In this article, we discuss the 10 best tech stocks to buy now according to Totem Point Management. You can skip our detailed analysis of Totem Point Management’s history, investment philosophy, and hedge fund performance, and go directly to 5 Best Tech Stocks to Buy Now According to Totem Point Management.
Neal Nathani and Darren Dinneen’s Totem Point Management is a New York-based investment firm that was founded in 2013 with seed money from Maverick Capital. Mr. Nathani, the fund’s portfolio manager, spent more than a decade working for the Tiger family of funds, while Mr. Dinneen previously worked as an analyst at H Partners Management.
Totem Point Management focuses primarily on tech stocks that are undergoing secular change and maintains a relatively concentrated portfolio. The fund is long-biased, though it has also found increasing success in identifying alpha-generating themes on the short side of its portfolio.
Microsoft Corporation (NASDAQ:MSFT), Marvell Technology Group Ltd. (NASDAQ:MRVL), and Alphabet Inc. (NASDAQ:GOOG) are among the favorite tech stocks of Totem Point Management, whose founding partners began their careers in the tech space.
Since its inception in August 2013, the Totem Point Master Fund Ltd. has delivered a compound annual return of 7.78% through March 2020. The fund was getting into a solid groove before the pandemic hit, with three straight years of double-digit returns before losing over 10% in the first quarter of 2020. Totem Point held assets under management of over $309 million as of March 30, 2021. At the end of the third quarter of 2021, Totem Point’s 13F portfolio contained 15 long positions valued at $154 million, the vast majority of which were tech stocks. We’ll look at the fund’s top ideas in the tech industry in this article.
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Now then, let’s check out the 10 Best Tech Stocks to Buy Now According to Totem Point Management, which includes the likes of Microsoft Corporation (NASDAQ:MSFT), Marvell Technology Group Ltd. (NASDAQ:MRVL), and Alphabet Inc. (NASDAQ:GOOG). Note that all hedge fund data is based on the exclusive group of 800+ funds tracked by Insider Monkey as part of our market-beating investment strategy.
10 Best Tech Stocks to Buy Now According to Totem Point Management
10. Twilio Inc. (NYSE:TWLO)
Totem Point Management’s Stake Value: $9,230,000
Percentage of Totem Point Management’s 13F Portfolio: 6.01%
Number of Hedge Fund Holders: 96
Cloud communications software provider Twilio Inc. (NYSE:TWLO) kicks off the list of best tech stocks to buy now according to Totem Point Management, as the fund owned 28,930 TWLO shares on September 30, adding a net total of 1,283 shares to its position during the quarter. Twilio has grown extremely popular among hedge funds in recent quarters, as there’s been a 71% jump in ownership of the stock since the end of Q1 2020.
Twilio Inc. (NYSE:TWLO) has been highly successful in growing its revenue, which jumped by 65% in the first nine months of 2021 compared to the same period a year earlier, but its 73% surge in operating expenses wiped out any potential earnings benefits from that sales increase. While strong revenue growth is likely to continue, analysts are skeptical about when Twilio Inc. (NYSE:TWLO) will actually begin turning a GAAP profit, with the consensus being that it won’t happen until at least 2025.
9. Analog Devices, Inc. (NASDAQ:ADI)
Totem Point Management’s Stake Value: $9,258,000
Percentage of Totem Point Management’s 13F Portfolio: 6.02%
Number of Hedge Fund Holders: 74
Analog Devices, Inc. (NASDAQ:ADI) is the first of several chipmakers to appear among the top tech stock picks of Totem Point Management, though the fund did unload 35% of its ADI position during Q3. That left it with a stake of 55,280 shares valued at $9.26 million as of September 30. Analog Devices has also proven wildly popular among hedge funds lately, as there’s been a 42% jump in ownership of the stock during the previous two quarters.
In its Q3 2021 investor letter, Madison Funds discussed Analog Devices, Inc. (NASDAQ:ADI)’s huge growth potential in the electric vehicle space, noting that the company’s VP of Automotive Mark Gill had previously stated that the company earns nearly 150% more per fully equipped EV than it does for a similar combustion vehicle. The fund is also high on Analog Devices, Inc. (NASDAQ:ADI)’s EV battery management system, stating that though it comprises just 1% to 1.5% of the company’s product mix, it could contribute close to an additional point in top line growth annually as EV production continues to grow.
Madison Funds, an investment management firm, published its “Madison Investors Fund” third-quarter 2021 investor letter and mentioned Analog Devices, Inc. (NASDAQ:ADI). Here‘s what the fund said:
“At its 2017 investor day, Analog Device’s VP of Automotive, Mark Gill, described how the company’s content on well-equipped electric vehicles was $600 per car compared to $250 per car for the traditional 2017 internal combustion engine car. Since then, Analog has highlighted the success of its EV battery management systems (BMS) product nearly every quarter. The BMS product is hardware and software that manages the power into and out of the battery systems. It’s the brains of the operation. Analog says it’s on its fifth generation BMS product, that it has the no. 1 market share in high voltage products, and that it is on 5 of the top 10 selling EVs. While we think that the BMS product is just 1 to 1.5% of Analog’s product mix, we think that it could add nearly a point of revenue growth per year to the company’s top-line given the expected ramp in EV production. This is a material amount of growth atop an already nicely growing company revenue line.”
8. Sea Limited (NYSE:SE)
Totem Point Management’s Stake Value: $9,645,000
Percentage of Totem Point Management’s 13F Portfolio: 6.28%
Number of Hedge Fund Holders: 117
Totem Point has been a Sea Limited (NYSE:SE) shareholder since the third quarter of 2020 and held 30,261 shares of the e-commerce and mobile gaming juggernaut a year later. Hedge funds have certainly taken note of the company, which has been one of the top performers on the market in recent years, as hedge fund ownership of SE has increased 8-fold since the end of 2018. Sea Limited (NYSE:SE) shares have hit a rough patch in recent months, however, as interest rate hikes have caused investors to flee richly-valued assets in favor of more durable names. There also appears to be some skepticism about Sea’s aggressive expansion plans, which could weigh on the company’s already struggling bottom-line.
Sea Limited aims to use its Southeast Asian growth template of cross-selling its other services to the players of its wildly popular Free Fire mobile game in regions like Europe, India, and Latin America, where the game is also popular. Free Fire hit a record peak of over 150 million daily active users last year. Sea Limited (NYSE:SE) pulled in $6.7 billion in sales during the first nine months of 2021, a 140% year-over-year jump.
ClearBridge Investments, an investment management firm, published its “Large Cap Growth Strategy” third quarter 2021 investor letter and mentioned Sea Limited (NYSE:SE). Here‘s what the fund said:
“Over the last year, we have sought to improve the up capture of the portfolio by expanding exposure to the select bucket of companies growing revenues and earnings at meaningfully above-average rates and targeting large total addressable markets. Newer names in the select bucket like Sea Limited have been strong contributors to relative performance over this period. We believe that owning a broader group of IT and Internet companies with different drivers to the businesses helps manage some of the risk in this relatively more expensive subsector.”
7. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Totem Point Management’s Stake Value: $9,811,000
Percentage of Totem Point Management’s 13F Portfolio: 6.38%
Number of Hedge Fund Holders: 65
Two more chipmakers round out the first part of this list, beginning with Advanced Micro Devices, Inc. (NASDAQ:AMD), which Totem Point has been a shareholder of since the first quarter of 2019. The fund sold off 40% of its AMD stake in Q3, leaving it with 95,347 shares valued at $9.81 million on September 30.
Advanced Micro Devices, Inc. (NASDAQ:AMD) has been another one of the better-performing stocks over the past five years, gaining just over 800%. Hedge funds have somewhat missed the boat, as there’s been a modest 41% increase in hedge fund ownership of AMD over the past five years.
Investment firm Alger discussed Advanced Micro Devices, Inc. (NASDAQ:AMD) in the Alger Mid Cap Focus Fund’s Q4 2021 investor letter and sounded upbeat about the company’s prospects for 2022, which it believes could be another strong year for the company with market share gains against many of its product offerings, thanks in part to rival Intel struggling to bring new offerings to the market. The fund further notes that AMD is likely to generate further gross margin expansion. AMD grew sales by 68% in 2021 and anticipates that revenue will rise by another 31% this year.
Alger, an investment management firm, published its “Alger Mid Cap Focus Fund” fourth quarter 2021 investor letter and mentioned Advanced Micro Devices, Inc. (NASDAQ:AMD). Here‘s what the fund said:
“Advanced Micro Devices (AMD) designs and sells CPUs and graphics processing units (GPUs) for desktops, notebooks and gaming consoles, as well as for datacenter and professional environments. AMD’s key product families include Ryzen processors for personal computers, Radeon processors for graphics and EPYC processors for servers. AMD is gaining market share as it is undergoing a major server product upgrade cycle while its only competitor (Intel) is struggling to deliver new offerings. AMD shares outperformed in the most recent quarter in response to the company’s third quarter results substantially exceeding consensus expectations and management providing very strong guidance despite ongoing supply chain constraints. The updated revenue guidance for full-year 2021 is nearly $600 million above consensus and $2.7 billion above the initial fiscal year 2021 guidance provided by the company in January. AMD also repurchased approximately $750 million in stock during the quarter. Management’s commentary suggests that AMD is well positioned for 2022 to be another very strong year with continued market share gains across product offerings, a strong data center market, improving traction in its enterprise segment and no slowdown in the gaming console business. Management also implied it will make further progress in the graphics business. In addition, AMD is currently positioned to generate gross margin expansion resulting from an improving product mix and strong operating expense leverage despite the company increasing its marketing budget and spending for research and development.”
6. NVIDIA Corporation (NASDAQ:NVDA)
Totem Point Management’s Stake Value: $11,777,000
Percentage of Totem Point Management’s 13F Portfolio: 7.66%
Number of Hedge Fund Holders: 83
NVIDIA Corporation (NASDAQ:NVDA) closes out the first part of this list, with 56,848 shares of the chipmaker being held in Totem Point’s 13F portfolio as of September 30. The fund has been a shareholder of NVDA since Q1 2020, during which time its shares have gained over 300%. One of the 5 Metaverse Stocks to Invest In thanks to its virtual reality Omniverse platform, NVIDIA Corporation (NASDAQ:NVDA) could be in for a rough summer thanks to its chips’ usage in another new medium, cryptocurrencies. Equity research firm New Street predicted that a “crypto winter” could batter demand for Nvidia cards in the near term due to disgruntled crypto miners selling off their GPUs as the cryptocurrency market deteriorates.
The firm does however predict a quick bounce back for NVIDIA Corporation (NASDAQ:NVDA)’s sales and its stock price, characterizing the predicted crypto crisis as a buying opportunity for investors. Nvidia nailed down adjusted earnings growth of 60% year-over-year in its latest quarter, which was the firm’s Q3 of its fiscal year 2022, with its data center and gaming segments being strong earnings drivers. See where Microsoft Corporation (NASDAQ:MSFT), Marvell Technology Group Ltd. (NASDAQ:MRVL), and Alphabet Inc. (NASDAQ:GOOG) rank among Totem Point Management’s top tech stock picks by clicking the link below.
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Disclosure: None. 10 Best Tech Stocks to Buy Now According to Totem Point Management is originally published at Insider Monkey.