion active monthly users as of 2021.
The stock is extremely well-liked by the smart money. 266 hedge funds in Insider Monkey’s database were bullish on Facebook, Inc. (NASDAQ:FB) at the end of June, up from 257 in the previous quarter.
Mark Mahaney, an Evercore ISI analyst, kept an Outperform rating on the stock, setting a price target of $450 on October 15. However, Mahaney added Facebook, Inc. (NASDAQ:FB) to the firm’s “Tactical Underperform List”, citing tougher comps and the challenging online retail environment.
Wedgewood Partners mentioned Facebook, Inc. (NASDAQ:FB) in its Q3 2021 investor letter. Here is what they said:
“Facebook detracted from performance despite posting a staggering +56% growth in advertising revenues. Much of the stock’s underperformance was driven by non operating concerns that we view as mostly political in nature. The Company’s digital properties command a massive audience of over 2.7 billion daily users, so any government or state actor would be able to wield tremendous power by controlling that audience and it should not be a surprise when those actors attempt to do that. However, Facebook has invested aggressively in its content curation capabilities that address many of the concerns raised by media and political critics. We continue to carry Facebook at our maximum weighting as the stock is trading in line with a market multiple despite unrivaled competitive positioning and rapid growth, representing one of the best risk-rewards available in the market.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 271
Amazon.com, Inc. (NASDAQ:AMZN) is a highly sought-after tech stock by hedge funds. The American tech multinational specializes in e-commerce, cloud computing, digital streaming, and artificial intelligence.
Amazon.com, Inc. (NASDAQ:AMZN) is the most popular tech stock amongst hedge funds. At the end of June, of the hedge funds tracked by Insider Monkey, 271 funds were long Amazon.com, Inc. (NASDAQ:AMZN), up from 243 in the previous quarter.
Baird analyst Colin Sebastian kept an Outperform rating on Amazon.com, Inc. (NASDAQ:AMZN) on October 13, setting the price target at $4000. Even though the future outlook of the company was positive, according to Sebastian, Q4 and 2022 earnings would be lower due to an increase in labor costs, logistics and transportation expenses, product costs, and expensive technology infrastructure.
Worm Capital LLC mentioned Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2021 investor letter. Here is what they said:
“Our core portfolio as of this writing—TSLA, SPOT, SHOP, ABNB, and AMZN—are all premier examples of companies that use the concept of aggregation of marginal gains to continuously improve their value proposition for customers. After all, what is innovation if not just a continuous search for fractional advantages in business?
Amazon, for instance, accumulates marginal gains by compressing their costs year after year for consumers, creating an infrastructure and logistics network unrivaled by its peers. In the short-term, the market can often misunderstand the intentions of the “marginal gain accumulators,” but over time, their value-creation becomes obvious in hindsight.”
You can also take a look at 11 Best Penny Stocks To Buy According To Hedge Funds and 10 Stocks in the Limelight After Earnings Reports.
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Disclosure: None. 10 Best Tech Stocks to Buy Now is originally published on Insider Monkey.
