In this article, we presented the 10 best tech stocks to invest in right now.
The technology-themed investing guru and Coatue Management founder Philippe Laffont, 53, saw massive success in the past two years after ending 2018 effectively flat. The so-called ‘Tiger Cub’ has been investing heavily in the tech sector over the years, which makes up more than half of its overall portfolio. He, however, has also diversified its portfolio towards growth stocks from the media and consumer discretionary, healthcare, and energy sectors.
After spending three years at Julian Robertson’s Tiger Management hedge fund, Philippe Laffont founded Coatue Management with $45 million in initial capital. He is one of the most successful hedge fund managers of 2020 as Coatue Management has scored almost 52% gain this year, thanks to massive gains from its top ten stock holdings. The market value of Coatue’s 13F portfolio jumped from $11.3 billion in the second quarter to over $19 billion in the third quarter.
Philippe Laffont of Coatue Management
Before digging deeper into Philippe Laffont’s top stocks, let’s briefly review this Tiger cub’s investment strategies and why it’s wise to play with tech stocks.
Tech stocks have been shining over the last two decades, with expectations for more acceleration in the third decade of the 20th century.
The Nasdaq Composite soared almost 42% in 2020 compared to the broader market growth of close to 14%. Software stocks rallied almost 80% on average this year while chip stocks gained around 50% of value in 2020. Internet and digital payment companies also saw massive growth throughout this year amid the pandemic.
The tech sector includes businesses that sell services and products directly to consumers and multiple industries. World’s largest companies including Apple Inc. (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), and Facebook (NASDAQ: FB) also belongs to the tech sector.
Instead of focusing on past performance, Philippe Laffont says investors should chase businesses with strong future fundamentals for the next five to ten years.
Mr. Laffont said: “I truly believe that in every portfolio you need to ask yourself what is going to be more relevant five to 10 years versus today. “The most interesting trend is that technology, which used to be mostly software and semiconductors and obscure things, it’s coming everywhere, and it’s the future of cars and the future of transportation and every sector.”
Philippe Laffont likes to make changes in his portfolio to generate gains from the changing market trends.
In his September quarterly filing, one of the most successful Tiger cubs has sold out of 39 stocks while slashed its position in 18 stocks. It is important to note here selling or reducing a position in stock doesn’t mean the hedge fund saw losses. Pure growth investors always seek to capitalize on share price gains by selling stock and shifting that money towards new profit-making opportunities.
Meanwhile, Coatue Management hedge fund manager Philippe Laffont initiated a position in 24 stocks and raised his stake in 15 stocks. He doesn’t chase dividend stocks. Time held for the top ten stocks stands around 3.10 quarters on average.
While Philippe Laffont’s reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 78 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Philippe Laffont is one of the best hedge fund managers to follow for investors who seek to generate gains in the short-term by investing in tech stocks. Let’s start examining the 10 best tech stocks to invest in right now according to Coatue Management’s billionaire hedge fund manager Philippe Laffont.
10. Global Payments Inc. (GPN)
The payments software and technology solutions provider Global Payments Inc. (NYSE: GPN) is one of the best tech stocks to invest in, according to Philippe Laffont. After holding a position in Global Payments since the second quarter of 2019, the technology-themed hedge fund has massively raised its stake in GPN by 225% during the third quarter this year.
It is now the tenth largest stock holding of Coatue Management valued at $674 million, accounting for 3.43% of the overall portfolio. Global Payments stock price underperformed this year as shares rallied only 7% compared to double-digit broader market gains.
Artisan Mid Cap Fund highlighted Global Payments performance in a letter to shareholders. Here is what Artisan Mid Cap Fund said:
“Shares of Global Payments have been pressured amid clear indications that COVID-19 restrictions are having a disruptive impact across many of their businesses. Throughout our long holding period, we have been impressed by management’s progress in building a fast-growing, diversified, more recurring business at the intersection of many strong trends in payments and software. We believe these characteristics position it quite well to weather almost any type of recession.”
9. Netflix, Inc. (NFLX)
Although Netflix (NASDAQ: NFLX) is among the biggest beneficiaries of staying at home policies with a share price rally of 65% this year, the tech hedge fund manager sees more upside potential in the days ahead.
The hedge fund has raised its stake in the streaming company by 1% to 1.4 million shares valued at $712 million. It is the ninth-largest stock holding of Coatue Management, accounting for 3.62% of the portfolio.
Hedge funds are bullish on Netflix. Here’s what Ensemble Capital said about Netflix in an investor letter:
“Netflix, Inc. (8.5% weight in portfolio): We’ve discussed our Netflix thesis in the past, but now we are going to highlight the competitive and financial strengths that Netflix has demonstrated since we last discussed the business a couple of years ago, especially in light of the expected competition that has finally arrived from traditional media companies launching their own streaming services, such as Disney. In addition, the emergence of the COVID-19 pandemic around the world has led to accelerating benefits for digital entertainment and global production.
8. Anaplan, Inc. (PLAN)
PLAN ranks 8th in our list of the 10 best tech stocks to invest in right now. The software-as-a-service (SaaS) enterprise planning software provider Anaplan, Inc. (NYSE: PLAN) is among the most favorite stocks of Philippe Laffont.
The tech-heavy hedge fund has been holding Anaplan since 2018. However, the hedge fund manager looks more optimistic about future fundamentals. This is evident from the 40% increase in position during the September quarter this year.
Anaplan is the eighth-largest stock holding of the Coatue Management stock portfolio. Shares of the cloud-based connected planning platform surged 33% this year. We recommended a position in PLAN in 2019 in our quarterly newsletter and said the following:
“Anaplan (PLAN) is SAAS company that offers connected planning that enables collaborative, dynamic, and intelligent planning. The smart money is in the stock because it is growing fast, with annual subscription revenue rising from $144 million in FY18 to $209 million in FY19 (45% growth) and the company’s annual billings rising from $204 million in FY18 to $290 million in FY19. For Q1 of fiscal year 2020, PLAN’s sales growth actually accelerated from 2019, rising 47.1% year over year. For FY20, management sees sales of $326-$331 million versus the estimate of $313.04 million. Wall Street is bullish on the company’s growth. Heather Bellini of Goldman Sachs sees a ‘high likelihood’ of the company achieving the ‘Blue Sky scenario’ in 2020, where deal sizes grow and the company’s expansion accelerates due to increasing productivity. Goldman has a $62 price target. Some analysts still think PLAN is a M&A target.
7. Square, Inc (SQ)
The digital payment transfer company Square (NYSE: SQ) is on the list of the 10 best tech stocks to invest in, according to Philippe Laffont.
He has substantially raised his stake in the fintech company by 40% to $895 million in the September quarter. The hedge fund has first initiated a stake in Square during the second quarter of 2019. Square is among the biggest beneficiaries of staying at home policies and consumers shift towards online platforms.
Hedge funds are bullish on Square’s stock performance. Here is what Touchstone Sands Capital Institutional Growth Fund said:
“Square’s consumer-oriented Cash App grew from a project that created the U.S.’s first instant and direct bank-to-bank transfer service. Today, it has grown into a full-service, multiproduct consumer finance business. We believe its frictionless, low-cost offerings represent a strong value proposition for the 60 million U.S. adults currently unbanked or underbanked. We believe Square will sustain above-market volume growth via share gains and upmarket expansion, with margin expansion driven by sales & marketing and R&D efficiency.”
6. Snowflake Inc (SNOW)
The cloud-based data startup Snowflake Inc (NYSE: SNOW) is among the new stock picks of Philippe Laffont. The firm initiated a big position in Snowflake during the third quarter this year by purchasing shares worth more than $1 billion. It is the sixth-largest stock holding of Coatue Management, representing 5.92% of the overall portfolio.
Several other hedge fund managers are bullish on Snowflake. Here is what Baron Opportunity Fund stated in a shareholders letter:
“Snowflake Inc. provides a data-warehouse platform for large-scale data analytics and storage. The company is leveraging its cloud-native architecture to offer low-cost storage, scalability, and ease of use that are lacking in many competitive solutions. We participated in the company’s September IPO and the stock has performed well in the after-market. We believe Snowflake has a significant growth runway within its large addressable market given its differentiated technology, platform approach, and highly experienced management team. Snowflake’s CEO Frank Slootman and CFO Michael Scarpelli have successfully partnered at several public technology companies, including ServiceNow, a long-term Fund investment.”
5. Zoom Video Communications, Inc. (ZM)
The video communication company Zoom Video Communications, Inc. (NASDAQ: ZM) is among the 10 best tech stocks to invest in, according to Philippe Laffont.
Although the hedge fund manager sold 1% of Zoom’s stake in the latest quarter, the investment still accounts for 5.92% of the overall portfolio. Zoom Video Communications stock has been among the best performers of 2020 amid a rally of 500%.
Hedge funds have raised their positions in the pandemic darling Zoom Video Communications during the third quarter. Here is what Bill Nygren from Oakmark Funds stated:
“The biggest newcomer to the large-cap list this year was Zoom Video Communications. The company has a market cap of $134 billion and sells at nearly 100 times trailing sales. With so many people working from home, video conferencing has been a lifesaver.”
4. The Walt Disney Company (NYSE:DIS)
The entertainment giant Walt Disney (NYSE: DIS) was hit harder by the pandemic this year. However, Philippe Laffont saw the dip in share price as a buying opportunity.
The hedge fund has raised its stake in Disney by 2% to 9.4 million in the September quarter. It is the fourth largest stock holding of Coatue Management portfolio, accounting for 5.95% of the overall portfolio. We suspect that Laffont sees Disney as an online subscription giant with huge upside potential (and a Netflix competitor). Since he has large positions in both Disney and Netflix, he probably believes the market is large enough for both companies to succeed.
3. Sunrun Inc. (NASDAQ: RUN)
Philippe Laffont’s hedge fund has made a big bet on the residential solar energy systems developer Sunrun Inc. (NASDAQ: RUN) in the latest quarter.
The hedge fund has bought 9 million additional shares of the solar energy systems developer to increase the overall stake to 17 million shares. The investment is valued at $1.24 billion, accounting for 6.33% of the overall portfolio.
Shares of Sunrun soared 330% in the last twelve months. Despite an impressive stock run, Massif Capital looks bearish over the Sunrun. Here’s what Massif Capital stated about Sunrun in a shareholders letter:
“We laid out our thesis on Sunrun in our first-quarter letter to investors and concluded that while the company had dropped 50% in March, we still felt comfortable holding the short position, this was an error. We re-evaluated that posture in May, following a rapid rise in the stock price, and decided to exit the position as the title wave of liquidity entering the markets seemed more than enough to continue to support a firm dependent on capital markets for cash.”
2. Tesla, Inc. (NASDAQ: TSLA)
The world’s largest electric vehicle maker Tesla, Inc. (NASDAQ: TSLA) is one of the best stocks to invest in according to Philippe Laffont.
After initiating a position in the first quarter this year, the hedge fund has increased its stake in the world’s largest electric vehicle maker by 100% to $1.33 billion. The firm benefitted from a massive Tesla stock price rally of close to 800% this year.
Insider Monkey calculations show hedge funds are bullish on Tesla stock. Here is what Baron Partners Fund stated:
“Tesla, Inc. designs, manufactures, and sells fully electric vehicles, solar products, and energy storage solutions. The stock rose on strong second quarter results, including profitability that beat analyst forecasts and solid growth in existing and new programs across different geographies and vehicles. In addition, Tesla presented a grand vision around its battery research aimed at expanding its competitive advantage and market opportunity. We remain confident that Tesla will leverage its market trend and technology leadership to achieve sustainable long-term growth.”
1. PayPal Holdings, Inc. (NASDAQ: PYPL)
The digital payment transfer company PayPal Holdings, Inc. (NASDAQ: PYPL) is the top stock to invest in according to Philippe Laffont.
Although the hedge fund manager has sold 3% of stake in the latest quarter to capitalize on more than 100% share price rally, PayPal is still the largest stock holding of Coatue Management portfolio.
“We continue to have high conviction in MasterCard and Visa, which we trimmed last quarter, and chose to rebalance our weights as we added to our position in PayPal. PayPal’s value proposition to merchants and consumers continues to expand in the current environment, and we believe this will have a lasting positive impact on the business. At the end of the quarter, our collective position in Visa, MasterCard, and PayPal was more than 13%, an increase in our aggregate weight from the start of the year.”
Please also see: 10 Best Stocks To Invest In Right Now According To Tech Billionaire and Top 10 Stocks To Buy Now According To Secretive Billionaire Quant Hedge Fund Manager
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