In this article, we will discuss the 10 best technology stocks to buy according to billionaire Dan Loeb.
Daniel S. Loeb is the founder, CEO, and CIO of New York-based Third Point LLC. The hedge fund was established in 1995 and currently has a portfolio value of over $18.3 billion. Loeb’s fortune stands at $4 billion, according to Forbes. Loeb completed his Bachelor’s in Economics from Columbia University in 1983, where today he has a scholarship after his name for undergraduate students. He began his investing career at the private equity firm Warburg Pincus in 1984. His next job was related to securing debt financing as director of corporate development at Island Records from 1987 to 1990.
In 1991, he became the Senior Vice President of the distressed debt department at Jefferies LLC. In this position, the 59-year old gained exposure regarding selling distressed securities, analyzing bankruptcies, and trading bank debt. After that, he moved over to Citigroup Inc. (NYSE:C), where he worked as Vice President in the high-yield bond sales department briefly from 1994 to 1995.
Loeb’s investment mantra is to go long on companies that are in hot waters, replace underperforming management and bring the companies back to profitability or increase their profitability through restructuring efforts. The hedge fund focuses on generating outstanding risk-adjusted returns by taking on limited market risk. In the Q3 investor letter, Third Point stated that it had returned over 12.5% in the flagship Offshore Fund for the third quarter, in comparison to the 0.6% returns offered by S&P 500 INDEX (TR) for the same period. The hedge fund’s annualized return was revealed to be 15.5%, while the year-to-date returns were 29.5%.
Most recently, the hedge fund manager has locked horns with the management of European oil giant Royal Dutch Shell plc (NYSE:RDS-B). He is demanding the company be broken into two separate businesses. The first business comprised of the legacy oil and gas assets that give out strong returns to its shareholders, and the second business focused upon renewable energy that survives on its own. Loeb contests that the do-it-all approach is unable to attract shareholders as the Anglo-Dutch Big Oil company does not have a clear path to success with a singular focus.
Some of the popular stocks held by Dan Loeb’s Third Point LLC include Microsoft Corporation (NASDAQ:MSFT), Dell Technologies (NYSE:DELL), and Intel Corporation (NASDAQ:INTC).
Microsoft Corporation (NASDAQ:MSFT) is one of the large-cap stocks in Loeb’s portfolio. The hedge fund owns 1.6 million shares in the company, worth nearly $451 million as of Q3 2021. The investment represents 2.46% of the portfolio. Of the 867 hedge funds being tracked by Insider Monkey, 250 held a position in Microsoft Corporation (NASDAQ:MSFT) at the end of Q3, up from 238 in the preceding quarter.
Dell Technologies (NYSE:DELL) is another popular stock held by Third Point. Dan Loeb has increased his investment in Dell Technologies (NYSE:DELL) from $313.49 million in Q2 to $349.5 million in Q3.
Based on the 13F holdings for the third quarter, Dan Loeb’s Third Point owns 9 million shares in Intel Corporation (NASDAQ:INTC), representing a market value of $479.5 million. Dan Loeb has increased his investment in Intel Corporation (NASDAQ:INTC) by a total of 8 million shares, beginning from Q4 2020 to Q3 2021. The investment represents 2.61% of Dan Loeb’s portfolio.
Dan Loeb of Third Point
Our Methodology
In this article, we will be looking at the 10 best technology stocks to buy according to billionaire Dan Loeb. These 10 stocks have a cumulative holding of 22.49% in the overall portfolio. We have chosen these stocks from the Q3 portfolio of Third Point LLC. We have also analyzed data of the 867 elite funds being tracked by Insider Monkey to gauge the hedge fund sentiment.
Best Technology Stocks to Buy According to Billionaire Dan Loeb
10. Aurora Innovation, Inc. (NASDAQ:AUR)
Third Point LLC’s Stake Value: $50,963,000
Percentage of Third Point LLC’s 13F Portfolio: 0.27%
Aurora Innovation, Inc. (NASDAQ:AUR) is a company specializing in self-driving vehicle technology. Aurora Innovation, Inc. (NASDAQ:AUR) went public in May 2021 and has since experienced a meteoric rise of nearly 30% from its IPO price.
The Pittsburg, Pennsylvania-based company considers itself a self-driving technology company and is a pure-play for investors as opposed to diversified automobile players or tech giants like Tesla, Inc. (NASDAQ:TSLA) or Alphabet Inc. (NASDAQ:GOOG). Aurora Driver is the proprietary platform of Aurora Innovation, Inc. (NASDAQ:AUR) that brings together the data services, hardware, and software of a vehicle on a single page. The platform is operable on heavy-duty trucks, light commercial vehicles, and passenger vehicles. There is a significant market potential for autonomous driving in the goods delivery, ride-hailing and trucking industries.
Aurora Innovation, Inc. (NASDAQ:AUR) intends to focus on the trucking industry and plans to offer a subscription-based model to replace drivers.
In addition to Aurora Innovation, Inc. (NASDAQ:AUR), Dan Loeb’s Third Point also held stakes in Microsoft Corporation (NASDAQ:MSFT), Dell Technologies (NYSE:DELL), and Intel Corporation (NASDAQ:INTC) at the end of Q3 2021.
9. Black Knight, Inc. (NYSE:BKI)
Third Point LLC’s Stake Value: $129,600,000
Percentage of Third Point LLC’s 13F Portfolio: 0.7%
Black Knight, Inc. (NYSE:BKI) provides software, data, and analytics solutions to the mortgage and real estate industries that automate and facilitate many steps in the homeownership process.
In a research note issued on September 30 to investors, Patrick O’ Shaughnessy at Raymond James upgraded Black Knight, Inc. (NYSE:BKI) from Market Perform an Outperform with an $83 target price. The analyst sees Black Knight, Inc. (NYSE:BKI) experiencing double-digit growth in 2022 following the end of federal foreclosure in August 2021, along with cross-selling momentum in the real estate and mortgage market.
8. TE Connectivity Ltd. (NYSE:TEL)
Third Point LLC’s Stake Value: $179,758,000
Percentage of Third Point LLC’s 13F Portfolio: 0.98%
TE Connectivity Ltd. (NYSE:TEL) is a designer and manufacturer of connectivity and sensing products that act as an integral input of various industries like aerospace, automotive, consumer electronics, data communication systems, defense, energy, medical, and oil, and gas. TE Connectivity Ltd. (NYSE:TEL) claims that 247 billion products are manufactured annually with its components. Dan Loeb’s Third Point owns over 1.3 million shares in TE Connectivity Ltd. (NYSE:TEL), worth nearly $179.8 million as of Q3 2021.
In a research note issued on November 9, Shreyas Patil at Wolfe Research upgraded TE Connectivity Ltd. (NYSE:TEL) from a Peer Perform to an Outperform rating and increased the price target from $148 to $190. The analyst highlighted that TE Connectivity Ltd. (NYSE:TEL) had been appreciated for its exposure across various industries and a “best-in-class” free cash flow conversion. The company is also experiencing “sustained (and strong) organic growth.”
7. Alight, Inc. (NYSE:ALIT)
Third Point LLC’s Stake Value: $195,160,000
Percentage of Third Point LLC’s 13F Portfolio: 1.06%
Alight Inc. (NYSE:ALIT) is a provider of cloud-based benefits, HR, and payroll solutions globally. The Lincolnshire, Illinois-based company has a headcount of 15,000 employees and is serving 4,300 clients spread across 100 countries. Dan Loeb’s Third Point LLC initiated a position in Alight Inc. (NYSE:ALIT) during Q3 2021.
Overall, 42 hedge funds, out of the 867 tracked by Insider Monkey, reported owning a stake in Alight Inc. (NYSE:ALIT) at the end of Q3. The total value of the investment stood at nearly $1.28 billion.
6. Paysafe Limited (NYSE:PSFE)
Third Point LLC’s Stake Value: $305,924,000
Percentage of Third Point LLC’s 13F Portfolio: 1.66%
Paysafe Limited (NYSE:PSFE) is a provider of payment platforms through its payment processing, digital wallet, and online cash solutions services with experience of over 20 years under its belt. Paysafe Limited (NYSE:PSFE) had a transaction volume of over $100 billion in 2020. The company employs 3,400 people across 12 locations globally.
Paysafe Limited (NYSE:PSFE) reported underwhelming Q3 2021 results before the opening bell on November 11. The company reported revenues of $353.59 million, declining by 0.5% YoY and missing the consensus estimate of $370.63 million. Paysafe Limited (NYSE:PSFE) cited challenges in the digital wallet business for missing the top-line estimate. The company also provided soft guidance for Q4 and FY21. For Q4 2021, Paysafe anticipates revenue of $355 million to $365 million, compared to a consensus of $417.74 million. Meanwhile, for FY21, Paysafe Limited (NYSE:PSFE) has guided revenue of $1.53 billion to $1.55 billion as opposed to a consensus estimate of $1.55 billion.
Daniel Perlin at RBC Capital has still given the stock an Outperform rating but revised the price target from $15 to $9 on November 12 to incorporate the impact of the financial results. However, the attractive price target reflects a potential upside of 138% from the current stock price. The analyst highlighted the digital wallet segment has come under pressure due to intense competition from open banking and direct to bank applications in Europe, substituting Paysafe Limited’s (NYSE:PSFE) offering.
Apart from Paysafe Limited (NYSE:PSFE), Microsoft Corporation (NASDAQ:MSFT), and Dell Technologies (NYSE:DELL), Intel Corporation (NASDAQ:INTC) is also a part of Dan Loeb’s Q3 portfolio.
5. Dell Technologies (NYSE:DELL)
Third Point LLC’s Stake Value: $349,574,000
Percentage of Third Point LLC’s 13F Portfolio: 1.9%
Dell Technologies (NYSE:DELL) is a designer, developer, manufacturer, and seller of IT products, solutions, and services across the world. The Round Rock, Texas-based company, was founded in 1984 by Michael Dell and employs more than 165,000 people today. On November 1, the company announced the spin-off of its 81% equity stake in VMware, Inc. (NYSE:VMW).
Katy Huberty at Morgan Stanley increased the price target from $67 to $68 on Dell Technologies (NYSE:DELL) while maintaining an Overweight rating on November 24.
Third Point Management shared its detailed stance on Dell Technologies (NYSE:DELL) in its Q3 investor letter. Here’s what the fund said:
“Michael Dell has created substantial value for shareholders since re-listing the company several years ago. Earlier this year, Dell Technologies announced that it would be spinning its $50 billion stake in VMWare, which we believe will unlock the underappreciated value of the Dell server and PC businesses. Dell’s best attribute has been strong free cash flow generation, which the company has used to de-lever and create significant latent value for equity holders. Looking ahead, we believe this core Dell business, which still trades at a discount to its hardware peer group, should instead command a premium multiple thanks to its leading market share, profitability, and impressive execution. There are few large cap companies which possess a nearly 10% FCF yield, 2.5% dividend yield and 1.5x leverage ratio; Dell is one of them.”
4. Microsoft Corporation (NASDAQ:MSFT)
Third Point LLC’s Stake Value: $451,072,000
Percentage of Third Point LLC’s 13F Portfolio: 2.46%
Microsoft Corporation (NASDAQ:MSFT) is a $2.5 trillion tech giant that can be broadly divided into three business segments, namely Cloud and AI Group, Experiences and Devices, and Technology and Research. The Redmond, Washington-based company is the 11th biggest holding in Third Point’s portfolio through 1.6 million shares.
On November 22, Michael Turrin at Wells Fargo commenced coverage on Microsoft Corporation (NASDAQ:MSFT) stock with an Overweight rating and a price target of $400, reflecting a potential upside of over 18%. The analyst sees a “bright future ahead” with an opportunity to grow in “huge categories” of the IT sector. The analyst pinpointed the growth of Azure along with its presence everywhere and impressive margin profile in the research note.
Polen Capital mentioned Microsoft Corporation (NASDAQ:MSFT) in its Q3 2021 investor letter. Here’s what the investment management firm said:
“After modest Portfolio activity during the second quarter of 2021, activity increased during the third quarter. We would broadly characterize the various trades into two objectives: 1) managing risk, and 2) managing valuation. In both cases, we aimed to maintain the Portfolio’s growth profile. In aggregate, we believe we were able to increase expected earnings growth while reducing risk and the overall portfolio valuation… We also trimmed Microsoft, which had grown to nearly 10% of the Portfolio. At an 8% weighting, it still represents one of our largest positions.”
3. Intel Corporation (NASDAQ:INTC)
Third Point LLC’s Stake Value: $479,520,000
Percentage of Third Point LLC’s 13F Portfolio: 2.61%
Intel Corporation (NASDAQ:INTC) is another legacy player in the technology sector and the 10th biggest holding in Third Point LLC’s portfolio.
To counter the impact of stagnation and investor activism from Third Point, the company brought back Pat Gelsinger as its CEO in January 2021, after he left Intel Corporation (NASDAQ:INTC) in 2009 to become the President and COO at EMC. In 2012, he took over as the CEO of VMWare, Inc. (NYSE:VMW). Following his appointment, Dan Loeb revealed that he is “excited” to be a long-term investor in Intel Corporation (NASDAQ:INTC) and thinks that the company has “unmatched” resources in the semiconductor industry. He thinks that Gelsinger is the right person to motivate thousands of employees at Intel Corporation (NASDAQ:INTC) and take the company into the future.
Of the 867 elite funds being tracked by Insider Monkey, 66 reported owning a stake worth $6.47 billion in Intel Corporation (NASDAQ:INTC) at the end of Q3 2021. Dan Loeb’s Third Point owns 9 million shares in the company, worth nearly $479.5 million.
2. Intuit Inc. (NASDAQ:INTU)
Third Point LLC’s Stake Value: $593,461,000
Percentage of Third Point LLC’s 13F Portfolio: 3.23%
Intuit Inc. (NASDAQ:INTU) provides important software related to accounting, finance, taxes, and customer relationship management. The company is catering to 100 million consumers and small businesses worldwide through its 14,200 employees spread across nine countries. Following the acquisition of Mailchimp in November 2021, Intuit Inc.’s (NASDAQ:INTU) software portfolio comprises some of the notable platforms like Credit Karma, Mint, QuickBooks, and TurboTax under its umbrella.
On November 19, Kash Rangan at Goldman Sachs upgraded Intuit from a Neutral to a Buy rating, while increasing the target price from $535 to $840. The analyst anticipates Intuit Inc. (NASDAQ:INTU) to reach $17 billion in revenue by FY24 with an operating margin of 38% to 40%. This is similar to the topline and operating margins of Adobe Inc. (NASDAQ:ADBE) in FY21, which is trading at 1.8 times the market capitalization of Intuit. The analyst observes a strong execution plan at Intuit Inc. (NASDAQ:INTU) in achieving long-term growth.
In its Q3 2021 investor letter, Cooper Investments shared its views on Intuit Inc. (NASDAQ:INTU). Here’s what the fund said:
“The other meaningful deal during the quarter was Intuit’s acquisition of Mailchimp for $12bn. Intuit has reinvented itself over the last decade and thrived with a leadership position in QuickBooks Online, the financial accounting software for small businesses (effectively the ‘Xero of the US’). We originally invested in Intuit in February 2020, excited by the QuickBooks prospects.
Management have executed exceptionally well on the opportunity set which has seen the shares double since our initial purchase. However, the company has now conducted two meaningful deals in Mailchimp and Credit Karma worth a combined US$20bn over the last 12 months. The investment proposition has shifted from a focus on QuickBooks to now being a financial and small business software conglomerate. We continue to very much admire the company, but with Intuit now trading on 50x forward earnings we no longer see such attractive latency on offer, nor the rewards for the level of execution risk and thus we have exited the position.”
1. SentinelOne, Inc. (NYSE:S)
Third Point LLC’s Stake Value: $1,396,008,000
Percentage of Third Point LLC’s 13F Portfolio: 7.62%
SentinelOne, Inc. (NYSE:S) is a provider of cybersecurity services through its proprietary Singularity platform that detects and prevents attacks against cyber threats by employing artificial intelligence. The stock price of the Mountain View, California-based company has risen as much as 70% from its IPO in late June 2021 and is currently up 30%. SentinelOne, Inc. (NYSE:S) is the second-biggest holding in Third Point LLC’s portfolio, and the hedge fund increased its holdings in the company by 6% during Q3 2021.
In a research note issued on September 9, Yun Kim at Loop Capital raised the target price from $60 to $82 and maintained a Buy rating on SentinelOne, Inc. (NYSE:S) stock.
Third Point Management shared its stance on SentinelOne, Inc. (NYSE:S) in its Q3 2021 investor letter:
“Our top winners on a percentage basis in Q3 were our two largest positions; (which includes) SentinelOne, up 26%, as public market investors rewarded both companies’ disruptive business models and high-growth trajectories. We expect SentinelOne to grow rapidly and continue to gain market share over the next decade as flexible work patterns, cloud adoption, and IoT create more security vulnerabilities. This market is still dominated by legacy vendors whose solutions pale when compared to SentinelOne’s autonomous, machine-learning based security, which is taking share and helping the company grow annual recurring revenue by more than 100% year-over-year.”
You can also take a peek at Brian Higgins’ King Street Capital Portfolio: Top 10 Stock Picks and Top Tech Stock Picks of Amir Mokari’s Emerson Point Capital.
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Disclose. None. 10 Best Technology Stocks to Buy According to Billionaire Dan Loeb is originally published on Insider Monkey.
