In this article, we discuss the 5 best tech stocks to buy according to Stanley Druckenmiller. If you want to read our detailed analysis of these stocks, go directly to the 10 Best Tech Stocks to Buy According to Stanley Druckenmiller.
5. Palantir Technologies Inc. (NYSE: PLTR)
Number of Hedge Fund Holders: 26
Palantir Technologies Inc. (NYSE: PLTR) is ranked fifth on our list of 10 best tech stocks to buy according to Stanley Druckenmiller. The company is run from Colorado and operates as a software firm working in the data analytics business. Druckenmiller, through Duquesne Capital, owned more than 4 million shares in the company at the end of the second quarter of 2021, representing over 3% of the portfolio of the fund. The shares are valued at close to $106 million. Duquesne Capital has reduced stake in the company by 33% when compared to the first three months of the year.
On August 13, investment advisory Wolfe Research maintained a Peer Perform rating on Palantir Technologies Inc. (NYSE: PLTR) stock and raised the price target to $25 from $20, appreciating the solid revenue reported by the firm in the earnings report for the second quarter.
At the end of the second quarter of 2021, 26 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in Palantir Technologies Inc. (NYSE: PLTR), down from 32 in the preceding quarter worth $1.1 billion.
In its Q4 2020 investor letter, Guardian Fund, an asset management firm, highlighted a few stocks andPalantir Technologies Inc. (NYSE: PLTR) was one of them. Here is what the fund said:
“In October, we bought a stake in Palantir. Earlier, in June, our concentrated Tech Fund, which has a mandate to also buy shares in the secondary market, bought shares of Palantir from insiders, before the direct listing. At the price we bought, the equity had much more upside than downside. Palantir is operating a software platform that functions as the digital infrastructure for data-driven operations and decision making. The software helps to structure and capture context in data of large corporations. Governments are increasingly realizing that they have to deal with serious data challenges and cyber risk. As most governments cannot attract the most talented software engineers, they need private enterprises such as Palantir to help them build solid infrastructure. Foundry, Palantir’s software for enterprises, is used by companiesto make safer cars and airplanes or to accelerate cancer research. The speed to bring new clients on board is improving and revenues will grow faster than expenses. Palantir has a long runway of growth ahead.”
4. Palo Alto Networks, Inc. (NYSE: PANW)
Number of Hedge Fund Holders: 69
Palo Alto Networks, Inc. (NYSE: PANW) is a California-based cybersecurity solutions provider. It is placed fourth on our list of 10 best tech stocks to buy according to Stanley Druckenmiller. Duquesne Capital owned 411,015 shares in the firm at the end of June 2021, representing 4.37% of the portfolio. The shares are worth more than $152 million. Druckenmiller has trimmed stake in the company by 2% compared to the first quarter of 2021.
On July 22, investment advisory KeyBanc maintained an Overweight rating on Palo Alto Networks, Inc. (NYSE: PANW) stock and raised the price target to $507 from $469, identifying several growth catalysts for the firm, including consolidated security spend and improved market positioning.
Out of the hedge funds being tracked by Insider Monkey, Connecticut-based firm Viking Global is a leading shareholder in Palo Alto Networks, Inc. (NYSE: PANW) with 2.6 million shares worth more than $979 million.
3. Alphabet Inc. (NASDAQ: GOOG)
Number of Hedge Fund Holders: 155
Alphabet Inc. (NASDAQ: GOOG) is a California-based technology company. It is ranked third on our list of 10 best tech stocks to buy according to Stanley Druckenmiller. Regulatory filings reveal that Duquesne Capital owned 91,009 shares in the firm at the end of the second quarter of 2021. These are worth $222 million and represent 6.37% of the portfolio. Druckenmiller had increased Duquesne Capital’s stake in the company by a whopping 193% compared to the first three months of the year.
On July 28, investment advisory JPMorgan kept an Overweight rating on Alphabet Inc. (NASDAQ: GOOG) stock and raised the price target to $3,250 from $2,875, noting that the company remained one of the top investment picks of the advisory.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm TCI Fund Management is a leading shareholder in the firm with 2.9 million shares worth more than $7.3 billion.
In its Q1 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Alphabet Inc. (NASDAQ: GOOG) was one of them. Here is what the fund said:
“Large-cap tech companies have been resilient through the pandemic—Alphabet among them. A top contributor, Alphabet’s Play Store and Google Cloud are in demand as businesses accelerate online activity which, along with strong YouTube user growth, is helping stabilize temporarily weaker search ad revenue trends. Through the lens of our disciplined bottom-up research process, we view Alphabet as one of the best businesses in the world, capable of expanding revenues at a rapid rate for years to come, with a bullet proof balance sheet and an average asking price. It’s a name we’ve owned since 2012 and for which we continue to have high hopes regarding future prospects.”
2. Amazon.com, Inc. (NASDAQ: AMZN)
Number of Hedge Fund Holders: 271
Amazon.com, Inc. (NASDAQ: AMZN) is placed second on our list of 10 best tech stocks to buy according to Stanley Druckenmiller. The firm is based in Washington and markets technology-related services. Latest data shows that Duquesne Capital owned 94,405 shares in the firm at the end of June 2021. These are valued at more than $324 million and represent 9.32% of the portfolio. Duquesne Capital has increased stake in the firm by 25% when compared to the filings for the first quarter of the year.
On July 30, investment advisory Stifel maintained a Buy rating on Amazon.com, Inc. (NASDAQ: AMZN) stock with a price target of $4,400, urging investors to take advantage of a pullback in the share price and identifying it as a buying opportunity.
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 3.8 million shares worth more than $13.1 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.”
1. Microsoft Corporation (NASDAQ: MSFT)
Number of Hedge Fund Holders: 238
Microsoft Corporation (NASDAQ: MSFT) is ranked first on our list of 10 best tech stocks to buy according to Stanley Druckenmiller. The firm is headquartered in Washington and operates as a technology company focusing on software products. According to the latest filings, Duquesne Capital owned 1.5 million shares in the firm at the end of the second quarter of 2021, representing 11.72% of the portfolio. These shares are worth more than $408 million. Druckenmiller has reduced Duquesne’s stake in the firm by 30% as compared to the first quarter.
On August 20, investment advisory UBS kept a Buy rating on Microsoft Corporation (NASDAQ: MSFT) stock and raised the price target to $350 from $325, noting the commercial price increase in a key product marketed by the firm as the reason behind the improved outlook.
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 24.8 million shares worth more than $6.7 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.”
You can also take a peek at 10 Companies that Benefit From Crypto Mining and 10 Best Stocks to Buy According to Michael Burry.
