In this article, we discuss the 5 best tech stocks to buy according to Japanese billionaire Masayoshi Son. If you want to read our detailed analysis of these companies, go directly to the 10 Best Tech Stocks to Buy According to Japanese Billionaire Masayoshi Son.
5. Microsoft Corporation (NASDAQ: MSFT)
Number of Hedge Fund Holders: 251
Microsoft Corporation (NASDAQ: MSFT) stock has offered investors returns exceeding 33% over the course of the past twelve months. The company makes and sells different types of computer software, electronic devices, and other services worldwide. It is ranked fifth on our list of 10 best tech stocks to buy according to Japanese billionaire Masayoshi Son. SB Management is in possession of over 4.3 million shares in the software giant that are worth more than $1 billion, representing 6.6% of the investment portfolio.
On June 21, Microsoft Corporation (NASDAQ: MSFT) announced a new version of the Windows platform, one of the most popular operating systems globally. The new Windows 11 would be available for users by the holiday season this year.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Microsoft Corporation (NASDAQ: MSFT) with 23.9 million shares worth more than $5.6 billion.
In its Q1 2021 investor letter, Polen Capital, an investment management firm, highlighted a few stocks and Microsoft Corporation (NASDAQ: MSFT) was one of them. Here is what the fund said:
“We have written extensively about Microsoft in recent commentaries. It was our leading contributor last year and one of our largest weightings within the Portfolio. It continues to experience business momentum through several dominant, essential, and competitively advantaged businesses, like Office 365 and Azure. The markets it competes for are enormous, which gives the company the ability to compound at scale. In the past quarter alone, the company generated over $40 billion in revenue, representing a 17% growth rate. The inherent operating leverage in Microsoft’s business model continues and led to 34% earnings growth this past quarter. Despite the broad rotation we saw in the first quarter and Microsoft’s robust performance in 2020, we think its business fundamentals continue to exhibit strength, and the stock continues to reflect the fundamentals.”
4. PayPal Holdings, Inc. (NASDAQ: PYPL)
Number of Hedge Fund Holders: 143
PayPal Holdings, Inc. (NASDAQ: PYPL) is a digital payments company based in California. It is placed fourth on our list of 10 best tech stocks to buy according to Japanese billionaire Masayoshi Son. The company’s shares have returned more than 68% to investors in the past twelve months. SB Management has a stake worth more than $1.1 billion in the company. It owns more than 4.8 million shares of PayPal. However, the investment firm has trimmed stake in the payments company by 21% compared to last year.
On June 24, investment advisory DA Davidson initiated coverage on PayPal Holdings, Inc. (NASDAQ: PYPL) stock with a Buy rating and a price target of $325 on the back of new pricing changes announced by the payments firm earlier that put it in a new light among competitors.
At the end of the first quarter of 2021, 143 hedge funds in the database of Insider Monkey held stakes worth $14.7 billion in PayPal Holdings, Inc. (NASDAQ: PYPL), down from 147 in the preceding quarter worth $15.9 billion.
3. Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM)
Number of Hedge Fund Holders: 76
Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) is placed third on our list of 10 best tech stocks to buy according to Japanese billionaire Masayoshi Son. The stock has returned over 111% to investors in the past year. The firm makes and sells semiconductor chips used in electronic devices globally. SB Management owns more than 11 million shares in the semiconductor company that are worth over $1.3 billion, representing 8.5% of the investment portfolio.
On June 11, news publication Nikkei Asia reported that Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) was mulling over opening a semiconductor packaging facility in the United States in what would be the firm’s first such venture out of Taiwan.
At the end of the first quarter of 2021, 76 hedge funds in the database of Insider Monkey held stakes worth $10.8 billion in Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), up from 72 in the preceding quarter worth $11.8 billion.
In its Q1 2021 investor letter, Bonsai Partners, an asset management firm, highlighted a few stocks and Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) was one of them. Here is what the fund said:
“Taiwan Semiconductor is the world’s largest outsourced foundry of logic semiconductor chips. TSMC’s shares appreciated 8.9% during the quarter.
Similar to last quarter, the supply-demand imbalance in semiconductor chips continues to benefit TSMC. To fuel new technological advances and meet the current supply imbalance, we see significantly increased capital spending across the industry over the coming years.
TSMC has an extraordinary track record of return on these large investments despite their rapid historical cadence of expansion. I remain hopeful that the large capital expenditure plan they now have ($100 billion of investment over the next three years) will be money well spent and not lead to industry oversupply in the medium term. Hopefully, future returns on these investments will look as good as those of the past.”
2. Facebook, Inc. (NASDAQ: FB)
Number of Hedge Fund Holders: 257
Facebook, Inc. (NASDAQ: FB) stock has returned more than 55% to investors in the past twelve months. The company operates as a technological corporation and owns several large social media brands. It is placed second on our list of 10 best tech stocks to buy according to Japanese billionaire Masayoshi Son. SB Management is in possession of over 10.8 million shares in Facebook that are worth more than $3.1 billion. However, the firm has trimmed its stake in Facebook by 10% compared to the fourth quarter of 2020.
On June 28, Facebook, Inc. (NASDAQ: FB) stock jumped more than 3.5% and the firm reached over $1 trillion in market capitalization, one of a handful of tech companies to do so, as an antitrust lawsuit against the firm was dismissed.
At the end of the first quarter of 2021, 257 hedge funds in the database of Insider Monkey held stakes worth $40 billion in Facebook, Inc. (NASDAQ: FB), up from 242 in the preceding quarter worth $38 billion.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Facebook, Inc. (NASDAQ: FB) was one of them. Here is what the fund said:
“We continued to keep our learnings from 2020 in mind during the quarter as we sought to increase the up capture of the portfolio. We also made adjustments to the portfolio’s top 10 holdings to increase the participation of select stocks, including Facebook, while trimming our weighting to stable names, which now represent 47% of the portfolio. Our repositioning has been encouraging so far with the portfolio performing better on up days in the market while maintaining good down capture during more turbulent sessions.”
1. Amazon.com, Inc. (NASDAQ: AMZN)
Number of Hedge Fund Holders: 243
Amazon.com, Inc. (NASDAQ: AMZN) is ranked first on our list of 10 best tech stocks to buy according to Japanese billionaire Masayoshi Son. The firm is a tech company with core interest in the ecommerce business but large investments in other sectors like web services, publishing, and health. The company’s shares have returned more than 25% to investors in the past year. SB Management owns over 2 million shares worth over $6 billion in Amazon, representing a whopping 40% of the investment portfolio.
On June 29, news publication Bloomberg reported that Amazon.com, Inc. (NASDAQ: AMZN) had purchased the rights to a celebrity podcast featuring Jason Bateman, Will Arnett, and Sean Hayes in a deal reported to be worth close to $80 million. The investment marks the latest aggressive push into the podcast market by the ecommerce giant.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm Citadel Investment Group is a leading shareholder in Amazon.com, Inc. (NASDAQ: AMZN) with 3.3 million shares worth more than $10.5 billion.
In its Q1 2021 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Amazon.com, Inc. (NASDAQ: AMZN) was one of them. Here is what the fund said:
“Amazon (AMZN): We sold our last remaining stake in Amazon this quarter. Amazon was our longest-running investment holding, after having originally purchasing it at the inception of Hayden in 2014, at a price of ~$317.
I gave some details of how Amazon has progressed over these past 6.5 years in last year’s Q2 2020 letter, which partners can find here (LINK). The company has executed amazingly well over this tenure, with revenues up ~3.3x and since our initial purchase, and reported operating income up ~30x over that period.
Generally, I believe there are three reasons to sell an investment: 1) we recognize our initial thesis is wrong (sell out as quick as possible), 2) we have a significantly higher returning opportunity to redeploy the capital into (sell-down to fund the new investment), or 3) the company is maturing and hitting the top part of it’s S-curve / business lifecycle, so the business has fewer places to reinvest its capital internally. As such, the future returns will likely be lower than the past. This investment thus becomes a “source of capital” in the future, as we fund earlier-stage investment opportunities.
In the case of Amazon, we decided to sell due to the third scenario. I’m sure Amazon will continue to generate value for shareholders and continue to keep pace with the broader technology sector. However, I’m just not confident it’s as attractive an investment as when we first invested.
With ~51% of US households having an Amazon Prime account (and with very low churn), each of these households continuing to increase their annual spend with Amazon, and few / no real competitors in sight, Amazon is a dominant force that will only continue to accrue value as consumers continue to move from offline to online purchases for their everyday needs. Likewise, the “cash-flow machine” of Amazon Web Services is in a similar position of strength, with AWS now having ~32% market share and continuing to grow at +30% y/y. Because of this, I think Amazon is probably one of the safest investments in the technology sector today.
So why did we decide to sell the investment then? Simply put, Amazon is in a much different place than when we initially invested. Back in 2014, investors were starting to question whether Amazon’s promise of future earnings potential would actually come to fruition.
Operating income had declined from ~$1.4BN in 2010, to ~$676M in 2012, to just ~$178M by the end of 2014. Expenses were outpacing revenue growth, and investors were questioning whether Amazon’s expenses were truly “investments” as they claimed, or whether it was a structural necessity of the business and thus would never flow to investor’s bottom line.
The critical question was ‘what portion of expenses are truly growth investments vs. structural expenses, and as a result, will Amazon ever be capable of generating significant profits?’
Our analysis indicated that these expenditures truly were the former, and led to the belief that the business’ structural margins would inevitably increase over time. This was our differentiated insight / investment edge.
Fast-forward to today, and our thesis proved correct with operating margins having increased from ~0.2% to ~6%. However due to this success and proving this facet out to investors, Amazon investors have much higher confidence and a better understanding of the company today. I’m not sure we have the same level of differentiated insights, as we did back then.
In addition, I believe the departure of Jeff Bezos and his long-time lieutenants signal a regime change. Perhaps it’s now “Day 1.5” instead of the Day 1 mentality that made Amazon so successful (LINK)… The departures within the past couple years include:
- Jeff Bezos – Founder, CEO, Visionary. Started Amazon in 1994.
- Jeff Blackburn – Joined Amazon in 1998. Oversaw Amazon Marketplace, Advertising,
Amazon Studios, Prime Video, Prime Music, M&A.
- Jeff Wilke – Joined Amazon in 1999. Oversaw Amazon Consumer (ecommerce)
business.
- Steve Kessel – Joined Amazon in 1999. Oversaw Physical Stores, Kindle, and Whole
Foods.
Blackburn, Wilke, and Kessel have each arguably created hundreds of billions of shareholder value. On top of this, Bezos is the visionary and culture-setter behind Amazon. When he and his long-time lieutenants take their hands off the wheel, it is probably time for us to as well.
We sold our remaining shares at an average price of ~$3,240. Based on our initial investment, we made a ~10x return in a little over six years, for a ~45% IRR7. We reinvested the proceeds into our existing portfolio, taking advantage of the prices offered by this latest market draw-down.”
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