In this article, we discuss the 10 tech stocks to buy before the market rally begins.
The brief rally in technology stocks over the past few weeks has helped boost investor confidence in the growth sector that has been hammered in the past year or so due to rising inflation and soaring interest rates. The rally has even invited optimism around the resilience of the industry to a recessionary environment. Gains in tech stocks like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG) have helped the NASDAQ Composite post a 16% rise in the past month.
Jon Guinness, the co-manager of the Fidelity International American Fund, recently told news platform Financial Times, that the spending on the tech sector will remain “healthy” even as companies cancel or postpone projects. Guinness touted the importance of the tech industry to a variety of sectors to make his point, claiming that electric vehicles were “computers on wheels” and “cloud computing was a development of real substance” as more firms adopted it, underling that the “tectonic shifts driving tech adoption” were still constant.
Wedbush analyst Dan Ives, one of the biggest tech bulls in the finance world, has also backed tech stocks to rally even amid a slowing economy, noting that “the fourth Industrial Revolution tech trends are not going away due to a slower near-term period of growth over the next 6 to 9 months”. Even amid the bulls, some are cautioning for a more balanced approach. Sam Stovall, the chief investment strategist at CFRA Research, has termed the recent rally as a “bear market bounce rather than the start of a new bull market”.
Our Methodology
The companies that operate in the tech sector and have upcoming growth catalysts were selected for the list. In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks are also discussed. Data from around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
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Tech Stocks to Buy Before Market Rally Begins
10. Robinhood Markets, Inc. (NASDAQ:HOOD)
Number of Hedge Fund Holders: 19
Robinhood Markets, Inc. (NASDAQ:HOOD) owns and runs a financial services platform. The firm appears to have the potential to gain in the second half of 2022 as it has announced that it will shift the core growth strategy to cater to the needs of the most active users from the previously announced plan to gain as many users as possible. The acquisition of a more than 7% stake in Robinhood Markets, Inc. (NASDAQ:HOOD) by Sam Bankman-Fried, who owns FTX, has also helped boost the positive sentiment around the stock.
On August 12, Deutsche Bank analyst Brian Bedell maintained a Hold rating on Robinhood Markets, Inc. (NASDAQ:HOOD) stock and raised the price target to $10 from $9, noting that alternative asset managers were best positioned for upside in the second half of 2022.
At the end of the first quarter of 2022, 19 hedge funds in the database of Insider Monkey held stakes worth $947 million in Robinhood Markets, Inc. (NASDAQ:HOOD), compared to 34 in the previous quarter worth $1.5 billion.
Just like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG), Robinhood Markets, Inc. (NASDAQ:HOOD) is one of the tech stocks that hedge funds are monitoring ahead of a possible market rally in late 2022.
In its Q4 2021 investor letter, Claret Asset Management, an asset management firm, highlighted a few stocks and Robinhood Markets, Inc. (NASDAQ:HOOD) was one of them. Here is what the fund said:
“Robinhood Markets, Inc. (NASDAQ:HOOD) went public at $38 a share at the end of July of this year. After a oneday decline of 8%, it proceeded to rise to a peak of $85 in a matter of 4 days before settling down around $40 in September. Then, we found out that Robinhood Markets, Inc. (NASDAQ:HOOD) does not appear to understand the margin rules that apply to their client’s trades… and got fined by the Securities Exchange Commission. As of today, Robinhood Markets, Inc. (NASDAQ:HOOD) is trading below $20, at 57 times earnings, approximately half of its IPO price. Caveat emptor… Buyer beware.”
9. DraftKings Inc. (NASDAQ:DKNG)
Number of Hedge Fund Holders: 27
DraftKings Inc. (NASDAQ:DKNG) is a digital entertainment and gaming firm. On August 5, the company posted earnings for the second quarter of 2022, reporting a revenue of more than $465 million, up over 56% compared to the revenue over the same period last year and beating analyst expectations by $28 million. The firm also announced that Monthly Unique Payers increased to 1.5 million average monthly B2C customers. This represents an increase of 30% compared to the second quarter of 2021.
On August 8, Morgan Stanley analyst Ed Young maintained an Overweight rating on DraftKings Inc. (NASDAQ:DKNG) stock and lowered the price target to $30 from $31, noting that the management of the firm was focused on narrowing losses and there was increased confidence on execution after strong earnings results in the second quarter.
At the end of the first quarter of 2022, 27 hedge funds in the database of Insider Monkey held stakes worth $1.1 billion in DraftKings Inc. (NASDAQ:DKNG), compared to 34 the preceding quarter worth $1.3 billion.
In its Q3 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and DraftKings Inc. (NASDAQ:DKNG) was one of them. Here is what the fund said:
“Shares of DraftKings Inc. (NASDAQ:DKNG) fell in the quarter, as stocks of online gaming companies were under pressure. Sports betting and i-gaming are rolling out with great fanfare and success across the country; however, investors seem concerned about competition and margins. Most participants are spending heavily on marketing and promotions, which is cutting into margins. We see this as worthy investment in customer acquisition at a moment in time when revenues are just building. We continue to believe that online sports betting and gaming will be enormous industries, that DraftKings Inc. (NASDAQ:DKNG) will be a leading player. We think the business will have high margins as it matures. We believe we are underwriting the business conservatively and see much upside in the long term.”
8. UiPath Inc. (NYSE:PATH)
Number of Hedge Fund Holders: 33
UiPath Inc. (NYSE:PATH) provides robotic process automation services. On August 8, the company announced that it would be partnering with business solutions firm Accelirate. The partnership will give the solutions firm a chance to enhance the go-to-market UiPath managed services practice. This practice has several advantages compared to peers, like lower total cost of ownership and turnkey automation that simplifies the implementation strategy of a business. UiPath has also recently purchased a natural language processing company.
On July 7, Canaccord analyst Kingsley Crane assumed coverage of UiPath Inc. (NYSE:PATH) stock with a Buy rating and a price target of $25, expressing confidence in the ability of the firm to leverage automation in a broad set of use cases.
At the end of the first quarter of 2022, 33 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in UiPath Inc. (NYSE:PATH), compared to 28 in the preceding quarter worth $2.5 billion.
In its Q2 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and UiPath Inc. (NYSE:PATH) was one of them. Here is what the fund said:
“We participated in the IPO of UiPath, a developer of software for robotic process automation that uses AI, natural language processing and design to streamline complex processes across a variety of technology environments. The company is an industry leader with a superior solution for leveraging software to optimize workloads. Organizations around the world are beginning to understand the power of automation, with momentum picking up toward fully automating business processes, a $60 billion market today that could grow to $200 billion or more by 2030. UiPath has a unique pricing model, broad partner ecosystem and thoughtful management team supporting one of the strongest growth profiles in technology. Risks we are watching include a partial cloud transition ahead and increased competition from larger software platforms over time.”
7. Snap Inc. (NYSE:SNAP)
Number of Hedge Fund Holders: 54
Snap Inc. (NYSE:SNAP) is a camera company headquartered in California. In mid-July, the company announced that the popular Snap application would soon be launching for personal computers after years of being a mobile-only platform. The app, which will be named Snapchat for Web, will be accessible through the Chrome browser of Google and will let users engage with a variety of different functions. This will allow the firm to tap into new audience and gain ad-revenue in the latter half of 2022.
On July 22, MKM Partners analyst Rohit Kulkarni maintained a Buy rating on Snap Inc. (NYSE:SNAP) stock and lowered the price target to $17 from $26, noting that the forward-looking visibility of the firm remains challenging.
Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Lone Pine Capital is a leading shareholder in Snap Inc. (NYSE:SNAP), with 18 million shares worth more than $664 million.
In its Q4 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Snap Inc. (NYSE:SNAP) was one of them. Here is what the fund said:
“Snap Inc. (NYSE:SNAP) is the leading social network among teens and young adults in North America and a growing number of overseas markets, including Western Europe and India. Shares fell this quarter on a greater-than anticipated impact from Apple’s new privacy changes for iOS mobile devices. These changes made it more difficult for Snapchat to measure the effectiveness of ads shown on its platform. We believe this is a near-term, industry-wide issue for which Snap Inc. (NYSE:SNAP) is already developing a solution. Longer term, we continue to view Snap Inc. (NYSE:SNAP) favorably as the company sustains its rapid pace of product innovation and expands its premium partnerships with advertisers.”
6. Match Group, Inc. (NASDAQ:MTCH)
Number of Hedge Fund Holders: 55
Match Group, Inc. (NASDAQ:MTCH) is a Texas-based firm that provides dating products. On July 13, the company announced that it would be expanding a partnership with background check service Garbo. The move is part of a larger plan of the firm to increase safety features around the applications it owns. This increase has been approved as the firm estimates that the users on the dating applications are pushing for more in-person meetings and are thus more interested in safety features offered by the applications.
On August 4, Cowen analyst John Blackledge maintained an Outperform rating on Match Group, Inc. (NASDAQ:MTCH) stock and lowered the price target to $100 from $128, noting that Tinder revenue growth was slowing amid macro headwinds.
At the end of the first quarter of 2022, 55 hedge funds in the database of Insider Monkey held stakes worth $1.8 billion in Match Group, Inc. (NASDAQ:MTCH), compared to 53 in the preceding quarter worth $2.4 billion.
Alongside Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG), Match Group, Inc. (NASDAQ:MTCH) is one of the stocks on the radar of elite investors as the tech market begins to recover after a tumble in the first half of 2022.
In its Q4 2021 investor letter, Arch Capital Management, an asset management firm, highlighted a few stocks and Match Group, Inc. (NASDAQ:MTCH) was one of them. Here is what the fund said:
“We are long Match Group, Inc. (NASDAQ:MTCH stock because it is the dominant player in online dating, giving it immense and growing power over the population of single people worldwide. This may seem like a callous way to describe the business, but it is the proper way to look at it from an investment lens.
For those that are unaware, Match Group, Inc. (NASDAQ:MTCH owns every popular online dating property outside of Bumble, Badoo, and Grindr. Its apps and services include Tinder, Hinge, Match.com. BLK, Chispa, and many others…
In conjunction with this letter, we have published a report on Match Group. You can find it here: https://www.archcapitalfund.com/letters”
5. Airbnb, Inc. (NASDAQ:ABNB)
Number of Hedge Fund Holders: 66
Airbnb, Inc. (NASDAQ:ABNB) operates an online travel platform. In early August, the firm posted earnings for the second quarter of 2022, reporting earnings per share of $0.56, beating analyst expectations by $0.13. The revenue over the period was $2.1 billion, up more than 56% compared to the revenue over the same period last year. The company revealed that the nights and experiences booked on the platform in the second quarter of 2022 were more than 103 million, up over 25% year-on-year.
On August 3, Needham analyst Bernie McTernan maintained a Buy rating on Airbnb, Inc. (NASDAQ:ABNB) stock and lowered the price target to $150 from $220, noting that the profitability of the firm was beating expectations and allowing for continued investment.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Airbnb, Inc. (NASDAQ:ABNB), with 3.3 million shares worth more than $575 million.
In its Q3 2021 investor letter, Tollymore Investment Partners, an asset management firm, highlighted a few stocks and Airbnb, Inc. (NASDAQ:ABNB) was one of them. Here is what the fund said:
“Today disruptors are not typically seeking to replace incumbents entirely. Rather, they break the links in the customer journey, in doing so better aligning monetisation with value creation and minimising externalities. For example, Airbnb, Inc. (NASDAQ:ABNB) broke the link between staying in residential property and owning it. Airbnb, Inc. (NASDAQ:ABNB) is a specific example of a business model innovation which separated asset use from ownership. This is hardly a novel idea; it’s called renting. Rental models lend themselves to assets which are expensive and durable, and where usage is infrequent.”
4. Applied Materials, Inc. (NASDAQ:AMAT)
Number of Hedge Fund Holders: 74
Applied Materials, Inc. (NASDAQ:AMAT) provides equipment, services, and software for the semiconductor industry. The company is well-positioned to gain in the second half of 2022 as the US lawmakers just approved the CHIPS Act, a legislation designed to pour hundreds of billions into the chip industry in the US to make it more competitive with China. Applied Materials, as one of the biggest such firms in the country, can thus expect a windfall of government investment in the coming months.
On July 18, Deutsche Bank analyst Sidney Ho maintained a Buy rating on Applied Materials, Inc. (NASDAQ:AMAT) stock and lowered the price target to $110 from $135, noting that wafer fab equipment demand might weaken in 2023.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Generation Investment Management is a leading shareholder in Applied Materials, Inc. (NASDAQ:AMAT), with 4.2 million shares worth more than $560 million.
3. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 76
Intel Corporation (NASDAQ:INTC) markets key technologies for smart devices. Intel is planning a massive investment in Europe to set up chipmaking plants across the region. It is already close to a $5 billion deal with Italian authorities in this regard. This will help the firm increase footprint in Europe, one of the biggest chip markets in the world. Bank of America claims that the firm is also expected to be “the biggest beneficiary” of the CHIPS Act recently passed that will see a massive influx of government spending in the semiconductor sector.
On August 1, Northland analyst Gus Richard maintained an Outperform rating on Intel Corporation (NASDAQ:INTC) stock with a price target of $55, noting that the firm had a manufacturing capability that had strategic value for the US.
At the end of the first quarter of 2022, 76 hedge funds in the database of Insider Monkey held stakes worth $3.1 billion in Intel Corporation (NASDAQ:INTC), compared to 72 in the previous quarter worth $5.5 billion.
Baron Funds, an asset management firm, mentioned Intel Corporation (NASDAQ:INTC) in its first-quarter 2022 investor letter. Here is what they said:
“Intel Corporation (NASDAQ:INTC) capital spending process is guided by a process they appropriately named “copy exactly.” This means that they attempt to “copy exactly” what they have already built and attempt to improve tried and true processes iteratively.”
2. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 160
Alphabet Inc. (NASDAQ:GOOG) is a diversified technology company. On August 10, news agency Reuters reported that Google Fiber, the internet services platform of the tech giant Google, was planning to expand into five new states across the United States, the biggest expansion push in several years. These new states include Arizona, Colorado, Idaho, Nebraska, and Nevada. The firm has made the choice to expand in these new territories based on data about speed lags in these regions.
On August 3, Tigress Financial analyst Ivan Feinseth maintained a Strong Buy rating on Alphabet Inc. (NASDAQ:GOOG) stock and raised the price target to $186 from $183, noting the resilience of the core cloud and search business of the firm despite misses on earnings.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm TCI Fund Management is a leading shareholder in Alphabet Inc. (NASDAQ:GOOG), with 2.3 million shares worth more than $6.6 billion.
In its Q2 2022 investor letter, Wedgewood Partners, an asset management firm, highlighted a few stocks and Alphabet Inc. (NASDAQ:GOOG) was one of them. Here is what the fund said:
“Alphabet Inc. (NASDAQ:GOOG) grew its core search revenues +24% on a +30% year-ago comparison. Despite this stellar top-line performance, shares sold off as the market began to discount fears of a recession. However, the stock has outperformed relative to other holdings as core Google Search has been less affected by disruptions related to Apple’s privacy initiatives. Alphabet’s Cloud segment is generating revenue at a $24 billion run rate but is still running at a loss. We think this business can generate much better margins at some point. In the meantime, the Company has 4% to 5% of shares authorized for repurchase which is an attractive use of capital as the stock trades for about just 18X 2023 consensus estimates.”
1. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 200
Meta Platforms, Inc. (NASDAQ:META) is a tech firm that owns and runs social media platforms. The company has transitioned from a focus on social media towards the metaverse in recent months, and Mark Zuckerberg, the founder of the firm, claims that it is now in a competition with Apple, the largest tech-giant, for relevance in the space. As part of an investment push into the metaverse, the company is considering its first ever bonds sale and a new capital spending structure. Ad-revenues are also slowly recovering after being hammered in the first half of 2022.
On July 28, MKM Partners analyst Rohit Kulkarni maintained a Buy rating on Meta Platforms, Inc. (NASDAQ:META) stock and lowered the price target to $240 from $295, noting that there was an ad environment slowdown from economic pressures for the firm.
At the end of the first quarter of 2022, 224 hedge funds in the database of Insider Monkey held stakes worth $19 billion in Meta Platforms, Inc. (NASDAQ:META), compared to 248 in the preceding quarter worth $31 billion.
In its Q4 2021 investor letter, Boyar Value Group, an asset management firm, highlighted a few stocks and Meta Platforms, Inc. (NASDAQ:META) was one of them. Here is what the fund said:
“Corporate executives can have many different reasons for selling shares (anticipation of tax law changes, philanthropy, diversification, and much more), but the sheer number of billionaire founders who sold shares in 2021 should raise eyebrows and might well be signaling a market top. Bloomberg’s Ben Steverman and Scott Carpenter report not only that Mark Zuckerberg of Meta Platforms, Inc. (NASDAQ:META) (formerly known as Facebook) sold shares in his company almost every day last year but also that the founders of Google sold ~$3.5 billion worth of stock (the first time either Sergey Brin or Larry Page has sold shares since 2017).”
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Disclosure. None. 10 Tech Stocks to Buy Before Market Rally Begins is originally published on Insider Monkey.
