This article discusses the top 10 tech stock picks of Lee Munder’s hedge fund Lee Munder Capital Group.
Lee Munder Capital Group (LMCG) traces its history back to 1985, when it was founded as Munder Capital Management in the Motor City of Detroit by Lee Munder. Before starting Munder Capital Management, Mr. Munder was a senior partner at Loomis Sayles & Co. He received his bachelor’s degree from The Ohio State University and an MBA from Wayne State University.
The firm launched many mutual funds in the 80s, and in 1994 the Detroit-based bank, Comerica Incorporated (NYSE:CMA), invested in Munder Capital Management, becoming a partner. However, Munder Capital Management received mainstream recognition only after launching its NetNet mutual fund in the late 90s. Returning a whopping 175% in 1999, the NetNet mutual fund, which had invested primarily in dot-com era tech stocks, became a force to reckon with on Wall Street.
Assets managed by the NetNet mutual fund surpassed $11 billion by early 2000, and Munder Capital Management collectively managed capital worth $54 billion by the end of March 2000. However, things went downhill for the firm quickly after that. As the tech bubble burst, Munder Capital Management not only saw the value of its holdings drop significantly but also heavy redemptions from investors.
In 2000, amid the tech bubble bursting, Mr. Munder left Munder Capital Management and started another unaffiliated investment firm, Lee Munder Capital Group, headquartered in Boston, Massachusetts. Through a press release in December 2014, Lee Munder Capital Group, LLC informed investors that it had changed its name to LMCG Investments, LLC.
Lee Munder Capital Group (LMCG)’s Portfolio
According to LMCG Investments’ latest Form ADV filing, the firm had 1138 clients and managed assets worth close to $4.2 billion in April 2022. At the end of June, the aggregate value of LMCG Investments’ 13F holding was $1.45 billion, which represents a drop of 16% from the $1.725 billion reported by the fund at the end of March. LMCG Investments’ top 10 stock picks, which included names like Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corp. (NASDAQ:MSFT), in aggregate, accounted for 22.62% of its 13F portfolio value at the end of Q2.
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Our Methodology
Insider Monkey’s research shows that the consensus stock picks of the top hedge funds can produce returns that beat the broader market’s performance by a wide margin, which is why we actively track the portfolios of over 900 hedge funds. The stocks discussed in this article were selected from Lee Munder Capital Group (LMCG Investments)’s latest 13F filing for the quarter ending June 30.
Best Tech Stocks to Buy Now According to Lee Munder’s Hedge Fund
10. Oracle Corporation (NYSE:ORCL)
Lee Munder Capital Group’s Stake Value: $8,160,000
Percentage of Lee Munder Capital Group’s 13F Portfolio: 0.56%
Number of Hedge Fund Holders(Q1): 61
Oracle Corporation (NYSE:ORCL) was Lee Munder Capital Group’s 10th favourite tech stock and 47th top stock pick overall (excluding ETFs) at the end of Q2. After a steady decline in popularity among the hedge funds tracked by us between mid-2017 to early 2020, Oracle Corporation’s (NYSE:ORCL) stock again became noteworthy for smart money at the onset of the pandemic. In the two years between March 2020 and March 2022, the number of funds we tracked that reported a stake in Oracle Corporation (NYSE:ORCL) jumped to 63 from 50.
On August 5, The Wall Street Journal reported that the database software giant laid off hundreds of its employees as it increasingly focuses on its healthcare IT services and cloud businesses. The employees hit by this job cut chiefly worked for the company’s advertising and customer experience group. Late last year, Oracle Corporation (NYSE:ORCL) announced that it would be acquiring electronic-medical-records company Cerner Corp. for $28.3 billion, for which it recently received regulatory approval.
9. Meta Platforms, Inc. (NASDAQ:META)
Lee Munder Capital Group’s Stake Value: $9,309,000
Percentage of Lee Munder Capital Group’s 13F Portfolio: 0.64%
Number of Hedge Fund Holders(Q1): 200
Meta Platforms, Inc. (NASDAQ:META) has been one of the worst-performing large-cap tech stocks this year. Shares of the advertising giant are currently trading down close to 48% year-to-date and at a 54% discount to the lifetime high of $384.33 they made last year. Nonetheless, this decline has also made Meta Platforms, Inc.’s (NASDAQ:META) stock quite attractive according to analysts and investors, as it currently trades at a trailing price-to-earnings ratio of 13.94 and an EV-to-EBITDA multiple of 8.93.
Among the analysts who remain bullish on the company are those at Wells Fargo & Company. Though they reduced their price target on the stock to $275 from $325 on July 28, that price target still represents a potential upside of 62.17% from the current price. Moreover, they also reiterated their ‘Overweight’ rating on Meta Platforms, Inc.’s (NASDAQ:META) stock.
8. Motorola Solutions, Inc. (NYSE:MSI)
Lee Munder Capital Group’s Stake Value: $9,999,000
Percentage of Lee Munder Capital Group’s 13F Portfolio: 0.68%
Number of Hedge Fund Holders(Q1): 34
From a manufacturer of battery-eliminators to, at one time, a smartphone giant and now a communications and analytics software provider, Motorola Solutions, Inc. (NYSE:MSI) journey has been quite interesting. Its predecessor Motorola, Inc. was split into two companies in 2011 after suffering heavy losses during the financial crisis. Out of those two companies, Motorola Mobility was acquired by Lenovo in 2014, and Motorola Solutions, Inc. (NYSE:MSI) continues to trade as an independent publicly traded company.
For its most recent quarter ending July 2022, Motorola Solutions, Inc. (NYSE:MSI) reported non-GAAP earnings per share of $2.07 on revenue of $2.1 billion, topping analysts’ estimates by $0.20 and $40 million, respectively. For the same quarter in the previous year, the company had declared the same non-GAAP EPS of $2.07 but on a lesser revenue of $1.97 billion.
7. Micron Technology, Inc. (NASDAQ:MU)
Lee Munder Capital Group’s Stake Value: $13,295,000
Percentage of Lee Munder Capital Group’s 13F Portfolio: 0.91%
Number of Hedge Fund Holders(Q1): 78
DRAM and NAND manufacturer Micron Technology, Inc. (NASDAQ:MU) revealed on Tuesday that it expects a weaker market environment in its fourth quarter of 2022 and the first quarter of 2023. As a result, the company now expects its fourth-quarter revenue to be close to or below the low-end revenue guidance range of $6.8B and $7.6B that it had provided during its last earnings call on June 30.
Following this announcement from Micron Technology, Inc. (NASDAQ:MU), Raymond James analyst, Chris Caso, released a note to clients in which he downgraded the stock to ‘Outperform’ from ‘Strong-Buy’ and also reduced his price target on it to $65 from $72. However, not all analysts saw the company’s latest guidance in a bad light.
On August 10, Citigroup analyst Christopher Danely lowered his price target on Micron Technology, Inc.’s (NASDAQ:MU) stock to $75 from $80 but held his ‘Buy’ rating. In his note, Mr. Danely said that Micron Technology, Inc. (NASDAQ:MU) is showing three classic signs of bottoming out – 1) the stock is trading close to trough valuation, 2) most of the downside is already built in consensus analysts’ estimates, and 3) the company has lowered its capital expenditure spending.
6. Cisco Systems, Inc. (NASDAQ:CSCO)
Lee Munder Capital Group’s Stake Value: $14,027,000
Percentage of Lee Munder Capital Group’s 13F Portfolio: 0.96%
Number of Hedge Fund Holders(Q1): 66
Lee Munder Capital Group increased its staked marginally in Cisco Systems, Inc. (NASDAQ:CSCO) by 1,244 shares to 328,952 shares during the second quarter. Cisco Systems, Inc.’s (NASDAQ:CSCO) stock fell from a cliff on May 19 after the company posted third-quarter numbers below analysts’ projections and lowered its full-year earnings estimate on May 18 after market hours. Though the stock has recovered a bit since then, it is still trading down by 17.5% year-to-date.
Cisco Systems, Inc. (NASDAQ:CSCO) is scheduled to report its fiscal year 2022 fourth-quarter numbers on August 18. Analysts expect the company to report GAAP earnings per share of $0.68 on revenue of $12.78 billion for that period. Of the 25 analysts on Wall Street who cover Cisco Systems, Inc. (NASDAQ:CSCO), currently, more than half of them have a ‘Hold’ rating on the stock.
5. Applied Materials, Inc. (NASDAQ:AMAT)
Lee Munder Capital Group’s Stake Value: $15,415,000
Percentage of Lee Munder Capital Group’s 13F Portfolio: 1.06%
Number of Hedge Fund Holders(Q1): 74
Apart from Micron Technology, Inc. (NASDAQ:MU), Applied Materials, Inc. (NASDAQ:AMAT) was the only other semiconductor stock that made it to Lee Munder Capital Group’s top 10 stock picks at the end of June. Applied Materials, Inc. (NASDAQ:AMAT) popularity among smart money investors grew significantly from 2019 to 2021. At the end of 2021, 79 hedge funds tracked by us disclosed a stake in Applied Materials, Inc. (NASDAQ:AMAT), up 75% from 49 funds that reported a stake in the company at the end of 2018.
After President Biden signed the CHIPS Act into law on August 9, several semiconductor stocks, especially those with manufacturing facilities overseas, took a beating. This group included names like Nvidia (NASDAQ:NVDA), Micron Technology, Inc. (NASDAQ:MU) and Applied Materials, Inc. (NASDAQ:AMAT).
4. Amazon.com, Inc. (NASDAQ:AMZN)
Lee Munder Capital Group’s Stake Value: $38,866,000
Percentage of Lee Munder Capital Group’s 13F Portfolio: 2.67%
Number of Hedge Fund Holders(Q1): 271
Amazon.com, Inc. (NASDAQ:AMZN) was still the most popular stock at the end of Q1 among hedge funds we cover despite a decline in the number of hedge funds that disclosed holding a stake in the company to 271 from 279 at the end of 2021.
Earlier this week, LiveMint reported that the e-commerce giant is in advanced talks to acquire a 51% stake in India-based logistics solutions provider Ecom Express for between $500 million to $600 million valuing the latter at close to $1.2 billion. If the deal goes through, it will provide an exit to global private equity giant Warburg Pincus LLC which currently owns a 52.2% stake in Ecom Express.
On August 10, Amazon.com, Inc. (NASDAQ:AMZN) announced that it is expanding its palm-scanning technology, first introduced in 2020 as part of the Amazon One payment service, to 65 Whole Foods stores in California.
3. Alphabet Inc. (NASDAQ:GOOG)
Lee Munder Capital Group’s Stake Value: $51,697,000
Percentage of Lee Munder Capital Group’s 13F Portfolio: 3.55%
Number of Hedge Fund Holders Class A stock (Q1): 205
Number of Hedge Fund Holders Class C stock (Q1): 160
At the end of June, Lee Munder Capital Group (LMCG) held 137,720 Class C stock and 336,620 Class A stock of search giant Alphabet Inc. (NASDAQ:GOOG), with an aggregate value of $51.69 million, which made the company LMCG’s third favourite tech pick.
Bloomberg reported on August 10 that the US Justice Department is planning to sue Alphabet Inc. (NASDAQ:GOOG) as soon as next month on antitrust concerns over the company’s dominant position in the ad market. The Justice Department has already interviewed a few publishers and will interview more in the coming days to strengthen its case. This is not the first time the DOJ has sued Alphabet Inc. (NASDAQ:GOOG). In 2020, the regulator launched an antitrust investigation of the company’s online search market dominance.
2. Apple Inc. (NASDAQ:AAPL)
Lee Munder Capital Group’s Stake Value: $55,960,000
Percentage of Lee Munder Capital Group’s 13F Portfolio: 3.85%
Number of Hedge Fund Holders(Q1): 131
Despite being the world’s largest company by market cap, Apple Inc. (NASDAQ:AAPL) could only manage the 11th spot in our rankings of the most popular stock among smart money investors for Q1. Only 131 of the 912 hedge funds we track disclosed having a stake in the smartphone giant at the end of that period. The Oracle of Omaha’s Berkshire Hathaway held close to 900 million shares of Apple Inc. (NASDAQ:AAPL), worth over $155 billion, at the end of March, making it the largest shareholder of the company by a wide margin among funds tracked by us.
Ming-Chi Kuo, an analyst at TF International Securities, wrote a small Twitter thread on August 10 arguing that Apple Inc. (NASDAQ:AAPL) could raise the average selling price of its iPhone 14 series. Mr. Kuo tweeted:
Hon Hai/Foxconn is one of the winners of the increased ASP of iPhone 14 series. I estimated iPhone 14 series ASP would increase by about 15% (vs. iPhone 13 series ASP) to $1,000-1,050 (USD) due to two iPhone 14 Pro’s price hikes & higher shipment proportion.
Hon Hai is the major EMS for iPhone 14 series (with a 60-70% order proportion), so its revenue will markedly benefit from an increased iPhone 14 series ASP. No wonder Hon Hai raises full-year performance to “growing” from “roughly flat.”
1. Microsoft Corp. (NASDAQ:MSFT)
Lee Munder Capital Group’s Stake Value: $61,992,000
Percentage of Lee Munder Capital Group’s 13F Portfolio: 4.27%
Number of Hedge Fund Holders(Q1): 259
Microsoft Corp. (NASDAQ:MSFT) continued to remain Lee Munder Capital Group’s favourite technology stock and also its top stock pick at the end of the second quarter. Although Microsoft Corp.’s (NASDAQ:MSFT) stock might be trading lower by 18% from its lifetime high of $349.67 made last year, it still boasts of returning close to 900% gain to shareholders through price appreciation alone over the previous 10 years.
Several analysts covering Microsoft Corp. (NASDAQ:MSFT) have reduced their price target on the stock after the company reported its fiscal year 2022 fourth-quarter earnings on July 26. Despite that, 31 of the 32 analysts on Wall Street currently maintain a ‘Buy’ rating on the stock with a consensus price target of $335.72, representing a potential upside of 16.7% from the current stock price.
You can also look at Donald Yacktman’s Latest Portfolio: Top 10 Stock Picks and 10 Best Stocks to Buy According to Charles Paquelet’s Skylands Capital
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Disclosure: None. 10 Best Tech Stocks to Buy Now According to Lee Munder’s Hedge Fund is originally published on Insider Monkey.
